Wednesday, December 6, 2023

Indonesia’s election matters for relations with China and the environment

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Indonesians will vote for a new president on 14 February 2024. The incumbent, Joko ‘Jokowi’ Widodo, has been closely allied with China since taking office in 2014. He has consistently tried to attract investment, particularly into mining and metal refining, transportation, and the building of the new capital city Nusantara.

Thus far, three people have announced their candidacy for president, all well-known public figures with extensive experience in government.

How would Ganjar Pronowo, Prabowo Subianto and Anies Baswedan navigate Indonesia’s ties with China if they came to power, and what might the environmental implications be?

Indonesia–China relations under Jokowi

Since Jokowi took office, China has become Indonesia’s largest trading partner and investor. Chinese imports rose to US$71.32 billion in 2022, up from less than US$40 billion in 2014, according to the UN Comtrade database.

Chinese state-owned banks and construction companies have funded and implemented major infrastructure projects including a US$8 billion high-speed rail link between Jakarta and Bandung, which opened to the public in October this year. The line was 75 per cent funded by loans from the China Development Bank, and built by the China Railway Group along with a consortium of Indonesian enterprises. Indonesia has also increased its debt to China, to over US$21 billion, and has increased use of Chinese yuan in its foreign transactions.

As well as bringing opportunities, such investments have also raised concerns among communities, including over environmental degradation, cost-overruns and labour issues.

The building of the Jakarta–Bandung railway prompted fears over increased risks of landslides and impacts on water supplies. Several projects to mine and process nickel for the EV battery industry have encountered opposition. For example, fishers in Weda Bay, North Maluku, have reported their catch being dimished by a project involving Chinese firms including Tsingshan.

A joint nickel venture on the island of Obi, between China’s Ningbo Lygend Mining Company and Indonesia’s Harita Group, has been found to have contaminated drinking water. And work on the Batang Toru hydropower project in Sumatra, being built by North Sumatra Hydro Energy in collaboration with Chinese engineering and construction company Sinohydro, has eroded the natural habitat of the critically endangered Tapanuli orangutan.

How the candidates fare on the environment

Indonesia’s three presidential candidates have handled environmental issues in different ways.

Ganjar Pronowo is a member of Jokowi’s party, the Indonesian Democratic Party of Struggle. He was serving as Central Java governor during the Kendeng case involving local resistance to mining and cement production. In 2016, one month after the supreme court ordered the cement factory’s environmental permits be revoked, Ganjar issued a new permit.

He was governor too during the Wadas mining case, which saw resistance to mining for materials to build a dam that would supply water to an airport. Ganjar encouraged the community to accept compensation even though some remained worried about flooding due to mining activities. Both cases gave rise to prolonged conflict, accompanied by a repressive approach by the police towards communities who refused to be relocated.

Ganjar has never commented directly on environmental issues related to Chinese investment and critical minerals. Instead, he has highlighted their economic importance. In a dialogue with academics in October 2023, he said that Chinese workers were still very much needed and would not be replaced by local workers in the near future. Jokowi has sought to develop a critical mineral processing industry in Indonesia, to retain more value for the country rather than simply exporting the raw materials. Ganjar has got firmly behind this narrative and largely sidestepped any environmental and labour rights issues that trouble it.

Perhaps to make up for his poor environmental record while governor, Ganjar has focused a good deal of his presidential campaign on the energy transition. In his manifesto, he supports off-grid renewable energy projects that benefit village communities. His target for renewables in the energy mix is, however, not particularly ambitious, at only 25-30 per cent by 2029 – less than Jokowi’s current target of 34 per cent by 2020.

Prabowo Subianto, meanwhile, is the current minister of defence, and has been a rival of Jokowi in the last two elections (in 2014 and 2019). His environmental record is also flawed. Take the “food estate” programme to establish large agricultural plantations across Indonesia. Prabowo was in charge of creating one of these estates in Central Kalimantan with cassava as its main crop. Areas of forest were cleared in 2022-2023 but no cassava has reportedly yet been harvested.

Moreover, a company affiliated with Prabowo’s younger brother has a very large timber plantation in East Kalimantan. Several parties have linked the permitting of industrial-scale plantations within forests in Kalimantan with the deal to move the country’s capital, given the ensuing demand for both cleared land and timber for construction. The conflict of interest, and ensuing environmental damage, has ultimately made Prabowo keen to avoid talking about environmental and climate issues. In his manifesto, policies on the energy transition and preventing deforestation are broadly similar to Jokowi’s.

Anies Baswedan, a former governor of Jakarta, has a clearer record on the environment. His manifesto mentions accelerating the closure of coal-fired power plants, as well as providing incentives for the renewable energy sector. No presidential candidate has previously stated so clearly in a manifesto the desire to close coal power plants.

This commitment may conflict with China’s interests due to the construction in recent years of coal-fired power plants in industrial parks, funded and built by Chinese companies. In the short-term, early retirement of coal plants would make the nickel-smelting process more expensive for Chinese companies in Indonesia, due to a lack of battery storage and smart grids to facilitate solar PV.

Anies’ main challenge may be securing enough funding, given the high expense of running a presidential campaign.

For all three candidates, there are concerns about the influence of the fossil energy and extractive sectors. Political funding regulations in Indonesia are still very weak. Although candidates must provide personal wealth reports and identify sources of campaign funds, these disclosures need not be audited by an independent third party. As a result, fossil fuel firms may pay candidates to make environmental promises, so they get elected, and then to deliberately fail to keep promises, for the benefit of the firms.

Candidates’ track records with China

Examining the three candidates’ engagement with Chinese officials to date offers an indication of their approach to China should they be elected in February. We, the authors of the current article, all work for CELIOS (Center of Economic and Law Studies), an Indonesian think-tank that recently published a report mapping these interactions.

Of the three, Prabowo has interacted most with China. Between 2018 and 2022, he met several times with Xiao Qian, then Chinese ambassador to Indonesia. If elected, he is likely to continue engaging with China and has said he would invite Chinese investment in sectors including infrastructure and food security.

Prabowo’s running mate, Gibran Rakabuming Raka, is the mayor of Solo in Central Java and the eldest son of President Jokowi. Although his interactions have been limited, many commentators have highlighted his father’s closeness to China. If elected, his China focus would likely be on technology and sister-city cooperation.

The candidate pair of Ganjar and Mahfud Mahmodin, who is the coordinating minister for political, legal, and security affairs, have had frequent interactions with China. Ganjar, in his capacity as governor of Central Java, has had several meetings with Chinese officials, either in Indonesia or while visiting China (in 2015, 2018, 2019 and 2023). Most involved discussion of investment cooperation, especially in Central Java. Ganjar’s party has a good relationship with the Chinese Communist Party.

Mahfud had meetings with Xiao Qian in 2019 and 2020 to discuss sensitive geopolitical issues. In 2022, he also received a visit from Lu Kang to exchange views on political and security issues. Mahfud’s interactions with China are based on his diplomatic duties involving law and human rights. During his tenure, he has been considered quite critical of China.

Anies has interacted more often with Western countries than with China. His only public engagement occurred in 2019, when he met with Xiao Qian to discuss the potential for sister-city cooperation.

Anies’ vice presidential candidate, Muhaimin Iskandar (often called Cak Imin), has had more interactions, meeting with several Chinese officials in recent years. If elected, Cak Imin may compensate for Anies’ lack of experience in interacting with China. 

Indonesia’s bargaining power

Whoever is elected must acknowledge Indonesia’s bargaining power with China. Indonesia has the largest economy in Southeast Asia, and its inclusion as a member of the G20 group of major economies indicates the international community’s confidence in its economic strength. Moreover, its strategic location gives Indonesia a crucial position in the maritime component of China’s Belt and Road Initiative (BRI).

At the same time, Indonesia’s next president must also understand China’s interests and needs. The BRI began in part as a way for China to use its industrial capacity to improve its economic performance after the global financial crisis of 2008. Today, the BRI continues to help China ease domestic issues, such as excess supply of raw construction materials and of foreign exchange which can be delivered to partner countries.

It is not just countries signed up to the BRI that need China and its investment. China also needs them.

Whoever is the president come February, it is essential he understands this mindset. Indonesia should not position itself just as a market and investment destination for Chinese products and money. Flexibility and expertise are essential in negotiating future agreements with China, which should aim to secure mutual benefits for both countries.

The Indonesian government should be selective in determining which BRI projects will provide the best possible benefits, over projects that risk producing losses and environmental harm. The government should ensure that it mitigates such risks before any projects are agreed to.

Whoever wins the election will also have to maintain political balance between China and western countries in various global cooperation arenas. This includes the energy transition funding race, in which western countries are playing a role through their Just Energy Transition Partnership (JETP) with Indonesia, while China has ramped up its commitment to greening the BRI. Both can help accelerate the early retirement of coal power plants and the deployment of renewable energy.

Addressing the impacts of Chinese investment

The operations of various Chinese companies in Indonesia, notably in the mineral extractive industry, have caused social and environmental damage. The next president must encourage all relevant entities to improve corporate governance and prevent such problems from reoccurring. It is vital that the government involve all stakeholders – from central and local government, to civil society organisations and the private sector – in consultations around new projects and in the addressing of problems with existing ones.

The new president will need to seek strong agreements to ensure Chinese companies adhere to the highest environmental and governance standards. The government must also commit to thoroughly investigating cases of environmental and social harms, including when there is abuse of power by unscrupulous Indonesian officials, both at the central and regional levels.

This article was originally published on China Dialogue under a Creative Commons licence.

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