Indonesia’s huge China-backed ‘green’ industrial estate raises deforestation, environment fears

President Joko Widodo says the US$132 billion manufacturing hub being built in North Kalimantan represents a ‘leap in Indonesia’s economic transformation’

But activists fear the massive hydropower project being built to power it will cause deforestation, and destroy local villagers’ homes and livelihoods

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President Joko Widodo, right, and PT Kalimantan Industrial Park Indonesia consortium chief Garibaldi Thohir at last month’s groundbreaking ceremony in North Kalimantan. Photo: Twitter

Published: 4:30pm, 8 Jan 2022Updated: 11:34pm, 8 Jan 2022

When Indonesian President Joko Widodo officiated the groundbreaking ceremony last month on what has been touted as the world’s largest green industrial estate, he said it would spur the country’s “economic transformation” from raw material exporter to a significant player in the global supply chain.

But concerns have been raised about the China-backed project’s green credentials, as rainforest will have to be cut down and biodiversity threatened to build the five hydroelectric dams that are required to power it. Hundreds of villagers’ homes and livelihoods are also under threat, according to activists.

PT Kalimantan Industrial Park Indonesia (KIPI), a consortium of companies from Indonesia, China and the United Arab Emirates, is behind the US$132 billion project in North Kalimantan, which Widodo said will initially sit on 16,400 hectares of land on the island of Borneo but could be extended in future to almost twice that size. Leading the consortium is Garibaldi Thohir, CEO of coal mining giant Adaro Energy, owner of much of the land the project will be built on, and one of Indonesia’s richest people.

Only two of the five planned dams’ locations have been released to the public for the US$132 billion Kalimantan Industrial Park project. Image: SCMP

The five dams – developed by the Power Construction Corporation of China and PT Kayan Hydro Energy for a total cost of US$18 billion as part of Beijing’s Belt and Road Initiative to grow global trade – are already under construction on the Kayan River, some 200km away from Tanah Kuning, the coastal area where the industrial estate is being built. Once fully operational, the dams are expected to have a generating capacity of nine gigawatts, and the first is slated to come online in 2025. Solar energy and natural gas will also be used to power the industrial estate, the government has said.

Planned as a manufacturing hub for solar panels, electric car batteries, industrial silicon, electronic aluminium, steel, petrochemicals, and other semi-finished or finished goods, the industrial estate should start operations by 2024 and be completed by 2029, according to government forecasts. Luhut Pandjaitan, Indonesia’s coordinating minister for maritime affairs and investment, said at least 10 Chinese investors had committed to backing the project, after pouring “tens of billions of dollars” into downstream nickel production in the country in recent years.

Widodo has estimated that at least 100,000 workers will be employed in the project’s construction, with more required once the industrial estate is fully operational “5-10 years from now”.