Indonesia Must Strengthen Downstream Policy and Expand Partnerships to Avoid Reliance on a Single Investment Partner

Indonesia must prioritize strengthening its downstream policy and expanding strategic partnerships with other countries.
LG Energy Solution’s (LGES) cancellation of the US$7.7 billion electric vehicle battery project highlights the need for Indonesia to diversify its investment portfolio.

The cancellation of the US$7.7 billion electric vehicle battery project by LG Energy Solution (LGES) has left Indonesia’s policymakers scrambling to reassess their approach to downstream investment. According to Fathul Nugroho, deputy chairman of the Indonesian Association of Energy, Mineral, and Coal Suppliers (Aspebindo), the project’s cancellation serves as a critical reminder for Indonesia not to rely on a single investment partner. “In the past, we have seen that our dependence on foreign investors can be a double-edged sword. If they withdraw their investment, it can have significant economic implications,” Fathul said. “Therefore, it is essential for us to strengthen our bargaining power and downstream policy through domestic investment independence and strategic partnerships with other countries.”
To achieve this, Fathul proposed five strategic measures to be taken by the government and industry stakeholders. Firstly, expand investment partnerships with companies from the United States and Europe, such as Tesla, Eramet, and Bosch. This can be achieved by offering more attractive fiscal incentives and simplifying regulations, from land procurement to the acceleration of supporting permits. Secondly, strengthen synergy among the government, state-owned enterprises, and the national private sector. This can be done by facilitating joint ventures between IBC and major national private firms, allowing for the acquisition of technology and intellectual property rights through pooled funding. Thirdly, the government should allocate 20 percent of the Non-Tax State Revenue (PNBP) from minerals and coal, estimated to reach Rp37 trillion to Rp40 trillion annually, to support the acceleration of downstreaming. These funds can be used for the development of battery technology and industrial infrastructure under strict oversight from the Downstream Task Force. Fourthly, the government can utilize the surplus electricity from the 35,000 MW program for battery industry zones with special tariffs, along with optimizing trade diplomacy to address the 32 percent import tariff on batteries imposed by the United States. Lastly, Fathul emphasized the importance of policy consistency and technological self-sufficiency in the development of Indonesia’s nickel downstreaming industry. “Our nickel potential is extraordinary, but we must ensure that our policies are consistent and our technology is self-sufficient,” he said. The cancellation of the US$7.7 billion electric vehicle battery project has highlighted the need for Indonesia to reassess its approach to downstream investment. By prioritizing strengthening its downstream policy and expanding strategic partnerships, Indonesia can avoid reliance on a single investment partner and ensure a more stable and sustainable future for its energy and mineral sectors.

Strategic Measures	Explanation
Expand investment partnerships	Offering more attractive fiscal incentives and simplifying regulations to attract companies from the United States and Europe.
Strengthen synergy among the government, state-owned enterprises, and the national private sector	Facilitating joint ventures between IBC and major national private firms to acquire technology and intellectual property rights.
Allocate 20 percent of PNBP	Supporting the acceleration of downstreaming with a special allocation of funds.
Utilize surplus electricity	Using special tariffs for battery industry zones and optimizing trade diplomacy to address the 32 percent import tariff on batteries.

“LGES’s decision to withdraw from the Titan Project is a reminder that Indonesia must not depend on a single partner. Our bargaining power and downstream policy must be reinforced through domestic investment independence and by partnering with other countries such as the United States and European nations,” Fathul said. According to Fathul, the project’s cancellation not only hampers the target for domestic EV battery production but also risks delaying the transfer of strategic technology. “Missing the chance for technology transfer in this high-value sector could deepen our dependence on imports,” said Fathul. Fathul emphasized that the project’s cancellation may affect foreign investors’ perception of Indonesia, which is currently competing with Thailand and Vietnam in attracting EV sector investments. “The Inflation Reduction Act in the United States has played a significant role in redirecting investment, as it offers substantial incentives to battery manufacturers operating within their borders,” Fathul said. “This has shifted the global competitive landscape. Therefore, the Ministry of Investment and Downstreaming, along with the Downstream Task Force, must strengthen economic diplomacy with target countries and prepare competitive supporting infrastructure.”
In conclusion, the cancellation of the US$7.7 billion electric vehicle battery project by LGES serves as a critical reminder for Indonesia to prioritize strengthening its downstream policy and expanding strategic partnerships. By doing so, Indonesia can avoid reliance on a single investment partner and ensure a more stable and sustainable future for its energy and mineral sectors. Fathul Nugroho, deputy chairman of the Indonesian Association of Energy, Mineral, and Coal Suppliers, emphasized that the key to Indonesia’s success lies in policy consistency and technological self-sufficiency. LG Energy Solution’s (LGES) cancellation of the US$7.7 billion electric vehicle battery project has left Indonesia’s policymakers scrambling to reassess their approach to downstream investment. The investment plan was initially a collaboration between LGES and Indonesia Battery Corporation (IBC)—a partnership designed to cover the entire battery supply chain, from nickel processing to cell production. The reason, he said, is because the ability to process precursors and cathodes is a key element in increasing the added value of Indonesia’s minerals. Fathul also warned that LGES’s move may affect foreign investors’ perception of Indonesia, which is currently competing with Thailand and Vietnam in attracting EV sector investments. Fathul noted that policies such as the Inflation Reduction Act in the United States have played a role in redirecting investment, as they offer substantial incentives to battery manufacturers operating within their borders. Therefore, the Ministry of Investment and Downstreaming, along with the Downstream Task Force, must strengthen economic diplomacy with target countries and prepare competitive supporting infrastructure,” he stated. To anticipate long-term impacts, Aspebindo proposed five strategic measures. Firstly, expand investment partnerships, including revisiting talks with companies from the United States and Europe such as Tesla, Eramet, and Bosch, by offering more attractive fiscal incentives. Secondly, simplify regulations, from land procurement to the acceleration of supporting permits. “IBC needs to be more aggressive in forming joint ventures by partnering with major national private firms, allowing for technology and intellectual property rights to be acquired through pooled funding,” said Fathul. Fourthly, Aspebindo proposes a special allocation of 20 percent from the Non-Tax State Revenue (PNBP) from minerals and coal—which is estimated to reach Rp37 trillion to Rp40 trillion annually—to support the acceleration of downstreaming. Despite the loss of a major investor, Fathul stressed that nickel downstreaming remains a national priority. “Our nickel potential is extraordinary. The key lies in policy consistency and technological self-sufficiency,” he said.