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Doubts Linger on Green Capitalism Strategy of the Jokowi Administration

In speeches on various occasions recently President Joko “Jokowi” Widodo stressed the important role of the Green Economy in national development. But uncertainty lingers on the strength of his administration’s commitment in the face of disagreements within his cabinet.

By Alfin Zulfikar Rizky

President Joko Widodo (Jokowi) and the Coordinating Minister for Maritime Affairs and Investment Luhut Binsar Pandjaitan several times mentioned the green economy concept in a number of speeches. There stratagem what behind the green economic development Jokowi’s style of government?

Everyone is aware that planet Earth is the only planet that – until now – humanity can live on. However, it seems, few are aware that our only home is in a dire situation. Or else people just don’t care.

What is the evidence of this? Plastic waste is still scattered everywhere – and eventually find its way to the beaches and the oceans—polluting them. Plastic pollution is bad enough but, worse, the level of carbon emissions is also said to be increasing at an alarming rate—directly causing climate change and global warming. 

In fact, some experts say that when climate change is severe enough, it could bring mass extinction to all life on earth, including human. Today some island nations, mostly located in the South Pacific, are reportedly starting to sink due to rising sea levels.

In the face of this existential threat, countries finally got together and discussed ways to overcome the various consequences of climate change. After years of tough negotiations, various countries were finally able to reach an agreement in 2015. 

A multilateral pact known as the Paris Agreement was finally signed by a good number of countries in 2016. This was a joint commitment by developed and developing countries to reduce their respective carbon emissions. 

The United States pulled out of the Agreement when Donald Trump became its president but Joe Biden rejoined it when he took over from Trump. In fact, Biden made the green economy the main mission of his government. 

Perhaps, President Joko “Jokowi” Widodo of Indonesia took a cue from President Biden. On several occasions recently, President Jokowi cited the concept of a green economy as a feature of Indonesia’s economic development. 

One of the green economy sectors that Jokowi has mentioned is the lithium battery industry. It is envisioned that the industry will produce the kind of battery that will power electric vehicles (EVs), an idea that Biden is also promoting. 

In one of his speeches in 2021, Jokowi referred to this idea as in line with the ambition of Coordinating Minister for Maritime Affairs and Investment Luhut Binsar Pandjaitan. In this regard, it is well known that Minister Luhut is pursuing a policy to encourage investment in electric-powered vehicles.

There is, however, a great deal of doubt about this green economy policy. This is because many people think that the Jokowi administration is not really too committed to environmental conservation considering that it has issued several regulations that are considered to be damaging to the environment – for example, the Job Creation Act. 

So, why does Jokowi’s administration now claim to be focused on green economic development? What kind of green economy development ambition is the Jokowi administration trying to achieve?

Green Capitalism

It is not impossible for Indonesia to be able to build an electric-powered vehicle value chain. This is because economic development, which is in line with sustainable energy, does not necessarily mean loss of economic benefits. 

Gaining profits through green economic development is commonly referred to as eco-capitalism or green capitalism. This concept seeks to reconcile the need for sustainable development with the interests of maximizing profit in business and the economy. 

How is that achieved? Green capitalism can be carried out by capitalizing development efforts that are consistent with the conservation of the environment.

An example of this green capitalism is the emergence of sellers and manufacturers who produce metal straws to replace plastic straws. This type of straw can bring benefits to business people as well as reduce the use of plastic straws. 

Paul Hawken in his book Natural Capitalism explains that the commodification of environmental issues like this can be seen from how the government and business people have started to commodify the electric-powered vehicle industry. By producing electric-powered vehicles, the producers can profit while reducing the use of fossil fuels in the community.

It is the emergence of green capitalization in the electric-powered vehicle industry that the Indonesian government might want to target. On the basis of the policies that the Jokowi administration has launched, it is apparent that it wants to want to control the value chain of this sector. 

In January 2020, for example, the Jokowi administration finally banned the export of raw nickel ore abroad. The government has also required nickel producers to build smelters to process crude nickel. 

In addition, Luhut is also trying to attract investors to this value chain. Among them are lithium battery manufacturers such as LG Chem of South Korea and Tesla of the US.

Mastery of the value chain of the electric-powered vehicle industry can be an advantage for Indonesia. If you reflect on the People’s Republic of China (PRC), the presence of value chains in that country has brought about technology transfer that leads to innovation capability.

Thus, the control of nickel by Indonesia could be a bargaining leverage with other governments. Some experts predict that electric batteries can become the new oil in the future.

However, with the increasing importance of nickel and lithium batteries, disagreements on capitalization have also emerged. Could such disagreements be occurring within Jokowi’s own government? 

Airlangga Versus Luhut?

Although the Indonesian government seems to want to control business chains in the electric-powered vehicle sector, disagreement may also come along. This is because differences of opinion have begun to appear within the ranks of the Advanced Indonesia Cabinet itself. 

The latest news is that the negotiations between Freeport Indonesia and Tsingshan Steel over the construction of a nickel smelter, which was originally planned for Weda Bay, Halmahera, have failed. In fact, the development plan is one of the projects that Coordinating Minister Luhut is pursuing. 

On the other hand, based on the writings of John McBeth in the Asia Times, Coordinating Minister for the Economy Airlangga Hartarto is considered to be more supportive of smelter development in Gresik, East Java. This project in Gresik is a development of the facilities owned by Freeport Indonesia.

In agreement with Airlangga, Freeport McMoRan CEO Richard Adkerson deemed that the construction of a new smelter would cost more. Adkerson assessed that the development of an existing factory would be more cost-effective. 

The difference of opinion regarding the smelter construction may stand in the way of progress. The American firm Freeport McMoRan still owns 49 percent of the shares in Freeport Indonesia. 

Meanwhile, Luhut is considered to be more supportive of new smelter projects involving Chinese companies, such as Tsingshan Steel. Virtue Dragon, which built a smelter in Konawe, Southeast Sulawesi (Southeast Sulawesi), for example, is also a company from China. 

Apart from China and the US, there are also a number of Japanese companies that are also building smelters in Indonesia. Meiwa Corporation, for example, is partnering with Trinitan Metals to build a smelter in the Palu Special Economic Zone (KEK).

The capitalization of the nickel processing chain with this smelter could also determine who and which companies will benefit from this part of the green commodification. Business chains like this are also an important factor in the geo-economic competition. 

Geo-economy itself can be understood as the use of economic tools for geopolitical interests and competition. It is well known that Indonesia’s position has become increasingly important in the midst of rivalry between superpowers such as China and the US. 

Nevertheless the geopolitical dynamics in Jokowi’s green capitalism may not necessarily materialize. Moreover, several other countries, such as those in the European Union, are said to be trying to prevent the Indonesian government from trying to limit exports of crude nickel. 

The European Union also frequently questions the commitment of the Indonesian government to sustainable development and economy. Many foreign institutions and media also perceive the Jokowi administration as not having a strong commitment to environmental conservation.

Editor’s note: The views expressed in this article are the author’s and do not necessarily reflect the views of PinterPolitik.

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