Indonesia to build “world’s largest green industrial estate” backed by Belt and Road Initiative

PT Kalimantan Industrial Park Indonesia (KIPI), a consortium of companies from IndonesiaChina and the United Arab Emirates, is financing the US$132 billion project in North Kalimantan, Indonesia.

Indonesian President Joko Widodo said will initially sit on 16,400 hectares of land on the island of Borneo but could be extended in future to almost twice that size. Located in North Kalimantan province, the estate will span 30,000 hectares (74,132 acres) and include investment from China and the United Arab Emirates. President Widodo made the comments during a ground-breaking ceremony on December 21, 2021.

The Indonesian president said he is keen to establish manufacturing industries to take advantage of Indonesia’s rich natural resources such as nickel, bauxite and copper so that the country can move up the value chain and not just export raw materials. “Indonesia’s economic transformation starts here where we will manage our natural resources from the upstream to downstream to create massive job availability,” Jokowi said.

Indonesian President Joko Widodo launches the project. Photo: Xinhua

According to a report in the South China Moring Post (SCMP), the project will involve up to five hydro-electricity dams – these will be designed and constructed by the Power Construction Corporation of China and PT Kayan Hydro Energy “for a total cost of US$18 billion, as part of Beijing’s Belt and Road Initiative to grow global trade – are already under construction on the Kayan River, some 200km away from Tanah Kuning, the coastal area where the industrial estate is being built. Once fully operational, the dams are expected to have a generating capacity of nine gigawatts, and the first is slated to come online in 2025. Solar energy and natural gas will also be used to power the industrial estate”, the Indonesian government said.

Planned as a manufacturing hub, including for solar panels, electric car batteries, and industrial silicon products, the industrial estate is planned to start operations by 2024 and be completed by 2029. The SCMP quoted Luhut Pandjaitan, Indonesia’s coordinating minister for maritime affairs and investment, said at least 10 Chinese investors had committed to backing the project, after pouring “tens of billions of dollars” into downstream nickel production in the country in recent years.

Part of the environmental offsets offset proposed for the development is the restoration of around 5,000 hectares of mangrove forest in North Kalimantan.

Indonesia is Southeast Asia’s largest economy and will have much to gain from the huge new industrial estate being built in North Kalimantan. However some environmental groups say the project is controversial – particularly the five dams proposed on the Kayan River.

However, other analysts see the Indonesian government’s vision of an industrial estate powered by renewable energy as worthwhile, even if the project may not be entirely green in its first few years of operations.

The SCMP quoted Mohammad Faisal, executive director at the Jakarta-based Centre of Reform on Economics think tank as saying “This is a good first step. We hope that in the future there will be new technology that could improve our adoption of renewable energy, so that the industrial estate will be comprehensively green.”

Source: SCMP


Sources:

Borneo Post, January 16, 2022. https://www.theborneopost.com/2022/01/16/sarawak-to-gain-from-indonesias-latest-green-industrial-estate/

South China Morning Post, 8 January 2022. https://www.scmp.com/week-asia/economics/article/3162586/indonesias-huge-china-backed-green-industrial-estate-raises

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