Leo SuryadinataandSiwage Dharma Negara

Asian Angle | Will China concerns prove decisive in Indonesia’s presidential race?

China’s growing influence in Indonesia’s nickel industry is a cause for concern amid accidents at smelters and lack of access to Western markets

While the current and next administrations will need Chinese investment in the economy, two presidential candidates say the country needs to diversify its trade ties

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A street vendor pulls his cart past a banner showing presidential candidates contesting the upcoming general election in Jakarta, Indonesia, on Saturday. Photo: Reuters

Leo SuryadinataandSiwage Dharma Negara

Published: 10:00am, 21 Jan 2024

A recent accident at PT Indonesia Tsingshan Stainless Steel smelter in the Indonesia Morowali Industrial Park, South Sulawesi, which killed 21 Indonesian and Chinese workers and injured many workers, has put President Joko Widodo’s downstreaming (hilirisasi) policy under the spotlight.

This is not the first such incident: in fact, there have been reports of poor health and safety standards in several smelter sites constructed and operated by Chinese companies in Indonesia, and several accidents. Yet, the Indonesian authorities seem to ignore safe practices for the sake of getting more Chinese investment. Thus, the government seems to be prioritising achieving economic targets at the expense of workers’ safety.

With a month to go before the February 14 presidential and general elections, this factor might have some potential to be an election issue.

A police officer stands guard near the site where a furnace explosion occurred at the PT Indonesia Tsingshan Stainless Steel smelting plant in Morowali, Central Sulawesi, Indonesia, on December 24, 2023. Photo: AP

In one recent interview, Jusuf Kalla, a former vice-president who supports candidate Anies Baswedan in the coming election, said 90 per cent of Indonesia’s nickel industry was controlled by China. Most, if not all, of the nickel products from Indonesia’s smelters were exported to China for Chinese domestic needs, thus leaving little benefit for Indonesia. Kalla further criticised the government’s policy for creating dependency on technology from China, particularly in the nickel industry.

Indeed, China’s growing economic influence has drawn mixed perceptions in Indonesia. As the country approaches the elections, the topic of China’s domination in the economy can become a provocative issue. In the 2019 election, opponents of Jokowi used the same issue to stir negative perceptions concerning his economic policy platform, which they said laid a “red carpet” to China. Will the same pattern happen in the coming elections?

We argue that this election may be different. First, Indonesia’s government and the next administration need more Chinese investment to support the country’s downstreaming policy, which all three presidential candidates rhetorically support, albeit in differing degrees.

The present government openly invited foreign countries to invest in the nickel processing industry, given that Indonesia needs capital and technology in this field. The United States, European Union, Japan and China responded, but Beijing, which offered more competitive prices and superior technology, ultimately won out. This decision has proved critical for Indonesia to accelerate its downstreaming policy in the nickel industry.

The PT Indonesia Morowali Industrial Park, one of the biggest nickel producers in Indonesia. Former president Jusuf Kalla has claimed 90 per cent of Indonesia’s nickel industry is controlled by China. Photo: AFP