Jakarta s flip flops stall investment say analysts after LG pulls out of 11b nickel plan

JAKARTA – The decision by South Korean company LG to exit a US$8.45 billion (S$11.1 billion) plan to build an electric vehicle (EV) battery supply chain in Indonesia has sparked debate over Jakarta’s inconsistent policies and slow decision-making.

LG Energy Solution, the world’s third-largest EV battery maker, disclosed its decision on April 21, citing “market conditions and investment environment”.

LG had led the consortium that was meant to develop a nickel mine, build smelters and construct a battery cell plant in Karawang, West Java, under a memorandum of understanding signed with Indonesia in December 2020. Indonesia holds the world’s largest nickel reserves.

Some industry observers have described LG’s move as a setback in Indonesia’s plans to build an EV ecosystem and its ambitions to develop downstream industries around its mineral resources.

But the government has insisted the mega project is on track.

On April 23, Energy and Mineral Resources Minister Bahlil Lahadalia said development and production would continue as planned, with China’s Zhejiang Huayou Cobalt as the new lead company.

“There is no change in our plan to make Indonesia a global EV production base,” Mr Bahlil said.

On the same day, Investment Minister Rosan Roeslani said it was the Indonesian government that had decided to terminate the partnership with LG on Jan 31, after years of stalled negotiations.

Questions have arisen over the surprise entry of Huayou, and whether LG pulled out or was ejected by the government.

Industry analyst Fabby Tumiwa said the Indonesian government should explain what had really happened behind the scenes, and its reasons for selecting Huayou, which makes EV battery raw materials.

“For the sake of public accountability and transparency... we need to know what really was going on and what basis was used to go with Huayou, after spending long years of negotiation