Exploitation Of Illegal Nickel Mines In Indonesia – OpEd


Indonesia has abundant natural resources, especially nickel. Nickel is the raw material for making electric vehicle batteries. Electric vehicles are predicted to be low in emissions or environmentally friendly. Developed countries are currently competing to produce electric vehicles. Indonesia is not left behind with big plans to form a company producing electric vehicle batteries. This has attracted the interest of foreign mining companies including China to enter and explore for nickel in Indonesia.

There are several foreign mining companies operating and holding exploration permits in Indonesia. Nearly 70% of nickel mines in Indonesia are controlled by companies from China. Since October 2013, the 6th President of Indonesia, Susilo Bambang Yudhoyono and the President of the People’s Republic of China, Xi Jinping, in the middle of the Indonesia-China Business Luncheon at the Shangri-La Hotel, Jakarta, have made a joint agreement to build a nickel smelter project with a capacity of 300,000 tons of ferronickel. per year in Morowali, Central Sulawesi, valued at US$1.1 billion. This agreement was then followed up with the development of the Indonesia Morowali Industrial Park (IMIP).

IMIP development since 2013 has changed investment patterns. The downstream nickel industry is implemented to produce various types of products such as ferronickel, nickel pig iron (NPI), stainless steel, and in the future nickel-based nickel-based battery components for electric vehicles. This downstream process processes nickel potential and reserves.

Data from the 2019 Geological Agency recorded nickel resources reaching 11.7 billion tons and reserves of 4.5 billion tons. This figure places Indonesia as the largest nickel ore producer in the world. Nickel reserves of 90% are in four provinces, namely Central Sulawesi, South Sulawesi, Southeast Sulawesi and North Maluku.

Nickel has become an important raw material as the energy demand for electric vehicles increases. As the largest nickel producing country, Indonesia has a potential content of 11.7 billion tons with 4.5 billion nickel ores that can be mined immediately. Indonesia should benefit more from the rotating foreign exchange. Nickel in Indonesia has so far supported a positive trade balance in the last two years and has been able to withstand the fall in the value of the rupiah against the US dollar.

In May 2020, there were 29 times the value of Indonesia’s exports, a surplus of US$ 4-7 billion per month. Of exports throughout 2022 worth US$ 291.88 billion or IDR 4,524 trillion, non-oil and gas exports contributed US$ 235.61 billion. Palm oil, coal and nickel are the biggest contributors to exports of Indonesian products. As much as 23% of these export products sail to China, a country that does not attach importance to the legal origin of commodities.

The high export value should reflect the value of Indonesia’s foreign exchange. However, in fact, the value of foreign exchange reserves will decline by US$ 7.7 billion in 2022 compared to 2021. Who will then enjoy the blessings of natural resource commodities due to increased global demand if this is not reflected in the balance sheet?

According to Tempo magazine, there are dozens of illegal nickel mining companies in the Mandiodo Block, North Konawe, Southeast Sulawesi. These illegal companies launder illegal nickel using original but fake documents and then sell it to ore processors in Southeast Sulawesi and Central Sulawesi. In general, the nickel smelters in Konawe are a partnership of large groups of Chinese entrepreneurs.

By placing central and regional officials as commissioners, the illegal practices of these companies continue to operate without hindrance. In Mandiodo, illegal mining companies owned by politicians and officials’ families have even received protection from a number of police generals.

For almost four years the value of nickel dredged in the Mandiodo Block has reached Rp. 21.6 trillion. From Greenpeace Indonesia’s analysis of satellite imagery of the Mandiodo Block, dredging for nickel in this block will not only occur in 2022, but will start in 2019. In the 2019-2022 period, nickel mining spanned 985 hectares. This means that more than 36.9 million tonnes of nickel-containing soil were sold to nickel smelter companies in Morosi and Morowali. If the average price of nickel-containing land over the past four years is US$ 30.02 per ton, the Mandiodo Block nickel mining contractor will receive Rp 21.6 trillion in revenue.

The two smelters receiving nickel from the Mandiodo Block are PT Obsidian Stainless Steel in Morosi, Southeast Sulawesi, and PT Indonesia Ruipu Nickel and Chrome Alloy in the Indonesia Morowali Industrial Park complex, Central Sulawesi.

PT Lawu’s contractors said that all of the illegal nickel shipments from the Mandiodo Block were known to PT Lawu’s management. The delivery of nickel was successful to the smelter because they used the company documents holding a Mining Business Permit (IUP) in North Konawe which had a complete permit, both a Work Plan and Budget (RKAB) and a Borrow-to-Use Forest Area Permit (IPPKH). The miners referred to them as “dokter” or “dokumen terbang”.

The company documents most often used to pass the illegal nickel from the Mandiodo Block belong to PT Kabaena Kromit Prathama and PT Mandala Jayakarta. PT Kabaena’s IUP with an area of 102.6 hectares is located in the Mandiodo APL. Meanwhile, PT Mandala’s IUP area of 107 hectares outside the Mandiodo Block, namely in the Lasolo Islands District, is separated by the sea and the bay with the Mandiodo Block.

This illegal nickel laundering mode is classified as neat because there is a “coordination fee” with the police, prosecutors, to the ministry’s legal apparatus throughout the delivery of nickel to the smelter. The contractors in Mandiodo, Kendari and Jakarta said they are providing US$ 16 per ton for this purpose. “With all these costs, from a price of US$ 50, we only get US$ 3 per tonne,” said a local contractor.

Illegal exploitation of natural resources is now receiving legal protection through a Government Regulation in lieu of the Job Creation Law (Perpu Cipta Kerja). The Omnibus Law provides Articles 110 A and 110 B which prioritize the principle of ultimum remedium, which prioritizes administrative sanctions rather than criminal sanctions.

Article 110 A states, every person who conducts business activities that were built and has business permits in forest areas before this Law and has not met the requirements according to the applicable laws, must complete the requirements no later than three years after this Law comes into force. If more than three years, will be subject to administrative sanctions in the form of payment of administrative fines and or revocation of business licenses.

Article 110 B states that anyone who commits a violation without having a business permit prior to the enactment of this law will be subject to administrative sanctions in the form of temporary suspension of business activities, payment of administrative fines and or government coercion.

In this case, President Jokowi must firmly stop the illegal practices of nickel companies in his country. If this continues, Jokowi repeats what the United States experienced in the 19th century: the country’s wealth was robbed by “robber barons”, rich people who extracted natural resources while the law was unable to move because its officials failed to silence bribes.


Silvanah is an International Relations Student at the Islamic University of Indonesia who focuses on discussing environmental issues.

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