Nickel: Downstreaming, Potential, and Increasing Mining Area Poverty 2023

President Joko Widodo (Jokowi) refused to yield to warnings from the International Monetary Fund (IMF) or potential lawsuits from the World Trade Organization (WTO) regarding nickel downstreaming.

In early July 2023, the IMF did issue a note to Indonesia through the *IMF Executive Board Concludes 2023 Article IV Consultation with Indonesia*.

In this document, the organization comprising 190 countries warned about further cost-benefit analysis and plans to minimize cross-border spillovers if nickel downstreaming is carried out, as quoted by *Tempo.co*.

Nickel downstreaming involves processing raw nickel or nickel ore into final products with added value that can be traded, thus having economic value.

The push for nickel downstreaming is in line with restrictions on the export of this commodity. The IMF also urged Indonesia to consider phasing out nickel export restrictions.

Jokowi's firm stance on nickel downstreaming is because this activity is considered to have created more jobs than before.

"Before downstreaming, only 1,800 workers were involved in nickel processing. After downstreaming, 71,500 workers can work due to nickel downstreaming in Central Sulawesi," Jokowi said at the inauguration of the Indonesian Employers Association (Apindo) National Board at the Kempinski Hotel, Central Jakarta, Monday (31/7/2023), as quoted by *Detik.com*.

Data from the Decree of the Minister of Energy and Mineral Resources (ESDM) Number 31/2022 concerning the National Mineral and Coal Management Plan for 2022-2027 shows that nickel has enormous resources.

Total nickel resources reach 17.7 billion tons of ore and 177.8 million tons of metal, with reserves of 5.2 billion tons of ore and 57 million tons of metal.

(See also: Nickel Prices Down in the First Half of 2023, What is the Future Projection?)

Indonesia even ranks first in the world for nickel reserves. The volume is equivalent to 23% of the world's reserves. This value is greater than that of other world mineral and coal reserves.

"The demand for mineral commodities, especially nickel, is strengthening in line with the increasing demand for nickel-based batteries," the regulation states.

Luhut Binsar Pandjaitan, Coordinating Minister for Maritime Affairs and Investment, once stated that nickel industry downstreaming has successfully driven economic growth and reduced poverty in Indonesia.

“Downstreaming encourages quality investment, especially in eastern Indonesia,” said Luhut at the CNBC Nickel Conference in the Kempinski Ballroom, Jakarta, Tuesday (25/7/2023), as reported by *Tempo.co*.

How does this claim match up with Indonesia's poverty data?

(See also: Economic Inequality in Indonesia Increased in March 2023)

Through the 2020 nickel mining booklet, the Ministry of ESDM compiled a number of provinces that have nickel mining areas.

There are at least seven provinces where nickel mines are located based on the Mining Business Licenses (IUP) held by their companies. These include Southeast Sulawesi, Central Sulawesi, South Sulawesi, Maluku, North Maluku, Papua, and West Papua.

*Databoks* found that almost all of the mining provinces mentioned above experienced an increase in the poverty rate between September 2022 and March 2023, as seen in the March 2023 poverty report issued by the Central Statistics Agency (BPS).

Only two provinces experienced a decrease in the poverty rate, namely West Papua and Papua. The percentage of poor people in West Papua in September 2022 was 21.43%, down to 20.49% in March 2023.

Meanwhile, the percentage of poor people in Papua in September 2022 was 26.8%, down slightly to 26.03% in March 2023.

The other five provinces experienced an increase. The province with a significant increase was Maluku, from 16.23% in September 2022 to 16.42% in March 2023, or up 0.19 points.

In addition, Southeast Sulawesi, from 11.27% in September 2022 to 11.43% in March 2023, increased by 0.16 points. The rest are included in the graph.

BPS states that people are categorized as poor if they have an average per capita expenditure per month below the poverty line.

The poverty line in March 2023 was recorded at Rp550,458/capita/month. The composition is a food poverty line of Rp408,522 (74.21%) and a non-food poverty line of Rp141,936 (25.79%).

(See also: Not Nickel, This is the Mineral Most Needed by the Electric Vehicle Industry)