Is It True That Developed Countries ‘Hate’ Developing Countries That Level Up? – OpEd

A Case Study of Indonesia vs the European Union Regarding Nickel Trade at World Trade Organization

According to the World Economic Situation and Prospects (WESP) 2022, countries in the world are generally known at different levels, which are divided into three classes, namely poor or developing economies, economies in transition, and developed economies.

First, poor or developing economies countries are identified as countries that have low per capita income, high poverty rates, and a high level of dependence on foreign aid. Some of the countries of this classification can be seen in the Sub Saharan Africa region, several countries in Southeast Asia and Latin America. Second, economies in transition are identified as countries that have experienced economic and social improvements but still have challenges in creating better development, have low per capita income, security is not guaranteed, health facilities are less sophisticated, population growth is uncontrolled, unemployment is high, and imports are higher than exports. Some of the countries of this classification can be seen in several East and Central Asian countries. Third, developed countries are identified as countries that have a strong economy where export levels are higher than import levels, high per capita income, guaranteed security, low unemployment, and better developed education and health systems that are supported by modern infrastructure with good governance. Developed countries can be seen in North America, Western Europe, and several East Asian countries.

In this case, all countries basically want to be rich. However, when viewed from the understanding above, it is certainly more possible for a developing country to become a developed country, but it is unfortunately more difficult for a poor country to become a developed country. Developing countries can become developed countries by making changes to increase investment in the economy supported by high technology, improve the quality of education and health for all people, build quality and sustainable infrastructure, create political stability to ensure security for investors, and develop natural resources. It can take a tremendous amount of time for a poor country to achieve all of these efforts and gain the status of being a developed country. Furthermore, developed country status is given by developed countries which are recognized as having great power and influence in the international world.

In this article, the author will discuss how developing countries try to improve their status to become developed countries, especially Indonesia. Indonesia is still considered to be a developing country (or a third world country), that has abundant natural resources. For decades, Indonesia has relied on exports of raw materials so that the value obtained is not high due to a lack of technological development. However, now Indonesia is experiencing significant changes and Indonesia’s presence in the international world is increasingly being taken into account.

This was supported when Indonesia was removed from the list of developing countries and included in the list of developed countries by the United States. The increase in tariffs is based on an increase in Indonesia’s market share which reaches 0.5% of total world international trade. Referring to the Indonesian Ministry of Finance, cumulatively, Indonesia’s export value from January – December 2022 reached USD$ 291.98 billion, up 26.07% compared to the same period in 2021. Meanwhile, non-oil and gas exports reached USD$ 275.96 billion, up 25.80%. Indonesia was also previously a member of the G20 whose forum dominated by the world’s developed countries. This is a good sign for Indonesia which is able to demonstrate its abilities, but by increasing its level to become a developed country it means that Indonesia no longer gets special treatment for developing countries. However, in this case it needs to be acknowledged that Indonesia has not fully become a ‘developed country’ because there are still many aspects that have not been fulfilled.

Even though several countries were upgraded from developing countries to developed countries status, including Indonesia, not all developed countries were happy with this. By increasing the level of being a developed country, the country has shown massive changes in various sectors, especially in the field of exports. The state does not want to only export raw materials with low selling value, instead the state will try to manage them so that the price value becomes higher. One clear example of Indonesia’s decision to do this is how Indonesia responded to their lawsuit against the World Trade Organization. This lawsuit was filed by European Union as a response to Indonesia’s policy of banning exports of nickel ore in 2020 in the context of developing domestic downstream nickel. This decision by Indonesia was detrimental to the European Union’s nickel industry and therefore the European Union considered it to be unfair.

This lawsuit is considered by Indonesia as a new form of colonialism against Indonesia, considering that the country that filed a lawsuit with the WTO against Indonesia’s downstream nickel decision that had colonized Indonesia in the past. The state wants to control Indonesia’s abundant resources, while Indonesia wants to make optimal use of its resources in order to have a high selling value. Unfortunately, Indonesia had to lose the lawsuit. This is very sad when a country that tries to maximize its own natural resources has to lose and submit to the wishes of other parties.

The WTO decision on the SD 592 dispute came out on 17 October 2022 with the charge that it decided that the export policy and the obligation to process and refine nickel minerals in Indonesia were proven to violate the provisions of Article XI.1 GATT 1994 WTO and could not be justified by Articles XI.2 (a) and XX (d) GATT 1994. The decision also rejected the Indonesian Government’s defense regarding the limited number of national nickel reserves and the application of Good Mining Practice as a basis for defense. A number of Indonesian laws and regulations are deemed to have violated WTO provisions, namely :

1. Law Number 4 of 2009 concerning Mineral and Coal Mining;
2. Regulation of the Minister of Energy and Mineral Resources Number 11 of 2019 concerning the Second Amendment to Regulation of the Minister of Energy and Mineral Resources Number 25 of 2018 concerning Mineral and Coal Mining Business;
3. Regulation of the Minister of Trade Number 96 of 2019 concerning Provisions for the Export of Processed and Refined Mining Products;
4. Regulation of the Minister of Energy and Mineral Resources Number 7 of 2020 concerning Procedures for Granting Areas, Permits, and Reporting on Mineral and Coal Mining Business Activities.

Despite losing the lawsuit, Indonesia did not necessarily accept the decision. President Joko Widodo emphasized that Indonesia submitted an appeal against the decision through the Minister of Foreign Affairs, Retno Marsudi, to the WTO Dispute Settlement Body. He considered nickel downstreaming to be the right step as a stepping stone for Indonesia. President Joko Widodo stated “We have to be brave, we can’t back down, we can’t be afraid because natural wealth is in Indonesia. This is our sovereignty and we want it to be enjoyed by our people.” This dispute has to wait even longer because of the vacancy of judges in the

Appellate Body as the appellate court of the WTO settlement system. This agency itself has been inactive since 2019. However, downstream nickel is still being carried out in Indonesia and the construction of smelters is accelerating. In fact, Indonesia has experienced many positive impacts from Indonesia’s nickel export ban policy, which has succeeded in obtaining very large revenues added value of around USD$17 billion in 2014 and continues to increase to USD$ 20,9 billion in 2021.

As a ‘response’ to the defeat of the lawsuit, Indonesia is preparing regulations on the imposition of nickel commodity taxes aimed at export duties for nickel pig iron (NPI) and ferronickel (FeNi) downstream products. This regulatory plan is based on President Joko Widodo’s desire to make Indonesia an electric car producer and tax rules can be utilized to maximize nickel management for domestic electric vehicles. Many companies have invested in electric vehicle manufacturing, such as Toyota Motor Corp, Mitsubishi Motors Corps, Hyundai Motor Group, and others.

This case is a tragic example where developing countries that are trying to rise to become developed countries are actually hampered by other developed countries. In addition, this case shows that Indonesia is not fully sovereign over its own natural resources. On the other hand, the banning of nickel ore exports is enough to explain that Indonesia’s position in the international world must be taken into account and very significant. Indonesia is the world’s largest nickel producing country, reaching 11.7 billion tons and nickel reserves totaling 4.5 billion tons, including low grade nickel (limonite nickel) and high grade nickel (saprolite nickel) with a nickel mining area of 520,877.07 hectare, scattered in various provinces in Central and East Indonesia. President Joko Widodo responded to this case by saying that there are developed countries that do not want developing countries to become developed. However, he stated that whatever the challenges, Indonesia must continue to move towards a developed country. Losing a lawsuit is normal, but we have to be able to react to it by taking further legal steps. Thus, Indonesia showed its courage in fighting against developed countries to get a better life for Indonesian people.

Grace Inka Putri is currently studying as a final year student majoring in international relations at the Lampung University in Indonesia and has an interest in international issues, which relate to issues of gender, politics, economics, diplomacy, human rights, and others.