Why IMF is Asking Indonesia to Remove Downstreaming due to Alleged Favoritism towards China

Thursday, 06/07/2023 21:20 WIB

Foto: International Monetary Fund (IMF). (Dok: International Monetary Fund)

Jakarta, CNBC Indonesia – The request from the International Monetary Fund (IMF) asking the Indonesian government not to expand the policy of banning the export of raw minerals, especially nickel for downstream purposes, apparently is not without reason. This is because Indonesia’s downstream program is considered to only benefit one country, namely China.

INDEF economist, Abra Talattov assessed that the criticism or protest from the IMF was because there was an impression that RI’s downstream policy only benefited a handful or maybe even one country, namely China. Especially those who are taking advantage of the current momentum of downstream minerals.

“So that in terms of the supply chain for industrial mineral needs, for nickel in these various countries it is limited so everything is focused centrally as if it were only for China,” Abra told CNBC Indonesia, Wednesday (5/7/2023).

Under these conditions, according to Abra, Indonesia has the potential to face limited choices of final products, such as electric vehicle batteries to the main components for Rooftop PLTS. This means that Indonesia’s opportunity to get more supplies with varied quality and prices is also getting smaller.

“Because it is too dominated, our exports are even domestically downstreamed by an investor country, mainly China. This means that the government needs to be honest and open in evaluating how the proportion of downstream investors is domestically and also the export destination countries of these nickel derivative products everywhere,” he said.

As is well known, the IMF recently asked Indonesia to stop the mining downstream program from being phased out and not extending it to other commodities.

The IMF assesses that Indonesia’s downstream policy needs to consider the issue of cost and benefit analysis. The IMF reminds that the downstream policy creates negative propagation for other countries.

The IMF calls for regular analysis of the costs and benefits of downstream in Indonesia. This analysis must be informed periodically by emphasizing the success of downstream and whether or not it is necessary to expand downstream to other types of minerals.

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