IK-CEPA Paves the Way for Indonesia-South Korea's $9.1b Battery Project

Jakarta. Indonesia's and South Korea's $9.1 billion electric car battery joint venture project has gotten a boost after the two countries signed a comprehensive investment and trade deal, laying the groundwork for the Southeast Asian country's ambition to tap into the latter's technological prowess to establish an integrated battery industry. 

Trade Minister Agus Suparmanto and his South Korean counterpart, Trade, Industry, and Energy Minister Sung Yun-mo, signed the Indonesia-South Korea Comprehensive Economic Partnership Agreement (IK-CEPA) in a high-level meeting in Seoul on Friday. 

"The scope of the IK-CEPA agreement is quite broad, which shows that the two countries have a common determination to elevate the economic relationship to a higher level," Agus said. 

Apart from boosting the $13 billion annual bilateral trade between the two countries, the minister expected the agreement would accelerate South Korea's investment in Indonesia. 

"The agreement will certainly contribute to the modernization process of the Indonesian economy, given that South Korea has its own advantages in the field of technology," he said.

On the sideline of the meeting, LG Energy Solutions, a battery subsidiary of South Korea's largest chemical company LG Chem, signed a memorandum with the Indonesian government to develop a battery project in Indonesia. 

According to a report from news portal, BusinessKorea early this week, LG Energy Solutions would work with Indonesia Battery Holding — a joint venture between the country's mining holding company Indonesia Asahan Aluminium (Mind ID), state-controlled gold and nickel miner Aneka Tambang (Antam), state energy company Pertamina and state utility firm Perusahaan Listrik Negara (PLN) — on the project. 

The project would cost 10 trillion won ($9.1 billion) for investment to build nickel mining facilities, processing, smelting, and turning the metal into battery electrode and battery cell over the next five years. The report said that LG Energy Solutions would work on battery cell manufacturing, costing about 2 trillion won in investment.    

 LG Energy Solutions refuse to elaborate on its investment in Indonesia on Friday, saying many details are in discussion. 

Indonesia has set a goal to ban the sales of internal combustion engine cars by 2040, setting a similar deadline to South Korea, Singapore, and China. The goal was part of a global movement to wean the transportation sector off fossil fuel to reduce greenhouse gas emissions. Norway is among the most ambitious country by requiring all cars to be electric by 2025. Ireland, Denmark, the United Kingdom, Germany, Israel, and India aimed to achieve the goal in 2030 while the United States 2035.

Apart from the environmental goal, Indonesia saw the electric car and electric battery industry as a strategic sector to accelerate its recovery post-pandemic. The President Joko "Jokowi" Widodo administration was adamant about using Indonesia's enormous nickel reserve as leverage to attract foreign investment and transform Indonesia into a key global battery supplier.

"This policy is expected to be one of the government's strategic steps in economic recovery amid the pandemic, as well as an effort to improve the quality of life in a pollution-free environment," the Coordinating Minister for Maritime Affairs and Investment Luhut Binsar Pandjaitan said in a separate occasion.