Global Courant
JAKARTA – As the first and only Indonesian leader with a commercial background, albeit from the heart of rural Java, President Joko Widodo’s preoccupation with the economy and attracting foreign investment always dominates his agenda on trips abroad .
So it was with his last visit to Australia, but with an important difference. Buoyed by the rapid growth of the electric vehicle (EV) industry, there are signs that the two giant neighbors have finally found the foundations for a stronger and more lasting relationship.
“I think this will be a huge transformation of the bilateral economic space because it has bigger implications,” former Australian diplomat Kevin Evans, director of the Australia-Indonesia Centre, told the Australian Broadcasting Corp (ABC).
“It’s not just about the Australian-Indonesian corridor,” he said. “It’s really about doing things together that will enable a move into much larger markets in the region and the world.”
It will also depend on the active involvement of the Indonesian private sector and the willingness of Indonesia-based companies to take a stake in Western Australian lithium mines to strengthen their supply chains.
“It depends on Indonesia understanding that things are done on a commercial basis here,” said an Australian official, pointing to the intervening role of the Indonesian government to make things happen in the economy. “It will still take time and a lot of effort.”
Prime Minister Anthony Albanese, who scored points with Widodo in making Jakarta his first port of call after being sworn in last year, spoke of the often turbulent relationship as “getting up a gear”.
At the center of this is the potential symbiotic partnership that could develop around EV batteries and Indonesia’s interest in importing Australian lithium, which, along with some rare earths, is the only major component it lacks.
Australia has the lithium Indonesia needs to power its EV ambitions. Image: Twitter
Shortly before the leaders met, the Indonesia Chamber of Commerce and Industry (Kadin) signed a so-called action plan with the state government of Western Australia to bring both parties closer together in the critical minerals sector.
“The signing of the action plan is essential to seize opportunities and bring together all parties involved in the critical minerals sector with those parties that will support them financially to achieve more concrete cooperation,” said Indonesia’s Minister of Economic Coordination, Airlangga Hartarto.
Australia is the world’s largest producer of lithium, with last year’s production totaling 61,000 tonnes, or nearly half of global production, as trade in all EV battery ingredients – and their prices – rises significantly.
About 96% of Australia’s lithium exports last year went to China, which accounts for 58% of the world’s lithium processing capacity and nearly 80% of the world’s lithium battery production capacity, a dominance that worries the US.
Analysts say the lithium trade presents an opportunity to take full advantage of the 2020 Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA), which aims to unlock both countries’ trade and investment potential.
Under one of four ancillary agreements, A-CEPA provides Indonesian companies with preferential access to the Australian market by lowering the level of Australian content required in EV battery manufacturing.
Indonesian companies are said to have had initial talks with the owners of several Western Australian lithium mines, but the only agreement signed to date is an MOU between state-owned holding company MIND ID and Australian salt and potash supplier BCI Minerals.
In Indonesia, United Tractors, a subsidiary of automaker Astra International, is acquiring a 19.99% stake in Australian Nickel Industries Ltd, which supplies nickel ore to the Morawali and Weda Bay smelters in Central Sulawesi and Maluku.
Despite their proximity, Indonesia counts Australia as its 15th most important trading partner with imports last year of just US$3.5 billion, behind Bangladesh ($3.9 billion) and Pakistan ($4.3 billion).
On the other hand, Australia estimates last year Australian exports to Indonesia at $12.4 billion and Indonesian imports at $5.9 billion, a trade deficit in goods that Jakarta regularly complains about to Canberra’s bewilderment.
The discrepancy is explained by Indonesia not accounting for services, including money spent by the 1.2 million Australian tourists who are now returning en masse to Bali following the Covid hiatus.
In fact, Indonesia ranked 27th as a destination for sluggish Australian foreign investment, largely in the mining sector, and a modest 38th as a source of investment for Australia.
Indonesia’s electric car industry is moving forward, but could use Australia’s help. Image: Facebook/Caixin
Australian officials say a major impediment is the Indonesian mindset that it is unpatriotic to invest in other countries, one of many factors showing over-regulated Indonesia’s failure to sell itself on the global stage.
Former ambassador to Jakarta John McCarthy has noted that there has been no real diplomatic crisis in recent years in a relationship that was once marred by heated disputes over East Timor and Papua and also by the 2015 execution of two Australian drug traffickers, the year after Widodo came to Jakarta. current.
“If this lack of fireworks continues, we should be even less distracted by the need for crisis management and focus more on what we want from the relationship,” McCarthy wrote in the Australian Financial Review.
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