Mining companies court US investments

The Star

29-04-2025

Trade relations: Crane operators unload a container from a truck at the International Container Terminal at Tanjung Priok Port in Jakarta. The government is being asked to reduce complicated bureaucracy to improve the attractiveness of investment. — AP
JAKARTA: Mining state-owned enterprises (SOEs) are looking at partnerships with United States firms, which they hope could help Indonesia navigate US tariff policies, while seeking the investments needed to build downstream projects in the archipelago.
State mining holding company MIND ID said it would offer an electric vehicle (EV) battery project, dubbed the Indonesia iGrand Package, to US investors after South Korea's LG Energy Solution, one of the early backers of the project, decided to exit the venture.
The move aligns with recent efforts to balance trade relations with Washington, MIND ID's portfolio and business development director Dilo Seno Widagdo said.
Mutya Yustika, an energy economist at the Institute for Energy Economics and Financial Analysis, said Indonesia should address several challenges in improving the investment climate to secure foreign direct investment.
'Although Indonesia has great potential in mining downstream projects, attracting investors in general remains a challenge because the project has a fairly high investment risk,' she said.
Mutya stressed the importance of addressing complicated bureaucracy and regulatory uncertainty to improve the country's attractiveness as an investment destination.
'Strengthening the environment, social and governance regulations is also critical to attract investors and sustain downstream projects in the country.'
Putra Adhiguna, managing director of the Energy Shift Institute, said that the success of these initiatives hinged on the commercial viability of the projects and good management practices within the SOEs.
The government needs to introduce reform to its regulations and legal certainty before more local companies, particularly SOEs, look for partnerships with US companies in developing the domestic downstream industry.
Indonesia Battery Corp's (IBC) commercial and marketing vice-president, Bayu Hermawan, said the state-owned battery company has spent the last two to three years engaged with various potential investors, including US firms, to join the megaproject.
'We are still exploring the value propositions that both sides can offer,' Bayu said on the sidelines of the RE Invest Indonesia 2025 forum.
In addition to the United States, IBC is in discussions with potential partners from Europe, Australia, Japan and China.
The search for new investors marks a critical juncture for Indonesia's EV ambitions as it seeks to build a robust domestic supply chain and position itself as a global EV manufacturing hub.
LG announced on April 21 that it would withdraw from the Indonesia Grand Package project, citing factors such as market conditions and the investment climate as the reason behind the withdrawal.
The South Korean company had originally planned to invest about US$2bil and comply with local rules, including domestic content, to support Hyundai's Ioniq Electric.
Experts had previously suggested LG's departure may be due to the Indonesian market being seen as already dominated by Lithium Iron Phosphate (LFP) batteries, which does not contain nickel, the key commodity in the Grand Package battery project.
LFP batteries are predominantly used by Chinese EV companies that also dominate the local electric vehicle market.
Centre of Economic and Law Studies executive director Bhima Yudhistira said on Monday that Indonesian minerals have the potential to become leverage in dealing with US tariffs.
He cited nickel that the United States can source from Indonesia after Washington barred American firms from procuring Russian nickel following the invasion of Ukraine.
'The government could facilitate SOEs and local firms to partner with the United States, including in smelting businesses, but this should also come with commitments to improve domestic mining standards to meet the demand from US buyers, such as environmental and workers' safety concerns.' — The Jakarta Post/ANN