Introduction

Electric vehicles (EV) from China are gaining popularity in Indonesia, with 66% of consumers viewing them positively. This is driven by their affordability, innovative features and comfort.

Wuling Motors leads as Indonesia’s most popular EV brand, winning awards and achieving high sales. Other Chinese brands like BYD, DFSK, Seres, Chery and Neta are also making significant strides in the market.

This has been facilitated by the Indonesian government that is actively supporting EV adoption through substantial subsidies and incentives, totaling US$445.6 million, and has attracted large investments, such as the US$1.3 billion from BYD. Local production initiatives – such as Chery’s in Bekasi – and partnerships like Sokonindo aim to bolster Indonesia’s position in the global EV supply chain.

The focus extends to electric motorcycles, with several manufacturers establishing factories in Indonesia. PT. Sunra Asia Pacific Hi-Tech, PT. RPM and PT. Yadea Teknologi Indonesia are leading this initiative, with Luyuan planning a significant market entry through domestic partnerships.

Agreements

The influx of Chinese EV manufacturers into Indonesia is a result of recent cooperation agreements between the two countries, which have spurred efforts to enhance investment cooperation, particularly in EV batteries, automotive manufacturing and spare parts production. This is reflected in an MoU signed during Jokowi’s visit to Beijing in 2023. However, discussions on EV cooperation had been ongoing between the two countries since before this visit.

Furthermore, B2B collaborations have been established – such as between China’s GAC Aion New Energy Automobile Co. Ltd. and Indonesia’s PT. Indomobil Energi Baru – to distribute GAC Aion EV in Indonesia. This partnership aims to provide environmentally friendly vehicles including sedans, SUVs and supercars.

Additionally, another Chinese company, Zeekr, has partnered with PT. Premium Auto Prima as the Brand Holder Agent (APM) to introduce SUV and MPV models in Indonesia.

Other renowned manufacturers like Great Wall Motor will also enter the Indonesian automotive market in the second quarter of 2024 with a specific focus on hybrid models.

The growing entry of Chinese can also be attributed to the government’s efforts to revise the incentive scheme for electric vehicle manufacturers, such as relaxing VAT taxes, adjusting the Domestic Component Level and relaxing Completely Built Up (CBU) vehicle imports, all of which aim to attract foreign investors to invest in the country.

This also causes Chinese EVs to flood the Indonesian market compared to products from Japan or South Korea. This popularity is due to the low price of Chinese EVs compared to the price set by producers from other countries. In fact, Chinese EVs are even cheaper than normal cars in circulation today. This competitive price can be attributed to low production costs and component quality.

The increasing popularity of Chinese EVs in Indonesia actually plays well into the government’s goals to reduce independency on fossil fuel and facilitate transition to greener energy sources. This does not necessarily mean that normal vehicles will stop circulating, though EVs might very well overtake total sales due to their energy efficiency and low cost. To reach that point, however, there needs to be a shift in consumers’ attitude towards EV and willingness to abandon dependency on fossil fuel, as well as a wider awareness campaign on sustainability agenda. In other words, consumers need to be convinced why they need to shift to EV.

Challenges

The use of EVs in Indonesia still faces a number of challenges. For example, 71.2% of respondents in a survey two years ago considered it difficult to find public EV charging stations. This concern proves true even today, as charging stations remain limited an unequally distributed.

As of April 2024, the number of charging station stood at 1,380 units and almost half (656) were located in Java. Interestingly, charging stations remain limited in Sulawesi and Maluku, the two places where Indonesia’s nickels are mined and processed. This seems to suggest that the local population has not really benefitted from the downstream products of nickel extracted from their areas.

Moreover, 62% of respondents expressed concerns about the high price and maintenance cost, which goes to show their unfamiliarity with the minimum cost of charging an EV. In addition, a number of respondents also acknowledged the limited range and distance that EVS can cover as well as concerns about the long charging time for EV battery.

Another challenge concerns the handling of battery waste. The government needs to be more proactive and agile in creating clear regulations regarding the processing of battery waste, whether they will be recycled or repurposed to support sustainable battery use. Without clear regulations and adequate supervision, battery waste could potentially lead to new environmental issues.

Besides, the burgeoning presence of Chinese EVs in Indonesia could have several implications on the latter’s political and economic landscape.

Firstly, it would create inconsistent policy dynamics. The competition between manufacturers from China and other countries over EV imports and production would result in the inconsistencies of Indonesia’s policy frameworks, as manufacturers from Japan and South Korea would require different conditions. This lack of coherence in policies can lead to uncertainties for investors and hinder the sector’s sustainable growth as well as competitiveness.

Another important point is concerns over the exploitation of nickel resources in Indonesia, a crucial component for EV batteries. Indonesia’s abundant nickel reserves present a double-edged sword in the context of EV production. The rush to exploit nickel reserves without standardized environmental and labor regulations raises significant concerns about sustainability and social responsibility. The lack of standardized practices combined with the prevalence of cheap nickel prices raise concerns about environmental sustainability and fair economic practices. Indonesia risks becoming merely a raw material supplier without substantial value addition if proper regulations and strategic industrial policies are not implemented.

Moreover, Indonesia’s role in the EV supply chain is predominantly assembly, with the more technologically advanced components such as batteries and core EV technologies sourced from China. This condition limits Indonesia’s ability to capture higher value-added segments of the EV market, reinforcing dependency on foreign technological expertise and potentially stifling local innovation and industrial growth.

Related to this, the intensifying entry of Chinese EVs could increase Indonesia’s reliance on China. This dependency could include crucial components like batteries, electric drivetrain technologies and charging infrastructure, all primarily sourced from China. This would deepen Indonesia’s dependency on Chinese industrial strategies and market dynamics, potentially limiting its autonomy in shaping domestic EV policies and priorities. If, for example, China’s domestic market is shaken by geopolitical tension, its impacts would reverberate across Indonesia’s EV market.

Another concern relates to the recent announcement by the Indonesian government to implement up to 200% increase in import duty on textile products from China. This might induce a modicum of anxiety on Chinese exporters from all industries and sectors, including EV producers, if not communicated and managed well. For now, however, the impact of this announcement on the EV sector remains to be seen.

Lastly, EV is in no way going to be a panacea to the urban congestion problem in Indonesia’s major cities. The emphasis on increasing private EV ownership, as opposed to developing an effective public transportation system, could exacerbate traffic jam, air pollution and economic loss in Indonesian cities. Campaign for EV adoption, therefore, must be accompanied by complementary infrastructure development and policy measures to tackle multidimensional problems in Indonesia’s transportation sector.

Conclusion

Indonesia needs coherent policies amidst the influx of Chinese EVs and lack of competition in the sector. Clear policies are vital to attract investments and foster industrial growth.

Addressing nickel resource exploitation is critical. Indonesia should adopt standardized mining practices and fair pricing mechanisms to sustainably manage its reserves, minimizing environmental impact and maximizing economic benefits.

To strengthen its EV supply chain role, Indonesia must focus on developing domestic capabilities beyond just assembly. This includes technology partnerships, R&D in EV components like batteries and incentives for local innovation to reduce reliance on foreign technologies and enhance economic gains. Rather than solely promoting private EV ownership, Indonesia should prioritize enhancing public transportation infrastructure and technologies. This approach – involving investments in mass transit, adopting EVs for its public transport fleets and promoting sustainable mobility solutions – can ease urban congestion and lower emissions.

Introduction

Climate pledges are being used more than ever by businesses to demonstrate their commitments to combating the climate crisis and transitioning to a more sustainable society.

However, these terms may frequently cause confusion among consumers and could be misused for greenwashing purposes. It is, therefore, essential for individuals to accurately understand what such terms represent in order to be informed consumers. Businesses, on the other hand, should effectively align their sustainability goals with marketing strategies.

Climate Pledges

According to the Global Sustainability Study 2021, there has been a substantial global paradigm shift in consumers’ perspectives on sustainability and willingness to pay for sustainable products and services.

Globally, 85% of consumers said they had changed their purchasing habits to be more sustainable in the last five years, while 60% said sustainability was an essential purchase criterion.

As the demand for sustainable products and packaging rises among consumers, so does the need for companies to update their codes of conduct. At the time of writing, more than 400 corporations have pledged to achieve net-zero emissions by 2040, indicating that the private sector is under increasing pressure.

With that said, businesses have started to incorporate “climate pledge” into their advertising strategies. The goals are to demonstrate their commitment to sustainable business practices and attract consumers who are environmentally conscious.

The samples listed below are those that are typically found in regular business communication, such as on a product label, a company’s website, or an advertisement.

Carbon-neutral

The concept of carbon neutrality revolves around achieving a balance between the amount of CO2 emitted and the amount of CO2 removed from the atmosphere. The Greenhouse Gas (GHG) Protocol recommends assessing a company’s carbon neutrality across three scopes (direct and indirect emissions from operations, supply chain, and product use) as demonstrated below.

Carbon-offset

Similarly to carbon-neutral, carbon offset involves compensating for one’s carbon emissions by investing in projects that reduce emissions elsewhere. This could involve supporting renewable energy initiatives, reforestation projects, or improving energy efficiency.

Net-zero

Net-zero is tied to the 2015 Paris Agreement: in order to meet the 1.5°C global warming target, global carbon emissions should reach net zero by mid-century. Every five years, countries are expected to publish their Nationally Determined Contributions (NDCs), which must outline their long-term plans for achieving net-zero emissions and their emission reduction targets.

Climate-positive

Climate positivity goes beyond carbon neutrality by actively removing more CO2 from the atmosphere than is emitted. IKEA, for example, has pledged to be climate positive by investing in renewable energy and carbon capture projects, and emphasizing sustainable practices throughout their supply chains.

Eco-friendly

The Natural Step Framework (TNS) is a sustainability framework that aims to create a more balanced relationship between human activities and the natural environment. The ideas and goals of TNS can be seen in eco-friendly products, which are made to have as minimal a negative effect on the environment as possible by using fewer resources, employing renewable materials, or applying non-toxic production methods.

Recycled materials

Products labeled recycled are made from waste material or previously used items. It is closely related to the “Circular Economy” model, which aims to reduce resource waste and maximize resource usage by reusing and recycling materials. Both of these concepts aim to encourage responsible resource management as well as less waste generation.

Sustainably-sourced

This refers to goods that are obtained in a way that has little impact on the ecosystem, preserves natural resources and promotes social responsibility. Consumers who value sustainably-sourced products may also consider fairtrade options (i.e., fair prices, no child labor, gender equality, community development and sustainable farming practices) to support both environmental sustainability and social fairness. Both sustainably sourced products and fairtrade place an emphasis on responsible and ethical practices throughout supply chains.

Those pledges are excellent attempts to encourage responsible consumption and production, which is central to the UN’s Sustainable Development Goal 12, “ensuring sustainable consumption and production patterns, [..] sustaining the livelihoods of current and future generations”.

Things to Consider

While it is encouraging that businesses are adjusting their objectives, goals and labels to support the climate movement, there are some issues that must be addressed.

A recent report released at the COP27 climate conference raises concerns among citizens, consumers, environmentalists and investors around the possible use of net-zero pledges for greenwashing purposes.

One example would be the advertisement that HSBC ran prior to COP26. This advertisement promoted a tree-planting initiative as well as its net-zero goal, but it failed to mention that the company also sponsored fossil fuel projects at the same time. As a result, the advertisement was banned since it failed to include important information.

Another example, the fast-fashion retailer H&M was sued for “false” and “misleading” marketing because its closed-loop recycling campaign gave consumers the illusion “that old clothes are simply turned into new garments or that clothes will not end up in a landfill”, which indeed “would take H&M more than a decade to recycle what it sells in a matter of days.”

The examples above suggest that marketing professionals working for such organizations may lack sustainability literacy as well as transparency in sharing information. On the contrary, businesses may simply want to capitalize on this hype in order to appear more appealing and confuse their consumers with half-baked promises.

Whether intentional or not, brands that are exaggerating or falsifying their sustainability credentials need to be put under public scrutiny and even challenged legally to hold them accountable and stop the violations.

Practice Makes Perfect

As there is a potential that these climate-related terms could be employed deceptively, what can we do to bring them back on track and increase our trust in sustainable marketing campaigns?

Thankfully, there are climate action tracking organizations around the world serving as watchdogs for climate pledges and initiatives, such as Climate Action Tracker (CAT), Carbon Disclosure Project (CDP) and Carbon Trust, to name a few.

Yet, it is necessary to have some understanding of those climate pledges in order to exercise sound judgment. As customers, we have learned that when a company claims to be net-zero or carbon neutral, it must include not only the company’s direct CO2 emissions but also its carbon footprint in other indirect paths.

If a product is labeled “recycled” or “eco-friendly,” our awareness of the circular economy might prompt us to follow the product’s supply chain to verify how it was sourced and recycled before we can completely trust it.

We can also look to third-party certification for validation. Certifications such as the Forest Stewardship Council (FSC) for responsibly sourced wood products or the Marine Stewardship Council (MSC) for sustainable seafood are reliable indicators that a product is sourced sustainably in its industry.

We can always do a bit more to discover the true meaning of the marketing claims on the goods we buy. The bottom line is to be critical of green statements and educate ourselves on the various ways to become informed consumers and avoid falling victim to greenwashing.

On the other hand, companies may make mistakes during the process, but when there are too many meaningless slogans and marketing blusters, it will demotivate and undermine companies that are actually striving for the protection of the planet, as well as raise doubts about the integrity of these climate pledges in general.

The COP27 report proposed the following five guidelines for corporations to follow in order to maintain the integrity of their commitments: 1) having a reduction path towards 2050; 2) aligning commitments with actions and investments; 3) sharing relevant, non-competitive, comparable data on plans and progress; 4) being based on science and third-party accountability, and; 5) honoring equity and justice in all actions.

Best practices can be identified through implementation and continuous improvement. The more corporations that make true, meaningful efforts to aid the global fight against climate change, the more likely the business world will gravitate toward sustainability and the more trust customers will have in them when it comes to promoting their commitments.

Introduction

Though generally deemed to be positive, developments can lead to societal issues. Many ideas have been formulated to address this including transiting from Millennium Development Goals (MDGs) to Sustainable Development Goals (SDGs). Their core is to bridge the gap between infrastructure development and social development. Unfortunately, concepts such as SDGs remain a challenge to be implemented, particularly for developing countries that do not have the resources. Often infrastructure development is solely focused on which results in inequality, one issue that is intended to be addressed by SDGs.

Reducing inequality becomes harder when development incorporates Smart City as a central tenet. Similarly, this is ironical when the original idea of Smart City development was to reduce inequality. The United Nations saw the idea of Smart City as a means to address an expected 67% of the global population of almost 10 billion in 2050 living in urban areas. The future, thus, seems bleak for developing countries.

Indicators for this bleak future includes studies that uncovered many issues in the implementation of Smart City in developing countries. Issues include the lack of technology-related infrastructure readiness, lack of skilled human capital, lack of inclusivity, lack of citizen participation, technology illiteracy and knowledge deficit among the citizens. Collectively, these issues not only demonstrate that Smart City is not a silver bullet against economic and social issues but can also worsen them.

It is particularly troubling for Indonesia as it has decided to move and develop their new capital with the idea of Smart City. So far, Smart City development in Indonesia has been unfavourable. Jakarta, an example of a Smart City in Indonesia, dropped to 94th place in the Global Smart City Index as a result of negative public perception of its natural resource assets. Notably, Jakarta is the only Metropolitan area in Indonesia. If this metropolitan area struggles with the incorporation of Smart City development, what beholds the new capital, East Kalimantan, previously a jungle?

Of these issues, this article will highlight the lack of technology-related infrastructure readiness, skilled human capital, inclusivity, and citizen participation of smart city development in the new capital in East Kalimantan. The lack of technology-related infrastructure readiness and inclusivity will be explained by the lost in assets by indigenous communities, while issues of skilled human capital and citizen participation will be demonstrated by the lack of digital skills.

Indigenous Communities Losing Assets

The lack of technology-related infrastructure readiness and inclusivity is evident from the increasing demand for land use studies on the forest by the Dayak community. Similar demands are voiced by the Paser community for the forest to be preserved regardless of the Smart City development in their area.

Additionally, the Minister of Agrarian Affairs and Spatial Planning/Head of the National Land Agency stated that land ownerships will be consolidated and transferred to the government vis-à-vis lands within the boundaries of the new capital. He cited Law Number 2 which legally enabled to facilitate such transfer via a release mechanism. Similarly, the Special staff for the President stated that there were no regulations requiring the implementation of a referendum, or public vote in the plan to move the nation’s capital. These are indications that the government is not serious on inclusivity in the Smart City development of the new capital. Therefore, the indigenous communities who are concerned with the preservation of their forest are at the losing end of this development. Their voices are arguably muted to ensure a smooth development of the new capital. A win-win solution ostensibly requires technology-related infrastructure. Though 5,000 hectares of the forest was stated to be replaced by 180,000 hectares of green open spaces and protected forests, when and where this will happen is still uncertain.

Lack of Digital Skills

The lack of skilled human capital and citizen participation is evident from the digital divide in Indonesia when 49% of Indonesian adults do not have internet access. In addition to the issue of limited internet coverage, there is a need for digital literacy programs. However, the building of digital skills is a hard quest for the Indonesian government particularly when the new capital is a magnet for domestic immigration. Estimated to hold 3.6 million residents in 2018, East Kalimantan is envisaged to become home to 5 – 7 million residents in 2025, further increasing to 8.7 – 9.7 million and 10 – 11 million in 2035 and 2045, respectively. This increase is ostensibly due to hopes of better living prospects. Despite the anticipated rapid increase in population in East Kalimantan, it is questionable whether there will be adequate digital literacy programs and sufficient internet coverage for most if not all residents in the new capital. This will consequently affect an effective implementation of a Smart City.

Conclusion

Though intended to address issues such as inequality, SDGs are difficult to implement in developing countries. This is further confounded when such countries attempt to implement Smart City concepts as part of development. Arguably, this mix will instead prolong societal issues, leading many to become victims of such developments. 

In Indonesia’s move to a new Smart City capital, it is bogged by the lack of technology-related infrastructure readiness, inclusivity, lack of skilled human capital, and citizen participation. These issues are due to the lack of preparation and even political will. The government seems intent on rapid infrastructure development of the new capital while not placing enough focus on readying its citizens. Additionally, the voices of indigenous communities affected by the move are unheard and simply avoided via legalities. Therefore, many lessons can be taken from this Indonesian case study. Of significant importance is the need to factor how infrastructure developments can aid in addressing societal issues rather than simply focusing on the development of new buildings.