Indonesias value-added mining policy paying dividends

President Joko “Jokowi” Widodo inaugurated an industrial area that will become a region producing energy and environmentally friendly products with the support of investors from China and the United Arab Emirates.

The Indonesian Green Industrial Estate stands on a maximum area of ​​30,000 hectares that stretches in Bulungan Regency, North Kalimantan and is planned to be the largest in the world, the government said.

The construction of the project requires funding of US$132 billion or equivalent to Rp1,885 trillion and is planned to be completed in 2024, said Coordinating Minister for Maritime Affairs and Investment (Menkomarves) Luhut Pandjaitan.

The first phase of this area will be built on an area of ​​​​16,400 hectares, said Jokowi at the inauguration ceremony of the green industrial area which was broadcast live via YouTube.

“This is truly a leap in Indonesia’s economic transformation and it starts from here, so that we can manage our natural resources from upstream to downstream,” said Jokowi.

Greenaluminum,solar panels,industrial siliconewill emerge from here.Everything will emerge from this North Kalimantan, from this region,” he said.

Jokowi said this project is a collaboration of investors from Indonesia, China and the United Arab Emirates and will use the latest technologies.

This area will create new jobs and can contribute greatly to state revenue, Jokowi said.

“Revenue to the state is in the form of both tax and non-tax so that it will improve our current account balance, improve it later if our exports of trade balance which we have not been able to complete for years, and of course a lot of foreign exchange will enter our country,” he said. .

On the same occasion, Luhut said there were at least 10 large investors from China who had stated their commitment to support energy projects in the region.

“They are investors who have proven to havea very goodtrack record ofinvestment and have invested tens of billions of dollars to downstream nickel in Indonesia in recent years,” said Luhut.

BenarNewshas contacted officials at the Kemenkomarves to find out who the big investors are Luhut but have not received a response.

Nevertheless, data from the Ministry of Energy and Mineral Resources (ESDM) in 2019, noted that nickel smelter processing facilities in Indonesia were indeed dominated by investment from China.

Some of them are in the smelter project run by PT Sulawesi Mining Investment, PT Virtue Dragon Industry, PT Huadi Nickel Alloy, and PT Harita Nickel.

Most recently, in May 2021, the Chinese company, Zhejiang Huayou Cobalt Co.said it would partner with electric vehicle battery manufacturer EVE Energy in a nickel and cobalt project worth US$2.08 billion or equivalent to Rp29.7 trillion on Halmahera Island, Maluku.

On the other hand, Chinese investors have also started to build hydroelectric power projects (PLTA) from the Kayan River, which is also located in the Indonesian Green Industrial Zone.

The project, named KayanHydro Energy, targets the production of 9,000 MegaWatt of electricity with funding support from PowerChina (PCR) to reach US$17.8 billion or more than Rp. 2.5 trillion.

According to a report byIndonesia Corruption Watch(ICW), PCR is part of the Power Construction Corporation of China Ltd and is located in Beijing.PCR was founded in June 2012 and is engaged in power generation projects, oil, mineral resources, real estate development, and others.

Luhut said the presence of hydropower development in Indonesia’s Green Industrial Estate had a big influence on the presence of other investors.

“At first the response was mediocre, but towards the end of 2019, some investors began to respond very seriously,” said Luhut, referring to the year the foundation stone was laid for the KayanHydro Energyproject.

And this requires courage, good execution skills and great financial strength to realize hydropower.”

Downstream green industry

Jokowi said the presence of the green area in North Kalimantan would support efforts to downstream the industry in order to boost the Indonesian economy, which relies heavily on exports of raw goods.

What will happen in North Kalimantan will be almost all finished goods, so it will provide great added value for our country, because we sell them already in the form of finished goods.This is a frog jump, a leap that we want to make,” Jokowi said.

Fabby Tumiwa, an energy observer and executive director of theInstitute for Essential Services Reform(IESR), said that the government’s priority with the presence of this industrial area is not only how big the results are, but the green commitment to production goods.

Not only that, the government also needs to subsidize the area of ​​green cover lost from the development of this 30,000-hectare industrial area so that more carbon is not released from Indonesia’s forests.

“The dream of Presidentkanmake the region so that a truly ‘green’, so all that is produced there must be environmentally friendly from upstream to downstream, including the commitment of its investors,” said Fabby via telephone.

Fabby said the government needed to make strict regulations to support the industry from new and renewable energy in this region.

The control is in the government.If we talk about China, they are actually very consistent in their country for pollution control.They even have the strictest industry standards in the world, requiring industries there to suppress the use of coal, he said.

“So what has to be seen is how local regulations are, do they provide incentives or obligations for incoming investors to comply with the latest, most efficient technology?”

The government targets investment from both domestic and foreign investors to reach IDR 900 trillion this year, which is then set to rise again next year to IDR 1,200 trillion with a focus on development outside Java.

The increase in investment targets is in line with the existence of the Job Creation Act which provides a red carpet for business actors and investors.To support this, Jokowi in early December also asked the police to guard the investment climate from security disturbances.

The same order was again conveyed by Jokowi at the ceremonial green industrial area in North Kalimantan.

“I ask the Regional Police Chief, the Resort Police Chief, the Regional Military Commander, the Kodim, the Governor, the Regent to oversee in detail this area so that it is conducive and safe, so that investment can really accelerate development here.Don’t let there be even the slightest problem,” Jokowi said.