IN FOCUS: Indonesia wants to bag EV riches, but locals are split over what it means for them
Indonesia’s nickel reserves are set to play a big part in the electric vehicle revolution. CNA looks at local concerns over mining and how adherence to environmental regulations is key.
WAWONII, Southeast Sulawesi: Farmer Ratna, 65, had been walking barefoot for 40 minutes through a hilly plantation covered with lush cashew and coconut trees on the Indonesian island of Wawonii.
The air was humid and the soil was wet from a steady downpour which had stopped less than an hour earlier, but that did not prevent her from moving nimbly.
“We’re almost there. Come,” she told CNA.
A few minutes later, she ran downwards to a creek.
“This, this is my land!”
“The excavator was there, going towards the creek,” she said while pointing to a spot near the tributary.
She added: “It was there when we clashed with them.”
Mdm Ratna, who goes by one name, was referring to a confrontation between residents and workers from nickel mining company Gema Kreasi Perdana (GKP) in early March.
Locals shouted and lay on the ground in an attempt to prevent GKP’s excavator from moving forward. The excavator had to stop.
Mdm Ratna is one of many Wawonii islanders who oppose the presence of the company on the small island of 37,000 inhabitants.
They have been fighting against mining operations for the last five years, hoping to preserve their livelihoods and the environment as they fear that mining would ruin them.
However, as trees were chopped down, paving the way for GKP to mine nickel, Ratna and the others feared they might lose the battle.
Land clearing has been ongoing and mining is scheduled to start as soon as possible.
This comes as Indonesia aims to be a global player in the electric vehicle (EV) industry given that it is the world’s largest nickel producer, a key component of the batteries which power the vehicles.
In 2021, Indonesia was the biggest nickel producer in the world, producing one million metric tons of nickel, according to the United States Geological Survey, an agency which provides information on natural resource conditions.
About 22 per cent of the world’s known nickel reserves are in the archipelago.
Since countries around the globe are trying to move away from fossil fuel-based vehicles and switch to EVs which create less greenhouse gas emissions, Indonesia wants to tap into the opportunity by producing EV batteries.
Eventually, the government also wants EV cars to be manufactured locally.
While the economic case may appear to be clear cut, not all locals are convinced.
Environmental analysts also believe the path Indonesia is taking to fulfil its objective may come at a huge cost, unless regulations are adhered to closely.
The government has spelt out its ambitions.
“We must become an important player in the global supply chain in the electric car industry,” said President Joko Widodo on Mar 16 when inaugurating a Hyundai Motor factory and launching Hyundai’s IONIQ 5 in Bekasi, West Java.
“Our country has enormous mineral resources to support the development of electric cars,” he added.
Rich in natural resources, Indonesia has long been an exporter of raw materials.
In an attempt to spur higher-value smelting industries in the country, the government banned the export of nickel ore in 2014 so that it would be processed domestically.
Indonesia’s nickel reserves are mostly in North Maluku, Central Sulawesi and Southeast Sulawesi provinces, which are also the key nickel-producing regions.
The 2014 move triggered an influx of foreign investments. Particularly, Chinese companies looked to invest in nickel processing in Southeast Asia’s biggest economy.
Shanghai Decent Investment, whose parent company Tsingshan is the world’s largest stainless steel producer, invested in the downstream nickel processing sector through Indonesia Morowali Industrial Park (IMIP) in Central Sulawesi.
Spanning 2,000 ha, IMIP claims to be the longest industrial chain in the world, producing nickel, stainless steel and carbon steel. These products can be used for any industry, not just EVs.
The industrial park began operations in 2015 and is supported by coal power plants, seaports and an airport. It is currently home to at least 18 companies such as Huayue and QMB New Energy Materials.
But in 2017, the government revoked the nickel ore export ban due to falling production and sluggish smelter development.
Investors were still keen to develop another hub for the nickel industry in Indonesia. In 2020, Indonesia Weda Bay Industrial Park (IWIP) began operations in North Maluku.
The nickel-based industrial hub is a joint venture between three Chinese investors, namely Tsingshan, Huayou and Zenshi, according to the Ministry of Investment.
The hub claims to be the first integrated industrial estate in Indonesia, which is intended to facilitate the mineral processing and production of EV battery components.
As the market recovered, the authorities again banned nickel exports in 2020.
That year, the government established the Konawe Industrial Zone in Southeast Sulawesi, focusing on ferronickel development.
Ferronickel is a mineral containing about 25 to 40 per cent nickel and about 60 per cent iron.
The two main companies operating there are Virtue Dragon Nickel Industry, which smelters nickel ore and claims to be the largest smelter in Indonesia, and Obsidian Stainless Steel (OSS).
To support the nickel industry, four mining and energy-focused state-owned enterprises formed Indonesia Battery Corporation (IBC) in March last year. IBC is a holding company to manage the battery industry ecosystem, especially for EVs.
In September last year, Jokowi, as the Indonesian president is commonly known, led the groundbreaking ceremony of an EV battery factory PT HKML Battery Indonesia. It is the first EV battery plant in Southeast Asia.
The project in Karawang, West Java is a joint venture between Indonesia and South Korea’s Hyundai Motor Group and LG Energy Solution.
Meanwhile, when inaugurating the Hyundai Motor factory on Mar 16, Mr Widodo said: “The year 2022 will be important for the development of lithium batteries for electric vehicles.”
“Several investors will start constructing (smelters and refining plants, which will be) ready to process our nickel and cobalt into lithium battery materials.”
Apart from aiming to be a global player in the EV industry, the president stated that Indonesia must also transition from fossil fuel-based cars to electric cars.
In 2024, Indonesia would be manufacturing EVs and other related components, he added.
Late last month, Coordinating Minister for Maritime Affairs and Investments Luhut Pandjaitan announced that he had met Tesla CEO Elon Musk in Austin, Texas.
According to the minister, they met to talk about “Indonesia’s big potential in the nickel industry,” which Tesla as an EV manufacturer could need.
He also revealed that Jokowi is scheduled to meet Mr Musk during the president’s visit to the US this week.
When meeting business leaders in the US on Thursday (May 12), the president said he welcomed them to invest in Indonesia, which is seeing rapid growth in the iron and steel industry.
The mining products will form the backbone of new energy and renewable energy industries, he added, including the production of lithium batteries and electric cars.
BETTER INCOME AND INFRASTRUCTURE
On the surface, the economic case for boosting the nickel industry is clear as it would bring jobs, foreign investments and tax receipts.
The EV battery factory in Karawang alone is an investment of US$1.1 billion, said Jokowi during the groundbreaking.
As of 2020, at least 40,000 jobs have been created by the IMIP in Central Sulawesi. According to the investment ministry, the industrial park attracted around US$126.5 million worth of investments. In that year, IMIP paid taxes and royalties of around 5.37 trillion rupiah (US$366 million).
Meanwhile, IWIP in North Maluku has attracted US$10 billion worth of investments.
On the ground, some have seen the economic benefits.
In Konawe, about an hour’s drive from Southeast Sulawesi’s capital Kendari, locals interviewed by CNA said their income has increased.
Clothing seller Wati, 40, is originally from a subdistrict in Kendari and has a store there. But she has now set up another store in Konawe’s industrial area since there is higher demand.
“On good days, I can earn 5 million rupiah. At the other shop the sales are not so good,” said the woman who goes by one name.
Likewise, Mr Ardiman, who owns a minimart, said before the industrial area was established, he could earn about 3 million rupiah per day. Now, the 50-year-old who goes by one name said he earns up to 40 million rupiah daily.
GKP, the nickel mining company in Wawonii, said it has brought better infrastructure to the locals, too.
Its spokesman Marlion told CNA that even though the company has yet to start mining operations, its presence on the island means that people can enjoy 4G connectivity as it has built a communication tower.
“There was no Internet there, so we built a (communication) tower and it was finished within a few months,” said Mr Marlion, who goes by one name.
“And not to mention the other things we have built, like a bridge and so on.”
ENVIRONMENTAL IMPACT OF MINING
But there are also downsides, especially from the environmental perspective.
Social worker Rismanto, who lives about 1km away from a coal power plant in North Konawe serving the Konawe industrial zone, is frustrated over the environmental pollutants.
“There are lots of activities in the coal power plant area such as dismantling equipment at a nearby port owned by OSS. Almost every day, ships come and go,” he said.
Mr Rismanto added: “The impact that can be felt directly is the amount of coal dust flying in the air, which is carried by the wind to residential areas within a radius of about 4km. This happens because of coal unloading.”
“Not only that, we also often see factory pollution directly from the coal plant, where smoke from the funnels soars very clearly straight into the sky. The cars transporting the coal also bring dust, which is very disturbing.”
Mr Rismanto, who also goes by one name, claimed that many villagers have suffered from respiratory problems, although it is hard for them to prove that it is a result of the air pollution.
Mr Ahmad Ashov, programme director with Jakarta-based non-governmental organisation Trend Asia, which focuses on sustainable energy, said the government’s ambitions are problematic.
This is because it aims to do so without revealing how to use clean energy and dispose of the mining waste properly, he said.
“Mining will change landscapes. It involves a variety of chemicals and can disturb catchment areas. There will be tailings or waste, and smelting and refining also need a lot of energy (generated) from coal power plants,” he said.
Mr Melky Nahar, head of campaign with JATAM asserted that nickel mining has caused environmental problems such as polluted water and air. JATAM is an NGO focusing on issues concerning human rights, gender, the environment, indigenous people and social justice in relation to the mining, oil and gas industries.
In Morowali, for instance, fishermen were forced to switch jobs to become unskilled labourers due to limited catches following the mining activities, he said.
“People’s livelihood is under threat due to mining.”
Other associated issues include forest loss which makes regions prone to flooding as well as the threats to habitats, Mr Nahar added.
North Maluku and Sulawesi are home to endangered species and located near the Coral Triangle in the Pacific Ocean, where 75 per cent of the world’s coral species are located.
IMIP, IWIP, and Konawe Industrial Zone are all near the bay and companies pipe their waste to the sea, Mr Nahar claimed. The disposal process is known as deep sea tailings placement.
“There’s the Coral Triangle and internationally people want to preserve it. And one of our concerns is about the deep sea tailings which would impact the coral reefs and marine biota severely,” he said.
To operate the smelters, a huge amount of energy is also needed. The bulk of power supply requirements is met by coal power plants in the area.
Last year, Indonesia pledged to retire all its coal power plants gradually. However, a recent report by research organisation Centre for Research on Energy and Clean Air (CREA) revealed that China could still be funding new coal plant projects for the nickel and steel complexes in Indonesia.
Indonesian Nickel Miners Association (APNI) secretary general Meidy Katrin Lengkey acknowledged the fact that mining requires a lot of energy.
“When we talk about industries, of course, they require a big amount of energy, so we have to build coal power plants or work together with PLN (Perusahaan Listrik Negara, Indonesia’s state power firm).
“Like it or not, what is available at the moment is coal (power plants). Even though in the long term we hope to use renewable energy, green energy,” she said, adding that it would take time for Indonesia to change its fuel mix.
Mdm Lengkey said the miners are fully aware that nickel is toxic and therefore there are regulations mandating that industries cannot be located near settlements.
However, in reality it is not always the case, she added.
She noted a case in Kolaka, Southeast Sulawesi, where almost 60 per cent of villagers living near a coal power plant were said to suffer from damaged lungs.
There is a coal power plant there supporting the nickel mining industry.
WAWONII RESIDENTS STILL RESISTING NICKEL MINING
Wawonni is a three-and-a-half hour ferry ride from Kendari. The locals said they do not want to end up like the residents in North Konawe and Morowali.
Mdm Ratna, the farmer, said that she does not want mining company GKP to operate there because it would have a huge impact on the environment.
“First of all, it would affect the water. Secondly, the dust, and where would they dispose of the tailings?
“If they dispose of the tailings down under (in the sea) and people here go fishing, they wouldn’t be able to catch fish again because the seawater would be polluted. The impact is huge,” she said.
Another farmer, 50-year-old Sariah, is worried that the company’s activities would encroach on her plantation, which is near where GKP wants to clear land.
“I am a widow with four children. Our lives depend on the plantation,” she said.
Wawonii residents told CNA that for the past few years, their harmonious everyday life has been disrupted due to the ongoing mining conflict.
Mr Nahar of JATAM opined that mining is particularly dangerous for Wawonii island.
Considering its size of 867 sq km, Wawonii is categorised as a small island according to the Indonesian regulation on the management of coastal zones and small islands. Enacted in 2007, the regulation forbids mining on small islands.
“Small islands have different characteristics from big ones and they have limited resources,” said Mr Nahar.
However, it appears that the locals are fighting a losing battle and the mining project is set to go ahead as planned.
Deputy regent Andi Muhammad Lutfi, however, said the government would make sure that the environment is protected.
“We will set up a monitoring team. We will set up one which will evaluate the environmental consequences of mining,” he told CNA.
ADHERENCE TO ENVIRONMENTAL REGULATIONS
With EVs being the trend for the future, what Indonesia needs to do is minimise all possible environmental risks, an industry player said.
Mdm Lengkey from the nickel miner association said Indonesia has many regulations on environmental protection, and the industry should adhere to these regulations.
“Mining is complicated. Sometimes we want to follow the rules but there are many influences and power play as well as interests involved,” she told CNA, without elaborating.
Mr Mohammad Faisal, executive director of Center of Reform on Economics (CORE) Indonesia, a think tank which focuses on research in economy, industry, trade, regional development and public policy, believed that the key lies in “having consistent policies.”
“This is not only dependent on one or two stakeholders, but everything must be integrated so it would be effective.
“This means that general regulations must match regulations which oversee operational procedures,” he added.
Mr Ashov from Trend Asia said authorities should make their priorities clear and invest in electric public transport instead of individual cars.
“This is also related to the volume of mining needed to be extracted,” he said, explaining that less minerals are needed if carmakers produce public transport vehicles instead of individual cars.
The government has announced plans to use EVs as public transport for the country’s new capital Nusantara in eastern Kalimantan, although no details have been shared with the public so far.
Mr Rasman Manafi, director for marine and coastal spatial management with the Coordinating Ministry of Maritime and Investment, told CNA that they keep a close eye on the situation on the ground.
“We at the coordinating ministry are pushing for an integrated plan between (projects) on land and at sea, so what we do on the land would be harmonious with what’s happening in the sea.
“There is a ministry and agency tasked to control law enforcement and to revoke permits.”
But Wawonii residents such as Mdm Ratna still harbour hope that the government would call off the mining project before it is too late.
“I will protect my land until my very last (drop of) blood.”