Indonesia Will Be The Largest Battery Manufacturer in the World, Faisal Basri: That's a Dream

Ekonom senior Indef, Faisal Basri. (Foto: KKP)

JAKARTA - University of Indonesia senior economist, Faisal Basri, highlighted that non-tax state revenue from natural resources (SDA). It is because Indonesia is rich in natural resources but minimal in royalties. Even the production has increased, but its contribution to the state income is small.

Faisal found problems in the mining sector. This problem, which causes Indonesia's aspiration to become the largest lithium battery producer in the world, is just a dream.

According to Faisal, in the last ten years, there has been practically no increase in the mining sector even though the exploitation of natural resources has increased tremendously. It is because there is no export tax imposition.

"In mining, there is another more severe practice, namely exports are prohibited. So exports are zero, then there will be a further decline. So, for example, the price of nickel in the international market is USD 40. In Indonesia, it's only USD 20 because exports are prohibited," he said in a virtual discussion, Thursday, 3 September.

Faisal said, due to the government's ban on nickel exports for local mining companies, mining products can only be sold to smelters in the country. It is why foreign companies flock to Indonesia to build smelters.

"So the smelter company from China moved to Indonesia. Three years in Indonesia, they had already broken events, and the profits were tens of trillions. Because if he was a smelter in China, he would buy it on the international market," he said.

The existence of an export ban, said Faisal, would certainly reduce state revenue from this mining sector. Not only that, but state officials are also tempted by the lure of making Indonesia a battery manufacturer.

"Because they are praised for making Indonesia the largest battery producer in the world, a 25-year tax holiday is given which only applies to investments of more than IDR 25 trillion. Not even IDR 25 trillion because no one has supervised it. They have strong power," he said.

Furthermore, because of the tax holiday, the impact was that smelters did not pay corporate income tax, and state revenue was zero. It is what causes production to increase, but tax revenue does not increase.

"They don't pay VAT, the import duty for capital goods for the machines is zero, the workers are brought in from China on tourist visas. Not work visas, even if it's a pandemic. So, I don't pay individual employee income tax and don't pay dues for foreign workers. If I'm not mistaken, it's USD 100 per person," he said.

However, Faisal said, in his state speech, Jokowi said that the downstream of the mining sector is already underway. It is still in the upstream position.

"So the state's finances were collapsed because of this nickel which was included in the President's speech yesterday. In that speech, the one who gave input to the speech lied to the President because he said that our downstream is great. Even though our downstream is only about 25%, so, it isn't downstream. It's still in the upstream area, "he said.

Questioning the Downstream

Regarding batteries, the raw material for the production of batteries is made of nickel pig iron with ferronickel, which is then exported 100 percent to China. Meanwhile, China is processed into stainless steel.

"What kind of downstream is this? The battery will not be produced because there is no factory to process it into batteries. So almost all of it leads to stainless steel, the battery is still dream," he said.

Faisal said that it was not the state that enjoyed the mining products from Indonesia, but smelters. Local mining companies' revenues have plummeted due to the ban on nickel exports.

"Local mining companies pay royalties. Smelter companies don't. This mining company has dropped its income because it can only sell to smelter companies. But it can't sell directly. It has to go through traders determined by the smelter company. Who are the traders? For 1 ton, the fee is half to 1 dollar," he said.