Can Indonesia Become a Battery Superpower?

As nations seek to reevaluate themselves in a post-corona world, Indonesia is looking at becoming a ‘battery superpower’. Indonesia is the fourth most populous country in the world after China, India and the United States, is becoming a rising regional power. Acharya argues similarly in ‘Indonesia Matters’, while stating that as Indonesia continues to grow economically, it has the potential to become a manufacturing and industrial hub of the world and not just Southeast Asia. The news comes as President Widodo announced that he ‘will send a high-level team next week to meet with top executives of U.S. automaker Tesla as the Southeast Asian country aims to become the world’s biggest producer of electric vehicle batteries’ according to a Reuters exclusive.

President Widodo told Reuters in an interview last Friday that ‘next week we will send a large team to America and Japan, to promote the Omnibus’. The ‘Omnibus’ refers to a new Indonesian Job creation law, which for the Indonesian government it is hoped will display a new sense of a ‘business friendly’ Indonesia. The law in question ‘harmonizes 79 existing laws, significantly cutting red tape and potentially spurring investments from interested businesses’. It is hoped this will only help a recession hit Indonesia and that this trade mission will do just that.

One avenue this Indonesian team is hoping for is to secure Tesla’s investment into the nation during their trade missions to America. This is led by Minister of Maritime Affairs and Investment Luhut Pandjaitan, Widodo stating that ‘it’s very important because we have a great plan to make Indonesia the biggest producer of lithium batteries and we have the biggest nickel (reserves)’. Luhut has said that he is hoping to also hold meetings with the World Bank in addition to Tesla, and discuss the Omnibus Law with American fund managers to secure further investments into the nation.

It is hoped by Luhut that American companies will need to invest into Indonesia due to the nation’s nickel processing to cut costs for companies like Tesla. However, the environmental side is a sensitive topic for businesses. The reason for this is due to the nation’s lack of environmental standards and bad reputation of ethically sourced products (this is especially relevant regarding Palm Oil in Sumatra), which has only hindered the nation’s ability to secure American foreign direct investment.

This comes as Elon Musk (Tesla’s Chief Executive) has stated that he plans on offering a ‘giant contract for a long period of time’. This is on the sole condition that the nickel is mined ‘efficiently and in an environmentally sensitive way’ which aims at reducing its impact on the environment and making Indonesia a more attractive business location.

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The new Omnibus Law has created great criticism within Indonesia because it will relax environmental standards and labour laws within the country. The bill in question passed on October 5th this year and has been the cause of major protesting since January. Since the start of these protests, just under six thousand individuals have been detained due to unrest linked to the legislation.

As a result, Minister Luhut has continued to argue in favor of Indonesia benefiting from the legislation. This is because Luhut maintains that the nation could make the battery supply chains environmentally friendly within the next ten years so that they can then sell green batteries for Tesla’s cars by 2030. Widodo has constantly repeated that this Omnibus Law will only cut red tape and make Indonesia more economically competitive against its neighboring nations. This is something that the nation has suffered with over the last ten years, especially regarding Vietnam and Malaysia.

However, despite all of this, protests against the law have continued into the present even after a month of the bill becoming law. These mostly come from trade unions, student groups and environmental movements. Nevertheless, the legislation is hoped to spur Indonesian’s economic growth post-corona-virus. This comes as Indonesia has traditionally struggled with appealing to foreign investors when compared to its neighboring nations.

As the biggest ASEAN economy suffers its first recession since 1998, the loss of jobs causes great worries that the government cannot afford to be slow in creating jobs within the nation. One major positive could be investment from Tesla, which could help jump-start the nations economic comeback. The real question is – can Indonesia truly become the world’s battery superpower?

The answer stems solely from how Tesla chooses to respond to the Indonesian trade mission to America, and how successful the nation can become as a result. But as documented previously, a post-corona virus world will only further embolden developed countries to look further afield from their traditional manufacturing hubs. Thus, meaning that nations like Indonesia will become more industry focused. Therefore, the possibility of becoming a battery superpower is not too far out of the question.

Featured image credit: Mairel Theafila on Unsplash

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