Hannover Messe: What Indonesia expects from the partnership

The partner country of the Hannover Messe this year is Indonesia – the country with the world’s largest nickel deposits. The country is interesting for German car manufacturers. But what is Indonesia hoping for?

Federal Chancellor Olaf Scholz and Indonesia’s President Joko Widodo open the Hannover Messe in a festive manner. A great moment for Indonesia. Because of the corona pandemic, her appearance here was postponed several times. In his opening speech, President Widodo invites the German economy to invest in Indonesia – especially in building a green economy.

Indonesia “not an easy market”

Indonesia has around 280 million inhabitants – making it the fourth most populous country in the world, and the economy has been growing for years. By 2030, Indonesia wants to make the leap among the ten largest industrial nations. A growing, attractive market, also for German companies, says Jan Rönnfeld, Director of the German-Indonesian Chamber of Industry and Commerce. But he also says: Indonesia is definitely not an easy market.

On the one hand, Indonesia does not make it easy for other countries to bring products into the country. On the other hand, the country trying to keep commodities like nickel in the country imposed an export ban in 2020. Among other things, nickel is used to make batteries for electric cars. The processing of the nickel is to take place on site. Meidy Lengkey from the Indonesian Nickel Mining Association explains why:

That is why the government is trying to control access to it. It’s about supporting local production in Indonesia.

Germany wants to invest in the processing of raw materials

So far, this plan has worked for Indonesia. President Widodo has inaugurated many new nickel smelters. Chinese companies in particular have recently invested many billions of dollars in the processing chain.

And Germany also wants to promote the processing of raw materials in Indonesia in the future, said Chancellor Scholz at the opening of the Hanover Fair. Also to reduce dependence on countries like China. “We are currently importing a lot of raw materials from China, even though the rare earths, copper or nickel are often not extracted from the earth there, but in countries like Indonesia, Chile or Namibia. In other words, in countries that are affected by their natural Rich in raw materials often benefit far too little. We want to change that.”

Largest nickel producer in the world

The added value in the country has already multiplied and new jobs have been created. The Southeast Asian country is now by far the largest nickel producer in the world. Around a quarter of the world’s deposits are in Indonesia. President Widodo therefore wants to make his country the new center for battery production.

But the methods with which nickel is mined and processed in Indonesia do little to match the clean image of electric mobility, says Sahar Uddin from the environmental organization Walhi: “We found elevated chromium levels in water samples. This is harmful to health in the long term and can cause cancer and skin eczema cause.” Streams and rivers near the mines have turned reddish brown, the abundance of fish is declining – forests are being cut down.

Energy and climate protection topics at the fair

Energy and climate protection are also the dominant themes at the Hanover Fair. Indonesia still relies heavily on coal for energy generation. The country has very large deposits that are easily mined. The cheap but dirty coal energy is to be replaced by greener energies. For this purpose, Indonesia even received a 20 billion dollar investment package on the sidelines of the G20 summit in Bali last year – from foreign partners such as the USA, Japan and Germany. In return, President Widodo announced at the summit that he wanted to achieve a 34 percent share of renewable energies by 2030.

Jan Rönnfeld from the German Chamber of Commerce Abroad in Jakarta explains that Indonesia has relatively large potential in the field of renewable energies. “On the one hand there is of course geothermal energy, rather difficult, but there is great potential. And of course they have solar and biomass.”

Climate change plays important role for Indonesia

For an island country like Indonesia, climate change plays a crucial role. Indonesia consists of around 17,000 islands. And some of them are in danger of sinking into the sea in a few years.

For the Indonesian entrepreneur Agus Sari, the key to Indonesia’s success lies in the energy transition and more climate protection: “Otherwise there will be natural disasters caused by humans that will slow down our progress and hinder our growth. Droughts, floods, all of that costs money. A lot a lot of money. And Indonesia cannot afford to pay all that.”

Because of the rising water level, Indonesia is currently building a new capital on the island of Borneo. Widodo is also hoping for contacts and potential investors in Hanover.

Free trade agreement with Europe?

Indonesia and Europe have been negotiating a free trade agreement since 2016. At the opening of the Hannover Messe, Chancellor Scholz declared: “I am committed to finally bringing this agreement over the finish line.”

At the G20 summit in Bali, EU Commission President Ursula von der Leyen and President Widodo confirmed that they want to conclude the free trade agreement by the end of the year. So far, however, this has failed, among other things, due to questions of social and environmental standards.