Indonesian Minister Faces Opposition Over China's Nickel Investment

Indonesian Minister Luhut Binsar Pandjaitan is facing significant opposition over China's investment in Indonesia's nickel downstreaming sector. Senior economist Faisal Basri has been particularly vocal, criticizing the government's decision to allow Chinese involvement, arguing that the benefits are disproportionately skewed in China's favor.

Basri highlighted that 90% of the added value from nickel downstreaming goes to China, while Indonesia only receives 10%. He emphasized that the aggressive push for nickel downstreaming in Indonesia world benefits China more than the local economy. Basri pointed out that although Indonesia's GDP increased 1.8 times from 2010 to 2023, and the regional GDP in Morowali district surged 25.2 times, household consumption expenditure in Morowali only grew 2.2 times.

Why this matters: This matter has significant implications for Indonesia's economic development and its relationship with China. If not managed carefully, it could lead to unequal distribution of sustainability and negative consequences for local communities.

In a public discussion on Pancasila's Birthday, Basri stated, "The nickel is in Morowali. We have nickel ore, for example, worth Rp 100, and then invite China to process it into ferronickel with an added value of Rp 300. The added value that goes to the region and the central government is almost zero." He further criticized the government for providing tax incentives and easing restrictions on foreign workers, which has attracted Chinese smelters to Indonesia.

Basri's remarks highlight a broader concern about the economic impact of foreign investments in Indonesia's resource-rich regions. Despite the significant increase in exports from Morowali, which recorded a 107.1 times increase, the local population has seen minimal markets benefits. Basri noted, *"This means that the fortune from this nickel mine trickles down very little, all exploited for the interests of non-Morowali residents. "*

The controversy comes amid Indonesia's efforts to strengthen its economic ties with China. President Joko Widodo recently met with Chinese President Xi Jinping to discuss joint projects, including the development of Indonesia's new capital city, Nusantara. The two leaders signed several agreements, aiming to increase cooperation in various sectors such as health, research, and technology.

Indonesia's ambition to become a major supplier of nickel and other raw materials to China's burgeoning electric car industry is a key factor in this partnership. China's advanced technology in processing raw materials makes it an attractive partner for Indonesia. However, the economic supply benefits for local communities remain a contentious issue.

Basri's criticism highlights the need for a more balanced approach to foreign investments, ensuring that local communities benefit from the wealth generated by their natural resources. As Indonesia continues to chart its relationship with China, the government faces the challenge of balancing national economic growth with local economic equity.

While China's investment in Indonesia's nickel downstreaming sector brings advanced technology and potential economic growth, it also raises concerns about the equitable distribution of benefits. The ongoing debate highlights the complexity of foreign investments in resource-rich regions and the importance of ensuring that local communities share in the prosperity.

Key Takeaways

• Indonesian Minister Luhut Binsar Pandjaitan faces opposition over China's investment in nickel downstreaming.
• Economist Faisal Basri claims 90% of added value goes to China, 10% to Indonesia.
• Nickel downstreaming benefits China more than local economy, despite Indonesia's GDP growth.
• Basri criticizes government for providing tax incentives and easing foreign worker restrictions.
• Debate highlights need for balanced approach to foreign investments, ensuring local communities benefit.