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Indonesia at crossroads: Navigating challenges in EV revolution

Jakarta Post - October 9, 2023

Vijay Eswaran, Hong Kong, China – In the midst of a worldwide shift toward sustainable transportation, nations are racing to take pole position in the fast-emerging electric vehicle (EV) industry. The ASEAN region, known for its economic dynamism, is becoming a pivotal player in this race, set to redefine the future of mobility.

As the call for cleaner modes of transportation is growing stronger, some ASEAN countries have seized the moment positioning themselves as central players in the EV revolution. Thailand, Malaysia, and Vietnam have all made strategic investments in infrastructure and research to attract EV manufacturers.

Thailand, for instance, has already successfully drawn major automakers such as China's Neta Auto to establish production facilities within its borders. Malaysia launched the Battery Electric Vehicle Global Leaders initiative in March this year as part of the government's push to make the country a regional hub for the EV industry and Tesla was the first successful applicant for support under this program, setting up its regional headquarters in Malaysia's Cyberjaya.

Meanwhile, Vietnam recently authorized Foxconn Global's US$200 million investment into a factory for the production of EV components.

As neighboring countries vie for supremacy in the rapidly evolving EV market, Indonesia stands as a unique contender, seen by some as a "sleeping giant" due to its untapped resources and latent capabilities.

Indonesia has actively engaged with Elon Musk to secure his involvement in its EV ambitions, exemplified by President Joko "Jokowi" Widodo's visit to Tesla headquarters. Despite setbacks, like Tesla choosing Malaysia for its regional headquarters, Indonesia is determined to leverage its resources and market potential to become a key player in the EV sector.

The government's pursuit of a partnership with Musk, coupled with introduced tax incentives, reduced import tariffs on EV components, and streamlined regulations, underscores this commitment. Furthermore, incentives for the public to purchase EVs have fostered economic growth, job creation, and technological advancement while spurring the growth of local EV entities, especially in the two-wheel sector.

These incentives have spurred the growth of local EV entities, particularly in the two-wheel electric vehicle sector. Local producers like Maka, established by a former Gojek executive, plan to set up a factory by the end of 2023, indicating a move away from reliance on China for two-wheeler EVs.

What makes this possible is Indonesia's abundance of nickel reserves. As a critical component of EV batteries, nickel is the lifeline of the electric vehicle industry. With approximately 25 percent of the world's nickel reserves situated within its borders, Indonesia has emerged as a key player with a reliable and sustainable supply of this essential material for battery production. Furthermore, Indonesia possesses substantial cobalt reserves, essential for EV batteries. It also holds sizable deposits of other vital metals like manganese and lithium.

Despite the bright outlook, there are also reasons for concern.

First, the long-term environmental and labor implications of nickel mining can be devastating. Environmental problems like pollution have been observed at mining locations in Maluku and Sulawesi. Additionally, confrontations between local and foreign workers have resulted in fatalities, as reported by the Indonesian police.

Second, as for the environmental impact, serious questions remain about how the country will align its EV ambitions with the planned transition to more renewable energy sources. One can argue that the push for EV technology is a way to create demand for sustainable technologies. But on the other side, if local power producers keep relying mainly on abundant and cheap coal sources, their good intentions will fall short.

Third, the Indonesian government must also develop policies and infrastructure that support EVs not just in Java but throughout the entire archipelago. Although the government has declared that the new capital in East Kalimantan will be exclusively accessible by EV, there isn't a definitive strategy to extend this throughout the nation.

To sum it up, while there are abundant opportunities, there are also discernible risks and obstacles that could have a lasting effect on the country. Indonesia should ensure that vehicle electrification is accompanied by a fair transition to renewable energy. Otherwise, the country might find itself caught in a cycle of consumerism, with EVs becoming merely a lifestyle choice rather than a force for genuine change.

Indonesia's pursuit of EV leadership goes beyond economic aspirations; it is deeply intertwined with the country's commitment to environmental stewardship. By leveraging its nickel reserves for EV battery production, Indonesia contributes to a cleaner, greener transportation landscape. Furthermore, the nation's success in the EV sector can serve as a testament to the art of balancing economic progress with responsible resource management, setting a positive example for other developing nations.

Currently, many Indonesians have not yet embraced the idea of switching to EVs for personal use, given their high cost, the sparse infrastructure throughout the archipelago, and concerns over depreciation and performance.

However, there's a budding interest in the future of mobility. Conversely, there's a growing endorsement for the use of EVs in public transport, particularly as its effectiveness and benefits become more evident among the Indonesian populace. Consequently, this represents another facet of electric mobility that the Indonesian government should explore, especially to promote a fair energy transition within the nation.

In conclusion, Indonesia stands at a pivotal juncture of transformation. Its participation in the ASEAN EV hub race provides a unique avenue to awaken its latent potential – and it provides an opportunity to redefine its narrative on the global stage. As the EV race accelerates, the choices today will not only shape the nation's own destiny but also exert a substantial influence on the future of mobility and sustainable development worldwide.

Indonesia needs to find a successor who is willing to continue and improve the policy toward sustainability so it can transform the nation.

[The writer is executive chairman of QI Group.]

Source: https://www.thejakartapost.com/opinion/2023/10/09/indonesia-at-crossroads-navigating-challenges-in-ev-revolution.htm