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Indonesian Nickel: Chinese Investments Must Heed Ecological Risks, Avoid Repeating European Colonialism Sins

Aerial view of the Chinese-owned Virtue Dragon Nickel Industry mine in Morosi, Indonesia. ADEK BERRY / AFP

Indonesia has a deep wound from colonialism. For centuries, Indonesia was a European colony forced to dig and provide raw materials for the European market. This practice was even maintained during the second president Soeharto’s New Order regime under the disguise of economic development. That is why, when Soeharto fell, Indonesians vowed that sovereignty over their own natural resources would be unnegotiable. 

Indonesia began introducing laws to protect and keep mining products inside the country, including nickel. In the last few years, nickel has emerged as a critical mineral that is in high demand for its use in batteries for electric vehicles. It is in this context that nickel became one of Indonesia’s most prized metals. 

In 2019, President Joko “Jokowi” Widodo doubled down on the ban on exporting raw nickel ore – initiated by his predecessor President Susilo Bambang Yudhoyono – in a move that gained wide support even from his political opponents. This shows that Indonesians are unified on the issue. Therefore, even when European countries and the IMF protested and sued Indonesia over the ban, the government persisted. 

In contrast to the Western world’s reaction, China responded to the nickel ore ban by injecting heavy investments into processing facilities in Indonesia. Led by companies like Tsingshan and CATL, China even built a special industrial area for nickel processing in Morowali, Central Sulawesi. Nine out of eleven smelters in Morowali are now owned by Chinese companies, a study showed. 

With the construction of such large-scale nickel smelter industries, the hope is that the processed and refined products will increase the value of mineral exports from Indonesia. But, there is a catch. This ambition to gain added value tends to ignore the ecological risks that come with the industry.

This ecological risk, if left unchecked, has the potential to push Indonesia into a new pit of colonialistic system. Not to mention, it will erode the added value we have worked hard to get. 

There are many examples of environmental risks coming from Chinese nickel smelters in Indonesia. For instance, a report from Walhi, an environmental organization in Indonesia, showed that Chinese nickel companies in North Morowali had built dams in the Lampi River without notifying the local residents. This posed environmental risks for those living in the area. During the rainy season, river water overflows and soaks the rice fields and settlements. 

Walhi’s report also stated that sulfur dioxide (SO2) gas emissions were reported to have polluted the surrounding villages. Sulfur dioxide, like carbon monoxide (CO2), is a pollutant that contributes to the climate crisis. SO2 could also cause acid rain, which would be detrimental to life, particularly in aquatic environments.

Ecological risks that endanger the lives of local residents can be politicized and become a polarizing issue in Indonesia, especially now as we are inching closer to the beginning of the 2024 presidential and legislative elections. Moreover, Indonesians still hold a pretty strong negative sentiment against Chinese involvement in the country.

We are calling for Chinese nickel companies in Indonesia to improve their environmental and social governance practices. Ecological risks that arise from every nickel operation must be at the center of policy-making, and those risks must be informed and discussed with the local communities. Then, any environmental costs borne by the local community must be included in the calculation of compensation in the event of damages resulting from the operation of the smelter industry.

Coal power plants that are now used to power the industrial complexes must also be retired, as soon as possible. The Indonesian government must be firm in monitoring and enforcing environmental regulations for the nickel industry. 

Chinese investments into Indonesian nickel are welcome, but those investments must still comply with environmental regulations. The dominance of Chinese investment in Indonesia’s nickel industry is not a justification for destroying the environment. All companies in the nickel industry, including Chinese companies, must respect the rights of local communities to a clean and healthy environment.

Firdaus Cahyadi is a longtime environmental consultant and a regular columnist for several of Indonesia’s largest news publications.

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