In recent years, industrialization, especially in the context of global Electric Vehicle (EV) adoption, has been a hot topic. The number of EV users has skyrocketed from 1 million in 2017 to 10 million in 2022 globally, in stark contrast to the slower growth from 100,000 to 1 million between 2012 and 2017. One of the most critical aspects of EVs is nickel, as it serves as the primary source for batteries. As the country with the largest reserves in Nickel, Indonesia finds itself in the spotlight. The increasing demand for nickel has prompted the government to invest in building smelters for nickel production within the country, before exporting it, mainly to China. This initiative has sparked a significant debate: Is mining nickel and constructing smelters the right course of action?
Supporters of nickel development emphasize the need to make the most of nickel’s value as a crucial component in EV batteries. They believe that doing so can significantly boost economic growth and technological progress.
On the other hand, critics of the nickel industry argue that its advantages primarily benefit China, a major player in this field, and they express serious concerns about its impact on the environment. For instance, Mr. Ito, a fisherman from Bahodopi, Central Sulawesi, highlights the environmental consequences of nickel extraction by sharing his experience of a 70 percent income reduction due to water pollution from nickel mining activities.
At the national level, the Compound Annual Growth Rate (CAGR) of the nickel sector from 2017 to 2022 has exhibited a remarkable 29% increase per year. This substantial growth is further underscored by the astounding growth in Non-Tax State Revenue (PNBP), which surged from a mere US$49 million in 2016 to an impressive US$784 million in 2022.
On the regional front, the economic landscape in nickel-rich areas across Indonesia has experienced substantial expansion. Take, for example, Morowali in Central Sulawesi, where the average economic growth rate from 2015 to 2022 stands at a remarkable 11.7%. Moreover, the GDP stemming from manufacturing in this region has soared by an impressive 73%, a substantial contrast to the modest 8% growth observed in 2010.
Interestingly, there has been a notable shift in Foreign Direct Investment (FDI) patterns. Historically, FDI was concentrated in Java, but now, 58% of FDI comes from regions outside of Java. This shift in economics presents a strong case for the government to support and promote the growth of the nickel industry and other mineral sectors across the entire archipelago.