Energy and Mineral Resources Minister Ignasius Jonan. (Antara Photo/Rivan Awal Lingga)

Electric Car Regulation Stumped by Protectionist Tendencies


JULY 28, 2019

Jakarta. For 18 months, the government has gone back and forth on an electric car regulation that is promised to accelerate the country's shift away from being dependent on imported fossil fuel. But now it seems President Joko "Jokowi" Widodo has finally put the pedal to the metal on the issue and is expected to roll out the regulation by the end of this month.  

One of Jokowi's ministers has said people can blame the delay on a protectionist faction within the cabinet. 

"We've been waiting for one and a half years for the presidential decree. The debate between ministers is never-ending. Some are in favor [of the regulation], some are not. This [division] simply must end," Energy and Mineral Resources Minister Ignasius Jonan said on Sunday.

He said the deadlock is rooted in a debate about the use of local components in electric cars.

"We can't wait for all the electric car components to be made here 100 percent. These lawmakers would all be retired before that happens,” the 56-year-old minister said.

Indonesia is no stranger to the practice of forcing its industries to source locally.

The government has already required smartphone makers to put a certain amount of locally made material or software in their devices to be able to sell them in the Indonesian market.

The country has also limited metal ore exports in favor of local processing. 

Jonan said instead of forcing electric car manufacturers to source from local suppliers, the government should encourage the process to happen naturally by offering tax incentives for local manufacturers and suppliers. 

He also said Indonesia should not lose sight of the fact that electric cars will definitely reduce the country's dependence on fossil fuel imports.

The minister stressed the fact that electric cars run on electricity generated from coal, gas, wind or solar power, all of which are available in abundance in Indonesia.

Finance Minister Sri Mulyani Indrawati said on Thursday the regulation might be issued as soon as the end of this month.

"The presidential decree is all about [regulating] the ecosystem of the electric vehicle industry. It will include many incentives [to reduce] the luxury tax [on electric vehicles]. [It will also define] the types of vehicles that can receive the incentives, based on their emission levels," Sri Mulyani said.

The minister said electric vehicles are already all the rage in countries like the United States and Japan, and also in Europe.

"We hope to turn Indonesia into a manufacturing hub for electric vehicles, not only producing for the domestic market but also for export," Sri Mulyani said.

Indonesia's first target is to develop the capacity to produce and export the number one component in electric cars: the batteries.