AmCham Update
AmCham Update Vol. 4 #7
$2.59b Nickel Processing Deal, 21 Commodities Prioritized for Downstreaming, Govt Targets 7.4m International Tourists, BI Raises Interest Rates
Jan 20, 2023


BASF, Eramet to Invest $2.59b to Process Nickel for EV Batteries

German chemical giant BASF and French mining company Eramet are teaming up to invest in nickel processing facilities for EV batteries in Indonesia. The BASF-Eramet $2.59 billion partnership deal with the Indonesian government is near completion and will be finalized in the first half of 2023, said CEO of BASF Martin Brudermüller. Nickel processing facilities will be built in Weda Bay, North Maluku to process nickel and cobalt from Eramet’s mine.

Tesla has been reported to be close to a preliminary deal to build production facilities in Indonesia, although Tesla chief Elon Musk urged caution over the reports. Similar reports have also been made over Chinese automaker BYD, and Australia’s Nickle Industry and other parties also expressing interest to invest. These deals, if realized, will be a big success for President Joko Widodo’s administration, which has bet big on the nickel export ban. These deals will also diversify investment sources in nickel processing facilities in Indonesia.

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21 Commodities Prioritized for Downstreaming

The government plans to expand the number of commodities prioritized for Indonesia’s downstreaming development to 21 by 2035, aiming to boost state revenue and export growth. The expansion is spread across eight sectors: minerals, coal, oil, gas, plantations, maritime industries, fisheries, and forestry.

The 21 prioritized commodities are: coal, nickel, tin, copper, bauxite, steel, gold and silver, asphalt, crude oil, gas, palm oil, coconut, rubber, biofuels, logs, pine sap, shrimp, fisheries, crab, seaweed and salt.

This marks a larger shift in the government's downstreaming efforts, as previously it focused on downstreaming mining and mineral resources. The government targets to receive Rp 8.234 trillion worth of investment in 2035. 

The Indonesian Chamber of Commerce and Industry (KADIN) welcomed the plan, but recommended prioritizing nickel, iron and steel, coal, palm oil, and seaweed products as they already have a base for export competitiveness and downstream industrial development.

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7.4 million International Tourists Targeted This Year

7.4 million foreign tourists are targeted to visit Indonesia in 2023, a twofold increase from the Ministry of Tourism and Creative Economy’s 3.6 million target last year. In 2022, the Ministry recorded more than 4.6 million foreign tourists traveling to Indonesia.

The Ministry is targeting at least 10 countries which have contributed significantly to the Indonesian tourism industry, including Australia, Singapore, the United States, the United Kingdom, and China. This is consistent with the government's efforts to establish eight special economic zones for tourism as well as priority tourist destinations.

Minister of Tourism and Creative Economy Sandiaga Uno said encouraging tourism will lead to more job opportunities. At the very least, Indonesia's tourism has the potential to generate over 4.4 million jobs in 2024.

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BI Increases Interest Rate to 5.75%, Weakening Rupiah

Bank Indonesia (BI) increased its benchmark interest rate by 25 basis points (bps) to 5.75 percent at its Board of Governors' Meeting on Jan 18–19. The lending facility rate has also been increased to 6.50 percent and the deposit facility rate raised to 5 percent. The decision was taken to guarantee a decrease in inflation expectations, future inflation, and boost economic growth.

The move took BI's benchmark 7-Day Reverse Repo Rate to its highest in more than three years and impacted the rupiah, which closed at Rp 15,104 per United States (US) dollar at the end of Jan 19, depreciating 0.11 percent from the previous day at Rp 15,088 per US dollar. According to experts, other factors which have weakened the rupiah include profit taking, along with the sentiment that the US dollar interest rate may be raised to above 5 percent by the US Federal Reserve.

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Indonesia and Vietnam Compete for More Investment

Vietnam has become one of Indonesia’s main competitors in attracting foreign investment into the Southeast Asian region. With more investment-friendly regulations such as lower income tax, no minimum paid capital for non-capital intensive sectors, a higher Incremental capital output ratio (ICOR), Vietnam is among the most popular destinations for investment.

Vietnam’s foreign direct investment (FDI) in 2021 saw growth equal to 4.3 percent of its gross domestic product (GDP), compared to only 1.8 percent for Indonesia, the World Bank reported. The manufacturing sector in Vietnam contributed 24.6 percent to GDP in 2021, while in Indonesia it was only 19.3 percent.

President Joko Widodo has set a 2023 investment target at Rp 1,400 trillion, Minister of Investment Bahlil Lahadalia said, and the ministry is discussing strategies to achieve that target. The government has introduced new policies to improve industry downstreaming and develop special economic zones to accommodate investors. Bahlil said he was optimistic, while maintaining a realistic view of the global economy.

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Now is the Time to Join AmCham!

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AmCham Office and Events

AmCham Office and Events

The AmCham Office is transitioning back to the office. We are still maximizing online meetings, using the Zoom platform, but starting to have in-person meetings. You will be notified of the meetings as they are scheduled.

 

 

 


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What is Your Company Doing on COVID-19?

Please let us know what measures your company may be taking in the form of donations and other assistance to help Indonesia during this time of confusion and concern. Contact [email protected] with your news. We would like to publicize the ways that our AmCham companies are pitching in.


Stay well

We urge you to send us press releases and other information that we can pass on to the broader AmCham community. If you have items of interest, please email material to [email protected]. Follow this link to information provided by the US Embassy

Stay safe, call a doctor if you have a high fever, cough, or difficulty breathing. Stay healthy above all else.


AmCham Update is AmCham's regular newsletter on developments related to the pandemic crisis and other issues in Indonesia. It is edited by AmCham Managing Director A Lin Neumann and written by the AmCham Staff. Paul L Goddard is the Managing Editor.

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