America and Indonesia in mid-July 2024, again explored the possibility of a multilateral partnership on critical minerals, “critical minerals” in the Mineral Security Partnership (MSP). These minerals are very much needed in the global competition to produce advanced technology products including batteries for electric cars. What standards must be met and what are the challenges for Indonesia?
VOA – The Washington DC-based US think tank, the Center for Strategic International Studies (CSIS), in its study on essential minerals, said that “Indonesia is the world's largest nickel producer, in addition to producing significant amounts of copper, cobalt, tin and gold.”
Professor Joshua W Busby, a critical minerals expert from the University of Texas at Austin, explains the types of minerals that America considers critical.
“The U.S. Energy Act of 2020 defines critical minerals as those that are critical to U.S. economic or national security, those whose supply chains are vulnerable to disruption, and those that serve a critical function in manufacturing whose failure would have significant consequences for economic or national security.”
“There are different lists from different agencies, depending on their purpose. The U.S. Geological Survey identified 50 different minerals on its 2022 list. Key ingredients for lithium-ion batteries — including cobalt, nickel, lithium, manganese and graphite — are all on the 2022 Critical Minerals list,” he explained.
He added that the Department of Energy has identified 18 materials critical to energy, some of which are on the USGS (United States Geological Survey) list. The Department of Defense has another list of strategic materials that have important uses for defense purposes that includes materials known as “rare earths” that are used to make permanent magnets used in missile guidance and other applications.
Given Indonesia's role as one of the important mineral suppliers, America wants Indonesia to join the Mineral Security Partnership (MSP) with 14 other countries and the European Union to ensure improved standards in its production processes.
MSP considers projects along the clean energy supply chain, from mining, extraction and secondary recovery, to processing and refining, and ultimately recycling.
MSP focuses on the supply chain of minerals and metals most relevant to clean energy technologies. These include – but are not limited to – lithium, cobalt, nickel, manganese, graphite, rare earth elements and copper.
Included in the MSP standards are environmental protection, sustainable development, collaborative efforts, governance and an aligned regulatory framework.
Dr. Sampe Purba, an expert in Geostrategy Energy, an alumnus of the Indonesian Defense University, and an expert staff of the Minister of Energy and Mineral Resources 2019-2023 said, “Indonesia has been doing it for quite a long time and is getting more intense because it has become a world concern, what we do in the regulatory framework are two things, namely the first related to the environment and the second related to mining, the largest umbrella of which is the Environmental Law Law No. 32 of 2009, if read in detail that for every project that has a significant impact there must be an Environmental Impact Analysis (AMDAL)”
He added that Indonesia is still considering and reviewing the MSP, while hoping that the US understands the challenges faced by countries that are moving towards improving standards and negotiating partnerships based on the principle of equality. The mining expert said the partnership would be even better if US companies also invested directly and established mineral companies in Indonesia.
Chinese companies have dominated the establishment of mineral processing companies in Indonesia for the past two years. This happened after Indonesia opened a gap for foreign direct investment (FDI) to increase the production and operation of mineral companies in Indonesia.
Dr. Alvin Camba, a research advisor on critical resources for the Association of Universities in the US (Associated Universities Inc.) cited reasons why American companies are not as aggressive as China in competing for mineral investment in Indonesia.
“We have two very different economies. For example, the Chinese economy puts a lot of money into getting its state-owned companies and its big private mining companies to invest in Indonesia. The US economy is not like that at all, the government has a little, much less role, it relies heavily on private companies.”
If China subsidizes Chinese companies to invest abroad for its own interests, this is not the case in the US where private companies depend on the stock market, prices and profits from the final output of production.
Despite the involvement of the state and private sector, the economy and America's long-term interests in mineral investment. Alvin Camba warns of the challenges and impacts of the rapid increase in the number of mining and mineral processing facilities on the environment.
“Nickel mining is very, very horrible. So when you mine nickel, there’s waste that sticks to the ground. Then when you pour water on it, it becomes runoff, and then it sticks to the ground. When you say it sticks to the ground, it basically kills the ground. And it can also be very toxic to animals, etc. There are a lot of fish that have nickel in them. And this is just nickel. All of these mining activities are very bad for people,” he said.
He added that another challenge is that the Indonesian government is not taking adequate measures to protect the surrounding community. He stressed that the budget given to government agencies to monitor environmental standards is inadequate.
Professor Joshua W Busby also sees this challenge for Indonesia, “Mining can often have a high impact on local environmental quality by converting forests to mine sites and through contamination of rivers and coastal waters with mine waste. Mining and processing companies in China may be able to gain a competitive advantage in pricing their minerals impacts by having lower environmental and social standards at their mines.”
Dr. Sampe Purba acknowledged that the implementation of environmental standards still needs to be improved, and the government wants to ensure that all mining companies comply with environmental standards. This is not an easy task, he said, but Indonesia is getting there.
It is not yet clear when Indonesia will join the MSP partnership given the transition period of government in both countries which will affect environmental and economic policies. (my/ab)
