AmCham Update Vol. 5 #29

Election Results Could Be Announced Tonight, Prabowo to Mostly Continue Jokowi's Investment Policy, May Launch for Indonesia’s First EV Battery Factory, Electronics Import Restrictions Slammed

Mar 20, 2024

KPU Plans Election Results Announcement Tonight After Buka Puasa

After over a month of vote counting, the General Election Commission (KPU) says it has completed returns from 36 of Indonesia's 38 provinces, with Papua and Papua Mountains set to be completed today, March 20, and an announcement of the results likely to be made after buka puasa this evening.

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Prabowo to Continue Jokowi's Investment Policy, Mostly

Presumptive president-elect Prabowo Subianto will maintain about 70 percent of President Joko Widodo’s strategy to attract investment, said Minister of Investment/Head of the Investment Coordinating Board (BKPM) Bahlil Lahadalia.

The current administration has effectively managed investments, said Bahlil, who is confident this year’s Rp 1,650 trillion investment target will be met, as more investors express interest in Indonesia, particularly in the new Nusantara capital city (IKN). It would be difficult to alter the format and implement new investment regulations, he said. However, the current government lacks a detailed directory of investment opportunities, especially in mining, where exploration data is crucial to attract investors.

President Widodo’s foreign direct investment (FDI) success should continue under the next president, said researcher from Center of Reform on Economics (CORE) Yusuf Rendy Manilet, however, the next government must evaluate existing policies and identify priority sectors. Mira Arifin, Indonesia’s country head at Bank of America said policy consistency is crucial for attracting foreign investment, along with Indonesia’s strong demographics and stable political environment.

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Indonesia’s First EV Battery Factory to Launch in May

Indonesia’s first electric car battery plant is slated to open in May this year in Karawang, West Java, said Minister of Investment/Head of the Investment Coordinating Board (BKPM) Bahlil Lahadalia.

Operated through a joint venture with Hyundai-LG Industry (HLI) Green Power, the factory will have a capacity of 10 Gigawatts (GW) enabling the production of up to 32.6 million battery cells. A significant portion of these cells is expected to be exported to countries such as South Korea and India. Approximately 90 percent of the workforce are expected be local Indonesians, including young engineers.

Indonesia aims to capitalize on its natural resources, particularly nickel, by implementing a downstream strategy that integrates processes from mining to battery cell production, said Special Staff for Regional Relations at the Ministry of Investment/BKPM Tina Talisa. The establishment of the factory signifies Indonesia’s position as the first electric car battery cell manufacturer in Southeast Asia, underscoring its commitment to developing a fully-fledged electric vehicle battery ecosystem valued at $9.8 billion (Rp 142 trillion).

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DPR Member Slams Electronics Import Restrictions

A member of House of Representatives (DPR) Commission VI, Darmadi Durianto, has criticized the implementation of Minister of Trade Regulation 36/2023 and Minister of Industry Regulation 6/2024 on the guidelines to obtain technical recommendation (pertek) for electronic products.

Durianto warned these policies could impact imported products crucial for the Indonesian market, leading to supply shortages and price hikes. He said such regulations inadvertently encourage unethical practices among businesses, prompting some to import via unauthorized channels.

As the Chairman of the Board of Trustees of the Association of Indonesian Refrigeration Companies (Perprindo), Durianto emphasized the association's significant contribution to domestic investment. He urged the government to address concerns raised by Perprindo and create a supportive environment for investment and business operations.

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Manpower Ministry Issues Circular Letter on THR Payment

The Ministry of Manpower issued Circular Letter M/2/HK.04/III/2024 on the Implementation of Religious Holiday Allowance Distribution for Workers in Companies for 2024, on March 15. The Circular Letter obligates employers to pay the Eid al-Fitr holiday allowance (THR) to their employees by April 3 at the latest.

Minister of Manpower Ida Fauziyah urged companies to comply and advised employers to give the THR ahead of the deadline. She added the THR must be paid in full without installments, and the ministry has also reopened THR complaint centers to address issues on THR payments.

Director General of Manpower Supervision Haiyani Rumondang said the ministry will impose a 5 percent fine on non-compliant companies, with the amount calculated from the total THR due for employees.

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Gov’t Opens New Sand Mining Concessions

The Ministry of Maritime Affairs and Fisheries has reopened parts of the Java Sea, Makassar Strait and North Natuna regions for sand mining, lifting a ban which has been in place since 2007.

This follows the May 2023 signing of Government Regulation 26/23 concerning Management of Marine Sedimentation Proceeds by President Joko Widodo, which reversed the longstanding prohibition on sea sand mining and exports. Permit holders are now allowed to collect sediment including sea sand for land reclamation, infrastructure development and export, while prioritizing domestic needs.

Applications for permits to extract sea sediment up to a depth of three meters in these designated areas, which hold a potential yield of 17.65 billion cubic meters (cbm) of sea sediment, are open until March 28.

The move is expected to generate additional government revenue through non-tax state revenue (PNBP) and support land reclamation projects in Indonesia, Singapore and Hong Kong, although environmental groups have sounded the alarm with concerns over Indonesia’s fragile marine ecosystems, which many coastal communities and fishermen in the country depend on.

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Update is AmCham’s regular newsletter on developments related to investment, the economy, regulations and issues related to doing business in Indonesia. It comes out three times a week. It is edited by AmCham Managing Director Lydia Ruddy and written by the AmCham Staff. Paul L Goddard is the Managing Editor.

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