Indonesia is positioning itself as a global hub for critical minerals as soaring oil prices and Middle East turmoil accelerate demand for clean energy and electric vehicles.

The Southeast Asian nation is among the world's top producers of bauxite, copper and nickel, minerals that are essential for the development of clean energy systems and electric cars — the demand for which has been rising in recent months due to rising oil and fuel costs.

Indonesia's downstreaming push is reshaping supply chains for the energy transition, with officials calling on the nation to be not just a producer but also a strategic leader in the minerals ecosystem.

"Our vision is clear. Indonesia seeks to become not only a major producer of critical minerals, we also want to become a trusted partner, a responsible stakeholder, and a strategic leader in shaping the future of the critical minerals ecosystem," said Arif Havas Oegroseno, vice-minister of Indonesia's Ministry of Foreign Affairs.

In a speech delivered at the Indonesia Critical Minerals Conference and Expo held in Jakarta from June 3 to 5, Oegroseno said the world is entering a new industrial era where critical minerals will underpin future geopolitical and economic realities.

Sherly Tjoanda, governor of North Maluku, a mineral-rich region in Indonesia, noted that her province is helping power the energy transition.

North Maluku is home to some of the world's biggest nickel mining and processing facilities and is connected to the global EV supply chain.

Tjoanda said EVs and batteries are 'green products'. But she noted that these products should be manufactured without sacrificing the local community or the environment.

"A battery cannot be truly green if communities are left behind. An electric vehicle cannot be truly sustainable if ecosystems are degraded. The energy transition cannot succeed if local people do not share its benefits," Tjoanda said.

Indonesia is doubling down on its downstreaming push, locally known as "hilirisasi", and has banned raw exports of nickel and bauxite to force companies to process commodities at home and climb the global value chain.

Similar curbs

The government is weighing similar curbs on tin as it seeks to transform the resource-rich nation from a supplier of cheap ore into an industrial powerhouse, according to Indonesia's Energy and Mineral Resources Minister Bahlil Lahadalia.

During a briefing held in February, Lahadalia said the ban on raw nickel ore exports in 2018-2019 had bolstered the value of Indonesia's processed nickel exports to $34 billion in 2024. This was 10 times more than the 2019 figure of $3.3 billion.

Indonesia has likewise extended fiscal incentives to boost EV demand in the domestic market and to encourage foreign companies to set up EV and battery manufacturing plants in the country.

Primus Dorimulu, a Jakarta-based mining company executive, noted that Indonesia has moved forward in the EV global supply chain as it is not only developing a domestic EV market but also positioning itself as a regional production base.

"The government's strategy is quite clear. Investment is only welcome if it generates domestic value-add," Dorimulu told China Daily. He said fiscal incentives are extended selectively, with a focus on EVs and batteries.

Nanan Soekarna, chairman of the Indonesian Nickel Miners Association, pointed to Chinese investments in Indonesia's mining industry. Chinese companies are among the biggest investors in the Indonesian nickel processing and EV production sectors.

Soekarna said Chinese technology transfer and investment inflows to Indonesia will be more effective if the country improves the industrial governance framework.

Shirley Wang, vice-president of industry research for market intelligence firm Shanghai Metals Market, complimented Indonesia's downstreaming policy and how it has helped accelerate the nation's development of its steel and battery manufacturing industries.

Leonardus Jegho is a freelance journalist for China Daily.

Contact the writers at prime@chinadailyapac.com