BACKGROUND
Indonesia finds itself at a pivotal moment as President-elect Prabowo Subianto is set to take office this month, amidst the ongoing minerals conflict between China and the West. Outgoing President Joko Widodo has fostered Chinese investments in the sector in recent years while maintaining diplomatic ties with Western nations. APAC Assistance has assessed Indonesia’s recent resource agreements with China, evaluating whether these reflect a short-term approach by President Widodo or signal a longer-term policy realignment under Prabowo, aimed at recalibrating Indonesia’s global alliances. We also analyzed how increased Western scrutiny of Chinese-linked sourcing could affect Indonesia’s supply chains.

MINERAL SECTOR DEALS AND DYNAMICS
Indonesia’s abundant reserves of nickel, copper, bauxite, and tin have positioned it as a key player in the global resource market, especially as demand for renewable energy and electric vehicles (EVs) rises. As the world’s largest nickel producer, Indonesia is projected to meet 70% of global demand for the mineral, vital for EV battery production, over the next five years. The country’s policies on downstream processing, which limit raw ore exports, have drawn significant international attention, with China leading in investments. Recent projects include a USD 478 million anode plant by China’s BTR New Material Group in Central Java, a USD 429 million expansion of a copper facility by China Nonferrous Metal Industry in West Nusa Tenggara, and a USD 8.6 billion agreement between Vale Indonesia and Chinese companies to build nickel refineries in Sulawesi. Additionally, in March, the government pushed two Chinese firms to develop a nickel smelter and steel plant in Southwest Papua for around USD 4.8 million.

Last year, Beijing and Jakarta signed $12.6 billion in agreements, focusing on electric vehicle (EV) batteries and clean energy projects. In March 2023, Ford and China’s Zhejiang Huayou committed $4.5 billion to a nickel project in Southeast Sulawesi. Since then, Chinese companies have invested over $30 billion in Indonesia’s nickel sector, now controlling 82% of the country’s nickel production and operating 43 smelters.
In 2023, the U.S. encouraged Indonesia to join the Mineral Security Partnership to reduce Chinese influence in its nickel industry and secure mineral supplies. This effort is linked to the U.S. Inflation Reduction Act (IRA), which restricts EVs from using materials from “foreign entities of concern.” However, U.S. efforts faced challenges when the Department of Labor listed Indonesian nickel as a product of child or forced labor, complicating Indonesia’s pursuit of a free trade deal. While Indonesia supplies nickel to Western companies like Ford and Tesla, U.S. firms like Freeport-McMoRan and Newmont have struggled with Indonesia’s resource nationalism policies.

OUR ASSESSMENT
President Widodo’s resource deals with Chinese companies, especially in nickel mining and processing, are seen as part of his legacy-building efforts. By banning raw nickel exports, he pushed foreign firms to invest in local processing, with China becoming a key partner. Chinese investments provided capital and technological expertise, supporting infrastructure like power plants for nickel smelting. These deals aim to position Indonesia as a critical player in the global EV supply chain while driving short-term economic growth.
Widodo’s resource strategy has focused on domestic value addition and infrastructure, heavily relying on China. As Prabowo Subianto is set to take office, he is expected to continue this industrial strategy but diversify international partnerships to balance geopolitical relations amid China-West tensions.
Contact us today for a detailed & in-depth risk assessment of Indonesia’s strategy amidst escalating tensions between China and the West, particularly in the resource sector. For more information about our services, please visit our website or contact our
Regional Director, Bhargav Reddy at bhargav_reddy@apacassistance.com.
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