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Mining News Pro - Indonesian President Joko Widodo is trying to set his nation on course to become a global hub of electric vehicle production. That won’t be an easy task.
Jokowi flew to China last week with his EV dreams high on the agenda. He wants big carmakers — including from China — to set up in Indonesia, building on the country’s emergence as an indispensable source of nickel for EV batteries. That shift was fueled by billions of dollars of Chinese investment in metals plants.
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Chinese President Xi Jinping said after meeting with Jokowi that he’s willing to deepen cooperation in areas including new energy vehicles.
One of Jokowi’s key lieutenants also planned to drop by China’s BYD Co., the EV giant which has agreed to explore projects in Indonesia. The same official is due to meet Tesla Inc.’s Elon Musk in California later this week.
Jokowi’s drive to shift Indonesia up the value chain will be a much more complex and uncertain endeavor than its successful nickel push.
The country’s large nickel capacity has made it an attractive investment target, Makoto Tsuchiya, assistant economist at Oxford Economics, wrote in a recent report. But “there is room for further improvement to firmly establish the country in the global EV supply chain.”
Southeast Asia’s biggest economy needs more skilled labor, deeper industrial infrastructure and more low-carbon energy supplies if it wants to produce batteries or electric vehicles in high volumes. The country will also need to offer a more stable business and regulatory environment than it has in the past, Tsuchiya said.
Cleaner power and better environmental credentials tops the to-do list. Indonesia’s economy is heavily reliant on coal. The carbon footprint of its nickel production is much higher than the global average.
That’s a negative for EV makers trying to flaunt sustainability credentials, or wanting to avoid possible trade tariffs — such as those planned by the European Union — that penalize goods based on their carbon footprint.
Some nickel refiners are trying to address those concerns, for example by planning solar or wind farms to power their plants.
There are also concerns about the quality of Indonesia’s labor pool. Only a fifth of Indonesians aged 25 to 34 years old have attained tertiary education, compared to an average of about 50% among Organization for Economic Cooperation and Development countries.
Indonesia will also need to assure investors wary of the nation’s track record of policy reversals and excessive red tape. The country’s nickel-export policies flip-flopped over the last decade. More recently, an export ban on copper concentrate was postponed at the last minute to May 2024.
Jokowi’s presidency ends with elections pegged for February next year. There’s at least broad political consensus around the downstreaming strategy spearheaded by Jokowi, which he’s made central to a target to make Indonesia a high-income country by 2045.
He says downstreaming can create as much as 10 million new jobs over the medium term. The leaders that follow him will need to steer a careful course to achieve that.
“The success in terms of exports and the investments are very visible, so the assumption is that there will be pretty much a good degree of policy continuity on downstreaming,” said Bank of America economist Mohamed Faiz Nagutha. “If something were to change, that will come as a negative and nasty surprise for investors.”
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