The true cost of China’s hold on Indonesia’s nickel

This article was first published by Pacific Forum and is republished with kind permission. Read the original here.

During the 43^rd ASEAN Summit in Jakarta on September 5-7, 2023, Indonesian President Joko Widodo and Vice President Kamala Harris discussed the potential for a US-Indonesia Critical Minerals Specific Free Trade Agreement (CMS-FTA).

This FTA would allow the US to receive more Indonesian nickel for electric vehicle (EV) batteries, enabling Indonesia to benefit from the tax incentives for EV purchases based on the Inflation Reduction Act, which the US Congress passed in 2022.

Achieving this CMS-FTA is a goal for US-Indonesia relations under the Comprehensive Strategic Partnership established in November 2023.

However, on October 24, nine US senators sent out a bipartisan letter addressed to the US trade representative, treasury secretary, energy secretary, and commerce secretary expressing concerns regarding the CMS-FTA.

These include weak labor protections in Indonesia, Chinese dominance of its mining industry, environmental implications, and lack of community engagement among Chinese and Indonesian workers.

Indonesian policymakers should take this as a wake-up call to acknowledge and address the absence of beneficial environmental, social, and governance practices in its nickel industry, including accounting for the role of Chinese investments.

Unpacking Indonesia’s nickel

Indonesia, an emerging middle power in the Indo-Pacific, is a global hub for critical mineral reserves and production, with diverse resources including copper, gold, tin, silver, bauxite, iron and nickel.

One key to Indonesia’s mining industry is nickel, with extensive reserves in the Kalimantan, Sulawesi and Maluku islands, soaring