Indonesia breaks ground on China-backed 'green' industrial zone on Borneo

The estate will be a hub for making batteries for electric cars and solar panels.
Indonesia breaks ground on China-backed 'green' industrial zone on Borneo Indonesian President Joko 'Jokowi' Widodo talks to officials at the site of a project to construct a 30,000 hectare (116 square mile) industrial estate in North Kalimantan, a province in the Indonesian section of Borneo Island, Dec. 21, 2021.
Handout Photo from the Cabinet Secretariat of the Republic of Indonesia

Indonesian President Joko “Jokowi” Widodo broke ground Tuesday on a U.S. $129-billion “green” industrial estate on Borneo to be built with investments from China and the United Arab Emirates and electrified by a Chinese-funded hydropower plant.

When finished the 30,000-hectare (116-square-mile) industrial zone in North Kalimantan province would be almost as big as the island-nation of Malta and be a manufacturing hub for solar panels, batteries for electric cars, industrial silicon, and other products.

The government is targeting 2024, Jokowi’s final year in office, to complete construction of the so-called Green Indonesian Industrial Estate, located in Bulungan regency.

“A leap in Indonesia’s economic transformation starts from here,” Jokowi said at a ceremony at the site to launch construction of the industrial zone.

The new zone will create jobs and contribute significantly to state revenue, he said.

“This is a cooperation between Indonesia, Indonesian investors, investors from the United Arab Emirates, and investors from China – all of them together,” he said.

“What will be produced in North Kalimantan are almost all finished goods, so they will provide great added value for our country because we will sell them already in the form of finished goods,” Jokowi said.

Luhut Pandjaitan, the coordinating minister for maritime affairs and investment, said the project would cost up to 1,848 trillion rupiah (at least $129 billion).

So far, at least 10 major investors from China have committed to investing in the zone, Luhut said.

“They are investors who have proven to have very good investment track records and have invested tens of billions of dollars in downstream nickel production in Indonesia in recent years,” Luhut said at the ceremony.

Officials at Luhut’s ministry declined to provide details on those Chinese investors.

Nickel, a metal mined in the Sulawesi and Moluccas regions of Indonesia, is used for making batteries for electric vehicles.

According to information from the Ministry of Energy and Mineral Resources, Chinese-linked companies dominate the nickel smelter industry in Indonesia. These firms include PT Sulawesi Mining Investment, PT Virtue Dragon Industry, PT Huadi Nickel Alloy, and PT Harita Nickel.

In May, China’s Zhejiang Huayou Cobalt Co. said it would partner with EVE Energy, a maker of batteries for electric vehicles, to establish a $2.08-billion nickel and cobalt plant on Halmahera, and island in the Moluccas chain.

Hydropower plant and dams

Meanwhile, construction already is underway for a 9,000 megawatt hydroelectric plant that would power the future industrial zone.

Kayan Hydro Energy is building the $17.8 billion plant with funding from the Power Construction Corporation of China (PCR), Luhut said.

The hydropower project, which began in 2019 and includes the construction of five dams, has attracted other investors, he said.

“At first, the response was lukewarm, but towards the end of 2019, some investors began to respond very seriously,” Luhut said. “And this requires courage, good execution skills, and great financial strength to realize a hydropower plant.”

There are concerns however, that the five dams being built on the Kayan River and other rivers in the province will threaten the region’s pristine forests and ecosystem. The Kayan River runs through the northern part of Kalimantan, the Indonesian section of Borneo Island, where vast swaths of forest have been cleared for logging, mining, and the cultivation of palm oil.

Fabby Tumiwa, executive director of the Institute for Essential Services Reform (IESR), a private think-tank, said the government should live up to the green label of the industrial zone and make up for forest areas lost in its construction.

“The president’s dream is to make a truly ‘green’ area, so everything produced there must be environmentally friendly,” Fabby said, adding that the government needed to impose strict rules allowing only renewable energy in the area.

Indonesia, Southeast Asia’s largest and most populous country, is the world’s eighth most polluting one with 2 percent of global greenhouse-gas emissions to its name, according to the World Resources Institute.

“If we talk about China, domestically they are consistent about pollution control. They even have the strictest industrial standards in the world, requiring industries there to reduce the use of coal,” Fabby told BenarNews, an RFA-affiliated online news service.

“What needs to be seen is how good local regulations are. Do they provide incentives and require incoming investors to comply with the latest, most efficient technology?”

No. 2 investor 

China is the second-biggest investor in Indonesia. Its investments here doubled to almost $4.8 billion in 2020 from $2.4 billion in 2017.

China is funding projects in Indonesia as part of Beijing’s ambitious Belt and Road Initiative (BRI) worldwide infrastructure-building program. These include the $6 billion Jakarta-Bandung high-speed rail project, which is expected to be completed by the end of next year.

According to a study by AidData released late September, Indonesia owes $17.28 billion in “hidden debt” to China, more than four times its $3.90 billion in reported sovereign debt.

Nearly 70 percent of China’s overseas lending is directed to state-owned companies and private-sector institutions. For the most part, the debts do not appear on government balance sheets, said AidData, a U.S.-based international development research lab.

“The ‘hidden debt’ problem is less about governments knowing that they will need to service undisclosed debts (with known monetary values) to China than it is about governments not knowing the monetary value of debts to China that they may or may not have to service in the future,” it said.

But this is not hidden debt, according to a deputy at the Coordinating Ministry for Economic Affairs.

“They are investments by Chinese companies,” Iskandar Simorangkir told BenarNews in October.

Reported by BenarNews, an RFA-affiliated online news service.


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