Harris, Widodo Focus Talks on US Tax Credit for Indonesian Nickel

Vice President Kamala Harris engaged in discussions with Indonesian President Joko Widodo in Jakarta, Indonesia, with a primary focus on the proposed limited free trade agreement (FTA) put forward by Indonesia. This agreement aims to enable nickel and other vital resources utilized in the production of electric vehicles (EVs) to take advantage of tax credits offered by the United States.

"In the future, we are excited to collaborate with you in order to promote the exchange of goods and services between our countries. This will be done through the Indo Pacific Economic Framework," expressed Harris while conversing with Widodo at the U.S. – ASEAN summit, attended by leaders of Southeast Asian nations. "Furthermore, we will persist in our efforts to assist Indonesia in establishing robust supply chains, particularly for the vital minerals necessary to grow our sustainable energy industries."

In the Inflation Reduction Act, the Biden administration has allocated a significant amount of tax credits to encourage the production and sales of electric vehicles (EVs) as part of their commitment to combating climate change and promoting clean energy. To be eligible for these tax credits, it is required that 40% of the minerals utilized in the production of EV batteries, which are sold in the United States, are sourced from the United States or one of its trade partners with whom it has a free trade agreement.

With an abundance of nickel resources, Indonesia aims to foster its local electric vehicle (EV) and battery sectors and has halted the export of nickel ore in order to guarantee availability and entice investments for domestic manufacturing facilities.

Nevertheless, the mining and refining sector in Indonesia has heavily relied on funding from Chinese corporations and faced numerous environmental issues, resulting in restricted entry to the American market.

For several months, Jakarta has been actively seeking an agreement with Washington regarding essential minerals. Leading this initiative is Luhut Pandjaitan, the Coordinating Minister for Maritime and Investment Affairs, who has been engaging in discussions with top officials from the Biden administration and prominent figures in the American industry. In August, Pandjaitan held a meeting with Elon Musk, the renowned entrepreneur behind Tesla, an electric vehicle manufacturer based in the United States. This engagement with the wealthy American business magnate marked the conclusion of a series of interactions aimed at attracting investment.

"In this restricted trade agreement, we are suggesting something that will also be advantageous for the United States. It is important to note that this proposal is unrelated to China. Elon grasps this concept," he stated during a conversation with VOA's Indonesian Service after their encounter.

Rizal Kasli, the head of the Indonesian Mining Professionals Association, is optimistic that the Free Trade Agreement (FTA) proposal will gain momentum following Harris' visit.

"In order to promote sustainable energy, Indonesia is actively growing its electric vehicle industry network and has commenced the operation of limonite nickel refineries while also planning to construct additional ones," he informed VOA.

Chinese financial contributions and apprehensions regarding the environment

The Morowali Industrial Park in Indonesia's resource-abundant Central Sulawesi region is a significant endeavor of the Chinese Belt and Road Initiative within the country. China-based businesses have contributed funds to the construction of smelting plants in this island, aiming to ensure a steady supply of nickel. However, this pursuit has had detrimental consequences on both the environment and the well-being of indigenous communities, compelling one to question whether the cost is truly worth it.

The administration of Widodo has made a commitment to ensure that all mining companies adhere to the highest global standards. However, a significant number of Indonesian non-profit organizations in 2022 wrote a public letter to Musk, requesting him to abstain from investing in Indonesia due to apprehensions regarding the environment, society, and governance (ESG) issues.

Melky Nahar, the coordinator of the Mining Advocacy Network stationed in Jakarta, Indonesia, recently stated that the extraction of nickel has encroached upon the local community's territory, contaminated water sources and disrupted the delicate balance of the ocean ecosystem. This destructive activity has additionally resulted in rampant deforestation, accompanied by the prevalence of unethical practices, severe human rights violations, and widespread corruption.

Nahar expressed to VOA that this trade agreement is simply the government's attempt to promote and sell Indonesian nickel at a lower price. He strongly urged the United States to respond resolutely by refusing to purchase Indonesian nickel and any goods derived from it.

Regardless of whether or not the restricted Free Trade Agreement, which is strongly opposed in the U.S. Congress, is approved, the engagement between the United States and Indonesia is predicted to increase. After their meeting, Harris and Widodo stated their desire to enhance their relationship to a "Comprehensive Strategic Partnership," which is the highest level of partnership for a non-treaty ally and a progression from the "Strategic Partnership" status established in 2015.

Eva Mazrieva helped with this report for VOA's Indonesian Service.