This is how Indonesia hopes to recharge its economy

In a bid to spur economic growth, Indonesia has drawn up plans to convert its commodity-exporting mining sector into one that transforms raw materials into ready-to-use products, starting with nickel, which is used in lithium batteries of electric cars.

According to the country’s Minister of Investment, Bahlil Lahadalia, 2022 will be the year of downstream industries in Indonesia. Downstream industries process raw materials into finished products to add value.

Focus on downstream industries, export ban

Despite being a mineral-rich country, Indonesia’s minerals and coal sector contributed only 5% to Indonesia’s GDP in 2019, CNBC reported, citing data Extractive Industries Transparency Initiatives. The country has rich deposits of tin, nickel, cobalt and bauxite. Some of these elements are used as raw materials for the production of electric vehicles.

As part of the development plan for downstream industries, the Indonesian government plans to explore areas with rare earth materials and also to limit exports.

Indonesia’s Ministry of Energy and Mineral Resources has identified eight sites with rare earth reserves and plans to explore more areas through 2024.

“All eight are still in the early stages of exploration,” mines director general Ridwan Djamaluddin was quoted by The Star as saying.

Meanwhile, the country has enacted a landmark 2020 nickel ore export ban in a bid to force miners to develop nickel processing facilities. The government has also pledged to gradually stop exporting other raw materials.

“I think we can derive many benefits from stopping nickel ore exports,” CNBC quoted President Jokowi Widodo as saying in 2021, adding that the country would stop the export of raw materials for the ore. bauxite next year, followed by gold and tin ores.

How will this benefit Indonesians?

With the push towards downstream industries, the Indonesian government expects to generate more jobs, increase the sector’s profit margins and reduce carbon emissions. This will also help manage commodity price fluctuations and reduce import dependency.

Indonesia has 21 million tonnes of nickel, the largest nickel reserve in the world, according to the country’s Investment Coordinating Board, BKPM.

The country hopes to use the raw nickel to produce lithium batteries for electric cars, a move that will ultimately lead to economic growth.

At the end of 2020, President Widodo said that the government was working on lithium-ion battery innovations and it was expected that the country would start producing batteries in 2-3 years.

As Indonesia is a key resource base for nickel, the country’s production outlook would “accelerate the pace and extent of decarbonization of the transportation sector internationally,” analyst Shirley told CNBC. Zhang of Wood Mackenzie.

(Edited by : Shoma Bhattacharjee)

First post: STI


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