Indonesia expands green economy with e-vehicles

Electric vehicle manufacturing is emerging as one of the key sectors in the Indonesian economy, with the nation's government courting foreign investments and promoting green growth.

Indonesian President Joko Widodo met with Tesla CEO Elon Musk on May 14 to persuade the world's biggest EV maker to set up shop in Southeast Asia's largest economy.

Widodo, whose country currently chairs the G20, has also invited Musk to attend a summit of the bloc that will be held on the resort island of Bali in November.

Tesla is just one of several companies that Indonesia is eyeing in its bid to develop an EV industry. In March, Hyundai opened an EV manufacturing plant in West Java-the South Korean automaker's first factory in Southeast Asia.

Indonesia has also imported 30 electric buses from China, and these are now used in the capital Jakarta.

Analysts said Indonesia's huge nickel and copper reserves-among the world's largest-make the country an investment destination for EV manufacturers. Nickel and copper are needed to make lithium-ion batteries that power EVs.

Indonesia has also been offering several incentives to encourage investment in EV manufacturing, including tax allowances and holidays, as well as tariff cuts for imported machinery and materials used in EV production.

The Indonesia Battery was established last year to oversee the development of the nation's battery manufacturing industry.

Manufacturing lifeline

Easy access to the materials used in making batteries is the lifeline of an EV manufacturer, said Fabby Tumiwa, executive director of the think tank Institute for Essential Services Reform in Jakarta.

Tumiwa said EV manufacturers want to secure the materials source needed to produce batteries and this is why it makes sense for EV companies to invest in Indonesia.

Apart from providing resources and fiscal incentives, Indonesia also offers a huge consumer market for foreign EV investors.

Indonesia aims to produce 400,000 electric cars in 2025, with the figure reaching 5.7 million by 2035. To encourage local consumers to buy EVs, the country offers tax breaks and is building more charging stations.

While using EVs can help reduce emissions, the extraction of minerals needed to make batteries harms the environment and local communities, according to environmentalists.

Melky Nahar, head of campaigns at the Mining Advocacy Network, said mining is "destructive" and has caused flooding in villages, and miners also suffer from poor working conditions.

Aulia Hakim, from the Indonesian Forum for Environment, said people in the local community understand that mining is a useful source of employment, "but people also suffer from environmental damage".

Leonardus Jegho is a freelance journalist for China Daily.