Economy

Jokowi says green economy the key to Indonesia’s future

Singapore/Jakarta | Indonesia’s planned new capital city, aiming to be the world’s biggest green industrial park, and a budding electric vehicle ecosystem will help power expansion of South-East Asia’s largest economy, President Joko Widodo said in a major address on Tuesday.

Indonesia’s year leading the G20 had also boosted the country’s diplomatic credentials, according to Mr Joko – usually referred to as Jokowi – who in June became the first Asian leader to travel to Russia and Ukraine since the invasion started. The leaders of the two warring countries welcomed Indonesia as a “bridge for peace” he said.

In his State of the Nation address, the president focused on the country’s success in attracting advanced manufacturing and boosting steel production since it banned nickel exports.

“Indonesia has become the key producer of lithium batteries in the global supply chain,” Mr Jokowi said in the speech, the day before Indonesia’s national day that marks the anniversary of independence in 1945.

Tesla is the latest to be convinced that Indonesia is more than a source of raw materials, signing on with the Indonesian subsidiary of a Chinese company, Huayou, to source EV batteries from the country, according to an industry briefing by a senior cabinet minister.

Mr Jokowi said the nation would play to its strengths. “Electric vehicle manufacturers from the Asian and European countries, as well as the United States, have invested in Indonesia. Besides nickel, the government will also encourage down-streaming of bauxite, copper and lead.

“We need to build an integrated ecosystem for industry in our country which will support the development of global green economy ecosystem,” he said.

The speech came as Australian fund managers led by IFM Investors prepare to visit Jakarta next week to explore opportunities in infrastructure and the country’s emerging green power sector, among other possible investments.

The president said Indonesia had emerged from the pandemic with strong economic fundamentals “in the midst of global economic turbulence”. Gross domestic product expanded 5.44 per cent in the second quarter and the trade balance has been in surplus for more than two years.

“We should be grateful for these achievements … On the one hand, we must remain vigilant and careful. On the other hand, we must continue with the nation’s big agendas to achieve an advanced Indonesia,” Mr Jokowi said.

In the province of East Kalimantan, on the island of Borneo, the slowly emerging new capital, Nusantara, would be a showcase for the future, he said, as would a massive new industrial park located in neighbouring North Kalimantan.

“Green energy from solar, geothermal, wind, ocean waves and bio energy will attract manufacturers of low-emission products,” he said.

“The green industry zone in North Kalimantan will become the biggest green industrial park in the world. I believe that we will become a competitive green product manufacturer in international trade.”

Tesla deal
Tesla had signed a $US5 billion ($7.1 billion) contract with Huayou to make lithium batteries in the Morowali Industrial Park in Sulawesi to be used in Tesla cars, Coordinating Minister for Maritime and Investment Affairs Luhut Pandjaitan told CNBC on August 8.

The Tesla deal consolidated Indonesia’s position as an important nickel supplier to the EV industry, said Bhima Yudhistira Adhinegara, a researcher from Jakarta based-INDEF (Institute for Development of Economics and Finance).

“There is indeed a potential electric car ecosystem, and the Indonesian government has prepared an industrial area in Batang, central Java, to accommodate companies that will manufacture batteries and other components for EV and hybrid cars. So the infrastructure has been prepared,” Mr Bhima said.

“However, I think the biggest challenge is the Indonesian government’s commitment to the energy transition. This is still being questioned by many people.”

He said nickel smelting was still done using coal and the electricity for electric cars was still produced by coal power plants.

“President Jokowi sees this as an opportunity, but so far he has not been able to holistically integrate renewable energy and EVs.”