Jokowi’s dream
to ‘downstream’
nickel became an
industrial
nightmare

Jokowi’s dream
to ‘downstream’
nickel became an
industrial
nightmare

Three men sit at a table with the Environmental Reporting Collective (ERC), sipping coffee and smoking cigarettes. It is a warm and quiet evening at an industrial park in Indonesia’s Central Sulawesi province. Only the sound of crickets chirping can be heard, occasionally interjected by the intermittent blare of passing motorcycles.

The men work at nickel-processing companies at the Indonesia Morowali Industrial Park (IMIP), the largest nickel-based industrial area in the country. They agree to share their stories but ask ERC not to use their real names for fear of retaliation.

Jusuf, the oldest among them, recalls how he got his job. Around 10 years ago, he travelled 500 km to attend a recruitment process organized by IMIP. He rode his motorcycle from his hometown in North Morowali to Kendari, the capital of the neighbouring Southeast Sulawesi province. He did not know anyone in town, so when he arrived in Kendari, he slept on the floor of a prayer room. It was far from home and not comfortable at all, but the job should be worth it, he remembers thinking.

At that time, the nickel industry was expanding on the island of Sulawesi, one of the poorest regions in Indonesia, where people rely mostly on agriculture and fishing.

Jusuf expected he was applying for a well-paying factory job. Then he saw the salary the company offered him. “I almost cried,” he says. “The salary was tiny.” It was only around IDR 2 million (USD 125) per month, slightly above minimum wage, and there weren’t any allowances.

Jusuf, who had just gotten married before applying for the job, was wary because the low wage would not match the high living costs. “How could we make ends meet?”

Jusuf and his wife had to live far from his workplace. But he still spent one-third of his salary paying for a humble rented room. Gasoline for his motorcycle was the second largest expenditure. Every day, Jusuf rode through swamp areas and rice fields to go to work.

Prices around IMIP are also considerably higher. For example, a 3-kg gas canister costs between USD 1.91 and USD 3.18, whereas average regular prices in Indonesia are around 67%-150% cheaper.

Gas prices can skyrocket to USD6.37 to USD9.55 during major holidays like Christmas.

In the past decade, Jusuf has witnessed the transformation of the area. New factories, ports, roads, and airports were built. Tens of thousands of workers came. The swamps made way for plywood houses, where many of the workers live in tiny but expensive rooms without proper sanitation.

The rapid development of the nickel industry in Morowali has also spurred economic activities in the surrounding areas. There are micro and small businesses catering to tens of thousands of IMIP workers But the vibrant business activities do not translate to a decent standard of living for most workers.

Some are lucky enough to save a fraction of their salary after sending a portion to their families back home, while others spiral into debt.

Escaping the ‘resource curse’

The nickel industry was supposed to bring prosperity to Indonesia and benefits to workers like Jusuf. The development of the industry was part of former Indonesian President Joko “Jokowi” Widodo’s economic policies, known as “Jokowinomics.” Jokowi, who stepped down in October, argued that it would help Indonesia lift many of its citizens out of poverty.

Countries with vast reserves of resources in the Global South have historically suffered from the “resource curse,” the paradoxical situation in which the abundance of valuable materials fails to fully benefit the country and its people. Instead, the profits often go to selected few companies.

The push for clean energy technologies, spurred by the Paris Agreement in 2016, has exacerbated the resource curse. The growing demand for "critical transition minerals and metals" like nickel has led to a surge in mining activities in countries like Indonesia, which holds the world’s largest nickel reserves.

Indonesia’s nickel production skyrocketed to 1.8 million metric tons in 2023, increasing nearly ninefold from 2016 to meet global demand. However, mining has brought widespread environmental destruction, displaced indigenous communities, and exploited workers.

Read more: Global mining firms turn communities into ‘sacrifice zones’ to power green energy

Jokowi dreamed of escaping this curse. Instead of just exporting raw nickel ore, he pushed for “downstreaming” industry, or industri hilirisasi in Indonesian. Jokowi wanted Indonesia to develop its own electric vehicle industry to profit from the abundant resources. In this way, his country could develop its economy further, providing jobs and economic growth.

“We must dare to escape the curse of natural resources,” Jokowi said in his fiery State of the Nation Address on Aug. 16, 2019, two months before he started his second term as president. “We are developing nickel downstream industries to process it into ferronickel so our value-added nickel will rise four times higher. We must dare to begin now.”

However, five years on, the push to become the most important player in the international nickel market has yet to bring prosperity to most of the Indonesian population. Companies in the nickel-processing industry receive “tax holidays” and are exempted from paying profit tax – causing the country to potentially lose USD 5 billion in revenue between 2024 and 2027, according to a calculation by The Investigative Desk.

The newly elected President Prabowo Subianto, who took office in October 2024, has vowed to continue Jokowi’s downstreaming policy. But while Western and Chinese carmakers and battery producers are currently using Indonesian metal, they are moving away from the product, opting for a cheaper alternative. It calls into question whether the downstreaming strategy is sustainable.

The dream of escaping the resource curse became a nightmare for workers in the Morowali industrial area. They have to endure horrific working conditions, with heavily polluted air and water. Prosperity is beyond their reach. Instead, the barely taxed profits flow to a few rich Indonesian and Chinese men.

Wealth that doesn’t spill over

Despite the rapid growth of the nickel-mining and processing industry, living standards have barely improved for people in Sulawesi, said senior economist Faisal Basri. A fierce critic of the government’s economic policy, he got into a public feud with Jokowi about the benefits of the downstreaming industry. In an interview conducted a month before he died of a heart attack, Faisal showed ERC figures from BPS Statistics Indonesia, the central bureau of statistics. According to the data, exports from Morowali and the region’s total revenue rose exponentially, but the household spending in Morowali grew at the same rate as the rest of the country.

“Most economic benefits from the nickel industry … are not enjoyed by the locals,” Faisal said.

Parengi, an IMIP warehouse worker and a labour union activist, echoes what Faisal said. He says that their salaries are not enough to cover basic needs due to high living costs.

He tells ERC that he earns between USD 250 and USD 400 per month, depending on how much overtime he does. His family lives outside the industrial area while he lives in a shack near the factory.

His earnings largely go to parents and family, his lodging, food and motorcycle loan, says the father of three. He frequently has to borrow money from friends and food stall owners, Parengi adds – and he is not the only one.

Many of the IMIP workers interviewed by ERC talk about spiraling into debt. Some borrow money with high interest rates from apps, Indonesian workers and Chinese translators.

“Debt is a common thing here in Morowali,” Parengi says.

Jusuf, who started working in Morowali a decade ago, has seen workers borrow money from food stall owners or ask to pay for food on a later date so they can survive another day. “The food stall owners decided to help the workers out of pity,” he says.

Parengi wants to leave but doesn’t know how. “We cannot find another job,” he says. “If I could find a decent job somewhere else, I would resign from here.”

He often misses his village, where, he says, the cost of living is much lower. “Because there are some things that don't cost money. We can go fishing, or have yams and other fruits. In Morowali, we need to buy everything. Because we only focus on work, there are no other activities.”

However, the nickel industry harms agriculture and fisheries, according to a study by Finland-based nonprofit the Centre for Research on Energy and Clean Air (CREA) and Indonesia-based independent research institute the Center of Economic and Law Studies (CELIOS).

It pollutes the air as well. “Citizens living in Southeast Sulawesi, North Maluku, Southeast Sulawesi, and Central Sulawesi would bear the brunt of both economic damages and health impacts as a result of prolonged exposure to toxic air,” the February 2024 study warned.

It predicted the unregulated growth of the nickel industry could cause nearly 4,000 deaths in 2025 and an additional 5,000 in 2030.

‘We get close to nothing’

The economic gain also does not go into the state treasury. To attract foreign investments to develop the nickel industry, Indonesia offers a “tax holiday,” which exempts smelters from paying import and export fees, as well as profit taxes, for up to 20 years.

Indonesia’s main source of nickel industry revenue comes from royalties on extractive industry products. Mining companies are charged a 10% royalty fee, while smelter companies pay only 2%. Both types of companies also pay small regional taxes like land and building taxes.

According to the Indonesian government, the total tax revenue collected from the nickel industry reached around USD 1 billion in 2022, only around 3% of the USD 34 billion nickel export value that year.

Faisal disputed those figures. Nonetheless, tax collection from nickel is miniscule compared to that from coal, which accounts for almost 19% of export value.

According to calculations by the Netherlands-based journalistic collective The Investigative Desk, Indonesia is set to miss out on billions of potential taxes in coming years.

Jakarta could have collected approximately USD 800 million in tax on battery grade nickel (MHP) in 2024 alone, nine times more than it is earning now.

With new factories planned and production rising, this could add up to more than USD 5 billion between 2024 and 2027. But under the current tax system, the country would collect a fraction: half a billion dollars only.

“This is a policy mistake because the government hands out too many fiscal incentives to smelter companies,” Bhima Yudhistira, executive director of CELIOS, tells ERC. “Now, the environment is damaged while we get close to nothing in state revenue.”

This potential tax revenue could help alleviate the environmental destruction caused by the industry, lift people out of poverty, or pay for ambitious infrastructure projects such as the Jakarta Mass Transit system, which cost around USD 1.7 billion. Instead, the Indonesian government took a loan with the Japan International Cooperation Agency.

But the Indonesian government argues it needed to lower taxes to attract investments and build up the smelting industry. The tax holiday was implemented “to catch many big fish,” Septian Hario Seto, deputy for investment and mining at the Indonesian Coordinating Ministry for Maritime Affairs and Investment, wrote in August 2023. “We can’t get a big fish by sitting still.”

As of publishing time, the government has not responded to ERC’s request for comment.

The Chinese embrace

Since Indonesian nickel is barely taxed, almost all profit currently flows to the foreign companies, which dominate the industry. The five companies investigated by ERC are Chinese companies Tsingshan Holding Group, Zhejiang Huayou Cobalt, Zhenshi Holding Group, and Jiangsu Delong Nickel Industry, and Indonesian mining corporation Bintang Delapan Group.

IMIP, Indonesia’s largest nickel-processing industrial complex, covers an area of 4,000 hectares, with another 6,000 hectares planned – around the size of Manhattan. The industrial park is a joint venture of Bintang Delapan and Tsingshan – the latter is a Chinese private company founded by mysterious tycoon Xiang Guangda.

Tsingshan is one of the world's largest steel companies, ranking 256th on the Fortune 500 Global list. It is also the biggest shareholder in IMIP, with investment reaching USD 20 billion. However, since Xiang, now in his mid-60s, privately controls the company, its financial data is not publicly available. While Chinese media described Tsingshan as an “invisible” and “non-flamboyant” behemoth, the businessman himself has earned nicknames such as the “Alchemist,” “the Nickel King” and “Big Shot.”

Xiang made his fortune in the 1980s, when the Chinese metal industry underwent liberalisation. He entered the Indonesian nickel business in the 2000s. At first, he imported raw nickel for stainless steel production from Bintang Delapan, In 2009, the Indonesian government announced export bans of raw material ores, it did not deter his business expansion in the Southeast Asian country. The catalyst was Chinese President Xi Jinping’s visit in October 2013, a year before Jokowi became president.

In early October that year, Xi visited Jakarta and became the first foreign leader to speak in front of the Indonesian parliament. In his Oct. 3, 2013, speech, he announced China wanted to include Indonesia in the 21st century Maritime Silk Road. This was a predecessor of what came to be known as the ambitious infrastructure project “Belt and Road Initiative.”

Massacres and lucrative business careers

Just one day before, Xiang’s steel empire, Tsingshan, and Bintang Delapan signed a joint venture agreement to set up IMIP. Xi and his Indonesian counterpart, President Susilo Bambang Yudhoyono, witnessed the signing ceremony on Oct. 2, 2013.Indonesian businessmen Halim Mina and his brother, Hamid Mina, helm Bintang Delapan, which built the nickel industry in Sulawesi.

"In 2005 or 2006, when I first came here, we were given a shovel and a candle,” Hamid told the Jakarta Globe news site. “There was no electricity, and it was pitch dark at night.”

At that time, Sulawesi was largely a pristine island, little developed and full of rainforests. In the two decades after that, the Mina brothers transformed large areas in Morowali regency, on the eastern coastline of Sulawesi, into IMIP, the country’s biggest nickel industrial complex.

Bintang Delapan, one of Indonesia’s largest mining firms, has placed retired generals in top positions, earning the nickname “the generals’ mining company.” One of them is retired Indonesian army lieutenant-general Sintong Panjaitan, who serves as president commissioner of Bintang Delapan Group and its subsidiaries.

Sintong rose through the military ranks and became the Special Forces Command chief during President Suharto’s authoritarian rule. In 1988, he was appointed as a military regional commander overseeing provinces from Bali to the occupied East Timor.

His military career ended after Indonesian soldiers shot pro-independence demonstrators in East Timor’s capital, Dili, in November 1991, killing over 250 people. (The bloody event, known as the Santa Cruz Massacre, was part of the Suharto regime’s brutal occupation of the former Portuguese colony, which has been described by historians as a genocide.)

Indonesia’s political and business elite, often described as an oligarchy, is still largely tied to the army. Sintong is not only linked to Bintang Delapan, he is also a commissioner of a coal-mining company in East Kalimantan province. PT Adimitra Baratama Nusantara is owned by his longtime ally, Luhut Binsar Pandjaitan, a retired general who was a powerful senior minister in Jokowi’s cabinets and currently serves as head of the National Economic Council under President Prabowo.

Prabowo, a retired general accused of multiple human rights violations, also has multiple business interests, including coal mining.

From Sulawesi to showrooms worldwide

Indonesia has become an extremely important player in the international nickel market, producing over half of the world’s supply. To understand how nickel processed at IMIP finds its way to electric vehicles in European showrooms, ERC and The Investigative Desk used public records, company disclosures and news reports to follow a supply chain.

After the ore is mined by a corporation like Bintang Delapan, it gets processed in a large industrial complex such as IMIP.

At IMIP, there are currently two HPAL facilities, with more on the way. One of them, PT Huayue Nickel Cobalt, is majority-owned by Chinese battery material producer Huayou Cobalt. The other, called QMB, is owned by South Korean, Japanese and Chinese companies, including Tsingshan, battery cathode producer GEM, and the world’s largest battery producer CATL.

The “high-pressure acid leaching” (HPAL) factories transform the low-grade nickel into nickel suitable for battery production, a product known as “mixed hydroxide precipitate” (MHP).

It is then exported, often to companies in China or South Korea, for further processing. Companies like Huayou Cobalt alter MHP into “nickel sulphate,” which can be used in a battery, and sell it to battery manufacturers like LG Chem and CATL-.

A battery contains two sides: an anode (the positive side) and a cathode (the negative side). There are several types of lithium-ion batteries used in electric vehicles. The Indonesian materials are used for a type known as NMC, with a mixture of Nickel-Manganese-Cobalt as the cathode.

These batteries are currently the standard in Western electric vehicles, such as those made by Stellantis, the European-American auto giant which owns the brands Peugeot, Citroën, Fiat, and Chrysler.

For example, the Peugeot E-208, a popular and affordable EV model in the European Union, was using NMC batteries produced by CATL. Stellantis also listed Huayou Cobalt as a nickel supplier. Nevertheless, the company said in a statement to Bloomberg News that it had “not identified nickel being sourced for our batteries from the IMIP area.”

The European car industry, including Stellantis, is struggling with a plethora of issues, including low demand for electric vehicles and Chinese competition. The Dutch-based automaker is in deep turmoil, with declining sales and plummeting profits.

Faced with these issues, Western carmakers are now shifting away from NMC batteries, opting instead for a cheaper alternative made with iron and phosphate, known as LFP. Stellantis has struck deals with battery manufacturers like CATL to produce LFP batteries instead of NMC.

“This shift is happening for multiple reasons,” said Mark Huijben, a professor of battery technology at the University of Twente. “The LFP are cheaper, they last longer and are safer.”

Additionally, the growing desire among Western car manufacturers to avoid the reputational damage associated with sourcing metals like nickel and cobalt from regions plagued by conflict and environmental degradation plays a pivotal role in this transition.

Iron, in contrast, has a cleaner status. Many new and affordable EVs in the Indonesian market, produced by Chinese firms like BYD and Wuling, use LFP batteries, indicating a potential departure from nickel-based technologies.

The future of nickel down-streaming

After Jokowi left office, the question arises as to what his country has gained from “Jokowinomics” and the nickel industry.

Prabowo has vowed to continue Jokowi’s legacy of downstreaming. “We must implement downstreaming for all the commodities we possess,” he said in his inaugural presidential address in October. “The added value from all these commodities should strengthen our economy, allowing our people to enjoy a more prosperous life.”

Despite the ambition to develop a thriving industry and escape the “resource curse,” people in Sulawesi have not seen their conditions improve. The dream of a large Indonesian car-manufacturing business seems further away. Carmakers abroad are moving away from nickel, putting Indonesia’s strategy at risk.

Bhima and Faisal agreed that Indonesia should focus on building a domestic stainless steel industry to reap the full benefits of its nickel reserves. Almost three-quarters of nickel exports are for stainless steel production, not car batteries. But the steel production happens abroad, so Indonesia has to import the finished products back in for infrastructure development.

Meanwhile, profits from the nickel industry end up with businessmen like Sintong, Halim, Hamid and Xiang, whose daughter recently acquired a USD 62 million mansion in Singapore. Bloomberg News reported Xiang Yangyang purchased the 2,600-sq-m luxury home in the posh Bin Tong Park enclave.

In contrast, workers in Morowali can only afford to rent a 2-sq-m room, often sharing it with two other people. They usually try to find colleagues working different shifts as roommates, so three people won’t be in the same tiny room at the same time.

Thanks to labour unions’ and workers’ protests, Jusuf and his colleagues have seen their income improve. A newcomer can now earn between USD 313 and USD 376 in an accumulated monthly salary, allowances and overtime pay.Almost a decade since he started working at IMIP, Jusuf has climbed the career ladder and can earn up to USD 564 per month.

He now lives near his office, sharing a rented small plywood house with his wife and their young child. He still struggles financially due to the high cost of living. But, he points out, the situation is much worse for newcomers.

“By any standard, we aren’t prosperous yet,” he says.

This story was produced by the Environmental Reporting Collective in partnership with Initium Media, Mongabay Africa, Mongabay Latin America, The Investigative Desk, and The Reporter.