Long before the energy transition gained momentum around the world, nickel powerhouse Indonesia dreamed of harnessing its mineral riches to transform its economy and wield greater leverage in the international marketplace.
The global shift away from fossil fuels and the growing demand for the critical minerals powering green technology have turbocharged Jakarta’s ambitions. Nickel is a key component in electric vehicle batteries, yet few countries can claim as big of a stake over the global nickel sector as Indonesia, which is home to some of the world’s biggest nickel reserves and mined half of the global supply in 2022.
Now, with more than 100 million voters expected to head to the polls on Wednesday to elect Indonesia’s first new president in a decade, the future of Jakarta’s bid is set to come into sharper focus. Current President Joko Widodo, commonly referred to as Jokowi, is set to leave office in October after holding power for a decade—the maximum term length allowed—raising questions about how exactly his successor will continue to shape the country’s booming sector.
“It’s clear that Indonesia doesn’t just want to be a source of raw materials that are then made more valuable in other parts of the world,” said Alex Becker, a policy analyst at Benchmark Mineral Intelligence. “They would probably like to have at least a refined nickel, if not a full-fledged battery, industry that makes them more valuable on the world stage.”
Those ambitions were crystallized under Jokowi, who ramped up efforts to attract global investment and remake Indonesia into a regional battery-making power, at one point even proposing the creation of an OPEC-style cartel for nickel. Eager to build out higher-value manufacturing capacity, a process known as downstreaming, Jokowi banned raw nickel exports in 2020. That move pushed interested investors, mostly Chinese firms, to instead develop Indonesian smelters and process the minerals in the country. He didn’t stop with nickel, either; during Jokowi’s tenure, Jakarta has at various points also restricted exports of bauxite, palm oil, and coal, while a new ban on copper ore exports is set to take effect in May.
The race is now on for his successor. Three candidates are jockeying for his position: Prabowo Subianto, the current defense minister who has ties to the brutal dictator Suharto and faces accusations of committing human rights abuses; Ganjar Pranowo, the former governor of Central Java; and Anies Baswedan, the former governor of Jakarta.
Prabowo—whose running mate is, controversially, Jokowi’s own son Gibran Rakabuming Raka—is the current favorite to win, with recent polling predicting that he will win more than 50 percent of votes on Wednesday. (If no one candidate receives more than 50 percent, then the election will head to a runoff in June.) The duo have vowed continuity with Jokowi’s policies and have hailed them as a path to economic prosperity, with Gibran even accusing rivals of being “anti-nickel.”
“This is the tenacity we must maintain,” Prabowo declared in the run-up to the vote. “We would be better off exporting electric car batteries or electric cars, not exporting raw nickel to be processed by other countries.”
“The line is that ‘we’ve achieved so much in the mineral downstream sector and that a Prabowo-Gibran presidency will continue along that same path,’” said Eve Warburton, the director of the Australian National University’s Indonesia Institute and author of Resource Nationalism in Indonesia. “It’s been hard for other candidates to differentiate themselves from Prabowo and Gibran when it comes to this particular policy intervention because according to the government and the government’s numbers, it has been a huge success.”
When Jokowi took office in 2014, for example, Indonesia’s exports of ferronickel, a processed form of nickel, stood at $83 million; by 2022, that value had exploded to $5.8 billion. Beyond exports, Indonesia is now also seeing record levels of foreign direct investment, roughly one-third of which has poured into the country’s metals and mining sector.
Indonesia’s efforts to build out its nickel industry stretch back more than a decade, even before Jokowi’s tenure. Then-President Susilo Bambang Yudhoyono introduced legislation in 2009 that ordered firms to hire domestic miners and stressed that all mining efforts should focus on boosting national interests. To attract foreign investment, Yudhoyono also imposed Indonesia’s first ban on raw nickel exports in 2014, although those restrictions were later loosened in 2017.
Indonesia’s ambitions for its nickel sector “date back to the Yudhoyono years and the 2009 mining law,” Warburton said. “Since then, it’s been enshrined in law that Indonesia should be getting more value out of its minerals.”
Yet the sector has been beset by a number of challenges in the years since, particularly as concerns grow over the industry’s pollution, environmental toll, and safety issues amid reports of exploding smelters and other deadly incidents. In one of the deadliest cases, an explosion at a Chinese nickel plant in December killed 21 people and wounded dozens more.
“The real problem with the nickel downstreaming policy is just the seemingly total lack of safeguards,” said Kevin O’Rourke, the principal of Reformasi Information Services, an Indonesian political risk analysis consultancy.
And other challenges loom over the sector’s future. While major Chinese investors and EV makers, including BYD, have flocked to Indonesia with billions of dollars in investments, Jakarta’s approach has risked alienating it from other prospective partners and international markets, including in the United States.
With Washington, Jakarta had been pushing for a limited critical minerals trade agreement that would allow Indonesian companies to cash in on hefty tax credits via the Inflation Reduction Act. But that bid sparked fierce pushback in Washington, with nine U.S. senators writing a letter in objection to such a deal last October.
We “have concerns regarding Indonesia’s standards for labor rights, environmental protection, safety, and human rights,” the senators wrote. They also cited concerns about Chinese firms’ investments in Indonesia and Jakarta’s nickel ore export ban. In the end, the trade agreement never materialized.
As demand for the energy transition drives the development of new kinds of EV batteries, experts say the changing technology landscape could also complicate Jakarta’s future plans. While nickel is a crucial component in the powerful nickel-manganese-cobalt (NMC) batteries that are currently popular, some firms are eyeing new kinds of batteries that do not use the mineral.
“Indonesia’s nickel reserves and industrial ambitions are at risk of being rendered less valuable by changes in battery chemistry,” Cullen Hendrix, a senior fellow at the Peterson Institute for International Economics, wrote last November. The dominance of NMC batteries “may be fleeting,” he added.
One case in point is Tesla. Despite Jakarta’s yearslong effort to court the company’s investment, the EV maker has resisted investing in the country, instead adopting batteries that do not require Indonesia’s mineral riches.
“A lot of it depends on how quickly the technology evolves,” said Warburton of ANU. “The original plan rested for a long time on this idea that nickel would be the main ingredient needed to really kick-start this industry. The market seems to be suggesting that that could shift.”
