On February 14th, Indonasia is going to have presidential elections. The two main candidates are promising people an annual growth rate of 7 percent. But in the last two decades, the 7 percent growth has been a broken promise from politicians. Since 2004 candidates have been talking about it. Meanwhile the last year when the country witnessed a 7 percent growth rate was 1996. It was right before the Asian Financial Crisis of 1998. It was devastating for the Indonesian economy, the growth rate falled to minus 13 percent, much lower than 2020, when the country was hit by Covid-19.
Candidates are only talking about growth, there is no action plan nor a solid industrial policy. The Indonesian government is mostly proud because of its policy toward Nickel mining. The country holds the biggest nickel deposits. Since 2014, the government has forbidden the export of the rawest form of the Nickel. As a result, many car makers, including Ford, Hyundai and BYD invested in the Nickel processing industry of Indonesia. The export of Ferronickel, which is a processed form of metal, rose from $ 83 million to $ 5.8 billion in 2022.
Nickel is mostly used on EV batteries. However, other forms of batteries which do contain any Nickel are becoming more popular. Putting serious danger toward the Nickel industry. Last month, JAC Motors, a Chinese car manufacturer, backed by Folkswagen, introduced an EV equipped with sodium-ion batteries which contains no Nickel at all. The price of the metal has been in a continuous bust since 2021.
On the other fronts, the government of Indonesia discourages to foreign companies from investing. Last year, the new regulations halted the e-commerce operations of TikTok and the company was forced to pay $ 840 million in order to buy 75 percent of a domestic e-commerce company. In electronics, where most of its neighbors are doing exception, Indonesia is lagging. Indonesian exports of electrical machinery and tools had almost no growth over the last decade. The comparison with Vietnam makes the stagnation clear!
Although the politicians are continuously promising 7 % growth rate. With current bureaucracy and regulations, it seems more like an illusion.
Source: Economist
