Electrifying the Future: Indonesia's Push for Battery Industry and Collaborative Efforts with Australia

 

Missing a train is only painful if you run after it! This quote by Nassim Nicholas Taleb, author of "The Black Swan: The Impact of the Highly Improbable," perfectly captures the urgency for Indonesia's battery industry, which is a critical turning point in its development.

Indonesia, the world's largest nickel producer, is seeking to capitalize on the global demand for electric vehicle batteries by establishing a domestic battery industry. With the shift towards renewable energy, the need for electric vehicles is expected to increase rapidly in the coming years, creating an opportunity for Indonesia to play a significant role in the global electric vehicle supply chain. 

Taking advantage of its membership in the Regional Comprehensive Economic Partnership (RCEP) that includes ASEAN countries plus Australia, China, New Zealand, Japan, and South Korea, Indonesia can open doors to significant opportunities to connect with global market chains. This advantage is further strengthened by the ease of processing certificates of origin (Surat Keterangan Asal Barang/SKA) and provision of preferential tariffs in the RCEP scheme, increasing Indonesia's potential to attract investors and become a key player in the battery industry from upstream to downstream.

However, the development of the battery industry in Indonesia faces challenges related to sustainable practices and social engagement, as well as a shortage of key materials for batteries, lithium.

One potential solution to Indonesia's lithium shortage is collaborating with other countries with abundant mineral reserves. Australia, for example, is one of the largest producers of lithium in the world, and its Western Australia region alone produces more than half of the world's lithium. Therefore, Indonesia's cooperation with Western Australia is expected to develop the lithium industry significantly. A Memorandum of Understanding (MoU) was signed on February 21, 2023, by Arsjad Rasjid, the Chairman of the Indonesian Chamber of Commerce and Industry (KADIN), and Western Australia's Deputy Premier Hon Roger Cook MLA. This MoU aims to explore potential partnership opportunities in critical minerals for the thriving battery and electric vehicle (EV) industry.

According to the Memorandum of Understanding (MoU), KADIN and the Western Australian Government will collaborate on the supply chains of critical minerals in their respective regions. They will also exchange information on updates to legislation or regulations. The MoU aims to speed up cooperation and encourage the industry's growth to benefit the global battery and electric vehicle sector. Additionally, the MoU demonstrates the dedication of both countries to promoting investment and cooperation for the mutual benefit of Western Australia and Indonesia. 

One of the key benefits of this collaboration is that it will help ensure the sustainable and responsible development of the battery industry in Indonesia. Indonesia has faced some criticisms in the past for its lack of environmental and social safeguards in the mining sector, and the lithium industry is no exception. By partnering with Australia, which has a strong track record of responsible mining practices, Indonesia can learn the best practices for sustainable lithium extraction and processing. This cooperation will help ensure that the development of the battery industry in Indonesia is not only economically viable but also socially and environmentally responsible.

Another potential benefit of the Indonesia-Australia lithium partnership is that it can help establish a regional supply chain for electric vehicle production. The Association of Southeast Asian Nations (ASEAN) has identified electric vehicle production as a priority area for regional cooperation under the ASEAN Smart Cities Network. By collaborating with Australia on lithium processing, Indonesia can establish a solid domestic downstream industry for battery production, which can then be integrated into the broader regional electric vehicle supply chain. The collaboration may help position ASEAN as a significant player in the global electric vehicle market and contribute to the region's economic growth. Domestically, this will also support Indonesia's position, which currently has four electric bus companies, three electric car companies, and 35 electric motorcycle companies by 2022 in the global electric vehicle market competition.

Further looking through the lens of Indonesia's chairmanship in ASEAN 2023, the lithium partnership with Australia can be a significant opportunity to promote regional cooperation and achieve shared goals for sustainable and inclusive economic development. One potential area of focus for the chairmanship could be to encourage knowledge-sharing and capacity-building on responsible lithium extraction and processing across ASEAN countries, leveraging the expertise of Australia and other partners. This can help ensure that the development of the lithium industry in the region is socially and environmentally responsible and contributes to the United Nations' Sustainable Development Goals.

Various actions can be implemented to guarantee the collaboration's accomplishment. First, the governments of Indonesia and Australia can establish a joint committee to oversee the implementation of the cooperation. The committee can consist of experts in the lithium industry and representatives from relevant government agencies. The committee can develop a roadmap and action plan for the cooperation, including identifying areas of collaboration, setting targets and timelines, and monitoring progress.

Second, the governments can provide incentives for private sector investment in the lithium industry. Tax incentives, financial support, and simplified regulatory frameworks could be implemented. The incentives can be designed to encourage investment in collaboration between Indonesia and Australia and promote the development of a regional value chain.

Third, both countries can collaborate on research and development in the lithium industry. This can include joint research projects, sharing data and information, and collaboration on developing new technologies and products. The partnership can focus on areas such as sustainable practices, efficient extraction and processing methods, and the development of new applications for lithium.

Last but not least, both countries can invest in education and training programs for workers in the lithium industry. It can be including scholarships, internships, and vocational training programs. The programs can focus on developing lithium extraction, processing, battery manufacturing, environmental management, and social engagement skills. The education and training program is essential in ensuring the opening of employment opportunities for the Indonesian workforce.

In conclusion, Indonesia's push for a battery industry and its collaborative efforts with Australia signify a significant step towards a sustainable future. By leveraging each other's strengths and resources, both nations can accelerate the industry's growth and drive the adoption of electric vehicles. However, this collaboration also highlights the importance of international cooperation in addressing global challenges such as climate change. With continued efforts and commitment, Indonesia and Australia can pave the way for a cleaner and greener forthcoming for future generations. 

Indonesia must not miss the train this time!

-Yudha Basuki