Indonesia’s Central Sulawesi is seeing how Chinese investment has benefited the local economy as exports from the province jumped 16-fold over the past five years and thousands of jobs were created after Chinese steelmaker Tsingshan turned Morowali, a sleepy town in the province’s south-eastern district, into the world’s largest nickel industrial park.
Unlike projects under China’s Belt and Road Initiative (BRI), the Indonesia Morowali Industrial Park (IMIP) is a business-to-business endeavour with no government guarantee. It is a joint venture between Tsingshan and local partner Bintang Delapan.
The project has received a strong endorsement from the leaders of both countries and enjoyed commercial financing from the state-owned China Development Bank.
The industrial park project was born at a bilateral summit between China’s President Xi Jinping and Indonesia’s then-President Susilo Bambang Yudhoyono in 2013.
At that meeting, President Xi conveyed a plan to construct a 21st-century maritime silk road. Both leaders then witnessed the signing of the joint-venture agreement for the Morowali project.
The maritime silk road is the sea route part of the Belt and Road Initiative, China’s geopolitical strategy offering infrastructure project investments in countries such as Malaysia, Indonesia and Pakistan to gain greater influence in the littoral regions across the historical Silk Road.
But various countries, according to observers, have fallen into a debt trap from over borrowing.
Sri Lanka, for example, has been forced to give up operations of its Hambantota Port, which China helped to finance and build.
The construction of the deep-sea port, allowing bigger vessels to dock there, was a costly project Sri Lanka had no need of as its meagre exports did not require a port for larger vessels. The financing for the project, guaranteed by the Sri Lanka government, was valued at US$1.5 billion (S$2 billion), which it struggled to repay.
Malaysia halted billions of dollars of BRI projects and Prime Minister Mahathir Mohamad has charged China with attempting to secure influence through debt-funded infrastructure projects that recipient countries cannot afford.
Professor Hikmahanto Juwana, a legal expert at the University of Indonesia, agrees with Tun Dr Mahathir’s concerns, telling The Straits Times: “Other objectives of helping include gaining market access in certain countries.”
“It is not something that only China is doing… Everyone else too, including the US,” he added.
The IMIP, which began construction four years ago on 2,000 ha of land, boasts the ability to produce two million tonnes of stainless steel slabs a year, which will soon rise to three million tonnes or 6 percent of global output.
The joint venture and tenants have spent at least US$4 billion on the industrial park, building facilities such as plants to process raw nickel into intermediate products, which are processed into the finished products of stainless steel slabs. Also to be completed this year is an airport to cater mainly to the industrial park, which has its own seaport and power plants.
IMIP and its tenants employed a total of 25,662 workers at the end of 2017, of whom 18,556 are Indonesians and the rest mainly Chinese nationals.
Morowali has now become a main income driver for the Central Sulawesi province.
The province’s total exports last year were worth US$5.11 billion, compared with US$297 million five years ago, according to the website of the province’s agency for statistics.
The jump reflects the successful climb up the value chain by Central Sulawesi as today’s exports are dominated by steel and stainless steel – accounting for two-thirds of the total – compared with five years ago, when exports were dominated by cheap raw minerals, including nickel ores.
IMIP and its partners have also recently started the construction of a plant to produce battery-grade nickel chemicals for electric car batteries, with commercial production expected next year.
Projects related to the BRI in Indonesia are valued only around US$5 billion, based on a loose estimate and including projects without a government guarantee, according to a senior Indonesian diplomat. This figure is dwarfed by those in Pakistan, valued at more than US$60 billion, and Malaysia.
BRI has been used as a tool by China amid rising rivalry in the region with the United States. The US has occasionally told Indonesian officials that the South-east Asian country is getting too close to China and receiving large investment projects, but the statistics speak otherwise – Indonesia lags behind in terms of benefits from China’s BRI strategies.
“China said we are a minion of the US, while the US said we are a minion of China. We are no one’s minion. This is just them playing us,” a senior Indonesian government official told.