Luhut Reveals Strategic Rationale Behind IMIP Airport and China's Nickel Investment

Background of Morowali Industrial Development

Coordinating Minister Luhut Binsar Pandjaitan has provided detailed insights into the construction of the IMIP Airport in Morowali, Central Sulawesi, revealing it was a strategic move to attract China's substantial investment in Indonesia's nickel downstream industry. The airport, which has been operational within the Indonesia Morowali Industrial Park (IMIP), was built during Luhut's tenure as Maritime and Investment Coordinating Minister under President Joko Widodo's administration.

Investment Incentives and Infrastructure Development

The decision to build the airport was made following a $20 billion investment commitment from Chinese companies in Indonesia's nickel sector. Luhut explained that the airport was offered as part of the investment incentives, similar to practices in countries like Vietnam and Thailand, to attract large-scale investors. The airport is designed to serve domestic flights exclusively and operates without customs or immigration facilities as per national regulations.

Nickel Downstreaming and Economic Impact

Luhut highlighted that the nickel downstreaming initiative, which began with the cessation of nickel ore exports, has transformed Indonesia's economic landscape. Previously, nickel ore exports were valued at only around $1.2 billion annually, with minimal value addition. Through his lobbying efforts, particularly with Chinese leadership including President Xi Jinping, Indonesia successfully attracted significant investment in nickel processing facilities. This strategic move has led to a substantial increase in exports, reaching $34 billion last year and projected to grow to $36-38 billion this year.

Policy Challenges and Implementation

The decision to stop nickel ore exports and focus on downstreaming was initially met with resistance from some ministers due to concerns about short-term revenue loss. However, Luhut's persistent efforts and detailed analysis eventually convinced President Jokowi to approve the policy. The successful implementation of this strategy has positioned Indonesia as a key player in the global nickel industry, particularly in the production of materials used in electric vehicle batteries and other advanced technologies.

International Context and Comparative Advantage

Luhut also referenced a recent conversation with Tesla CEO Elon Musk, who acknowledged that the United States currently lags behind China in nickel downstreaming technology. This observation underscores Indonesia's strategic decision to partner with China, leveraging their technological capabilities to develop its nickel industry. The Morowali industrial complex has become a significant hub for nickel processing, producing high-value products such as stainless steel, precursor materials, and cathode materials for global industries.