What is Extractive Enterprises: Definition, Functions, Characteristics, and Examples

Indonesia’s abundant natural wealth has succeeded in bringing this country into various extractive business fields. This extractive business is defined as a type of business related to natural resource management. For example, fishing, sand digging, and oil processing are some examples of the extractive business in question.

In carrying out its work, this extractive business does not merely explore and also extract resources. However, it is also responsible for maintaining and processing it into useful products for human life. For more details, let’s discuss more about the meaning and examples of extractive business.

Definition of Extractive Business

In essence, this extractive business obtains and utilizes raw materials originating from nature to then be produced into a product that can meet the daily needs of humans in general. This is supported by statements from experts contained in various book titles. One of them is from a book entitled Creative Products and Entrepreneurship by Arif Suhrson. There it is explained that extractive business is an activity that takes various kinds of things that come directly from nature, such as making salt, fishing, and so on.

In addition, in the integrated Social Sciences (Sociology, Economics, Geography, History) book by Nana Supriatna et al, it is explained that extractive businesses are companies that have business activities to take and exploit natural resources. In practice, this extractive business has the risk of destroying nature, especially in the environment where the extraction takes place.

The economy and public health around the location can even be affected if business activists carry out their activities without regard to the surrounding environment and only seek profit. Therefore, the government will generally make regulations related to this extractive business. The purpose of this is so that the business sector does not only seek profit, but can also provide benefits to the country and the surrounding environment.

In simple terms, extractive business is an industrial activity that obtains and utilizes production raw materials originating from nature. This business entity is an extractive company where they will carry out activities to manage natural resources by exploring, taking, and then processing them with the main objective of meeting market needs. The existence of these extractive companies can create jobs, gain profits, and also provide alternatives to fulfilling human needs.

Characteristics of Extractive Enterprises

To be able to distinguish forms and examples of extractive businesses from other businesses, there are several characteristics that you need to understand. Based on the process of its activities, this type of business has its own unique character. The following are some of the characteristics of extractive businesses, including:

1. Seeking Fortune from Natural Products

Like other forms of business activity, the purpose of this extractive business is to make a profit. Where the process of processing goods from a business activity can ensure the running of economic principles, namely trading to provide benefits to all parties involved.

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2. Materials Directly Taken from Nature

In addition to taking advantage, this extractive business has a unique characteristic, namely in its own source of profit. Where this one business takes ingredients directly from nature.

Extractive Business Function

From the explanation regarding the definition of extractive business, we can understand that this business is very important for the availability of goods in the market. Some of the functions of this extractive business are as follows:

a. Utilize natural resources

The main function of this one economic activity is to process natural resources or natural wealth into products that are said to be beneficial.

b. Open jobs

Apart from functioning to utilize natural resources in a more positive direction, another function of extractive businesses is to create new jobs. So it will reduce the unemployment rate. This is because in processing existing natural resources, it will require human labor or human resources.

c. Increase profits

By exploiting or processing existing natural resources, it will automatically bring a profit. Companies in this type of extractive business will mostly get big profits. This is because the products produced are always needed and sought after by the community.

d. As an Alternative

The meaning of this one point is that extractive businesses will provide alternatives to human needs. Where the products produced from the processing of natural resources can become substitution needs so that people can meet all their needs.

e. Enjoy Natural Resources

Not only does it function to process natural resources or natural wealth, but the results that will later be circulated among the community can be enjoyed together. Surely this will be very good, because the available natural wealth will not be wasted.

If you look at the existing functions, it reflects that this type of business is an economic activity that has a positive impact on society. Basic needs or daily living needs can be provided and utilized according to the needs of each individual.

Examples of Extractive Enterprises

Examples of extractive businesses themselves can be found in many fields, from food, clothing, to housing. Below are some examples of extractive businesses that are useful in meeting the needs of human life, including:

1. Sea Fishery Business

As we know that the sea is one of the largest natural resources in Indonesia where there are thousands to millions of marine biota that can benefit from it. The activities of companies that maximize marine fishery resources are generally in the form of packing, catching and distributing fish.

2. Salt Making Business

Another example of an extractive business is the business of making salt. Where this one business utilizes sea water by taking and then drying it into salt crystals. Not only from the sea, salt can also be obtained from mining on the mainland. Where the mining process is similar to stone mining. One of the results of salt mining on the mainland is Himalayan salt or Himalayan salt which is known to be very good for health.

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3. Businesses in the Forestry Sector

Businesses in the forestry sector are also included in one example of an extractive business because they utilize forest products to be processed into various kinds of goods, ranging from paper, furniture, to building materials. This is no different from other forest products, such as plants and even rubber latex, which can be profitable if converted into something useful for human needs.

4. Mining Business

The next example of an extractive business engaged in the mining sector will carry out management activities as well as research on raw materials. The stages include investigation, feasibility analysis, regional exploration, construction, and processing of raw materials. In Indonesia alone, this mining business includes extracting minerals such as copper, gold, nickel, coal, and several other things. Likewise with oil and natural gas, all of which are the result of the bowels of the earth. For several types of mining that may often be heard of, namely gold mining in Papua, sand mining in Bangka, to coal mining in South Sumatra and also Kalimantan.

5. Agricultural Business

In Indonesia, agriculture is a business sector that has great potential to be maximized by the community as a source of income. Where this has actually been realized by the existence of many people who work as farmers. Indonesia’s fertile and supportive nature can make agricultural activities easier to develop. In fact, this one sector is considered a way out in overcoming poverty in Indonesia.

Therefore, this agricultural sector continues to be encouraged to be further developed. No need to be a large company scale, individuals can also run this one line of business. As long as they take and make direct use of natural resources, they are classified as running an extractive business.

6. Plantation

Plantation is an extractive business that utilizes certain plants to be managed and marketed into more valuable products. Managing plantations requires knowledge, technology, capital, as well as qualified management so that the state, companies, and the community can enjoy the benefits. An example of a familiar plantation product is tea bags, which are now very easy to find in markets or supermarkets.

7. Livestock

Livestock is also known as an extractive business because it develops livestock to be used by the community. There are two types of livestock based on their size, namely large livestock such as goats, horses, cows, and others and small well-known animals such as ducks, chickens, turkeys, and so on.

Based on the explanation above, we can conclude that this extractive business is a business whose activities take and utilize natural resources, which are then processed into products that are useful for human life. Where can we easily find examples of this extractive business in Indonesia, which is indeed filled with various natural resources.

This extractive industry sector covers the business sector, ranging from marine, forestry, agriculture, animal husbandry, to mining. Each of them is expected to maintain and provide benefits to the surrounding environment.