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Tesla needs reliable rules
Rules that are not subject to abrupt change at the whim of policymakers jumping to accommodate public sentiment or lobby pressure are critical for business continuity.
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Aim for the sky: President Joko “Jokowi” Widodo walks with SpaceX founder Elon Musk at the SpaceX base in Boca Chica, Texas, the United States on May 14. (Presidential Secretariat Press Bureau/Laily Rachev)
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hen President Joko “Jokowi” Widodo visited United States business magnate Elon Musk in Texas, the US, last month, it was not to propose that the Tesla, Inc. CEO and SpaceX founder invest in Indonesia. That wish was conveyed years ago. The question for Indonesia today is, why hasn’t anything happened yet?
Tesla has been scouting out possible sites for investment around the world, and Indonesia has put its best foot forward. The country’s primary appeal is its abundance of nickel for the manufacture of batteries, as well as the government’s plans to build an industrial ecosystem on top of this natural blessing.
The May 14 meeting between Jokowi and Musk had been prepared in working-level discussions and preceded by a visit of Tesla representatives to Indonesia a few days prior, reportedly to discuss battery-related investment by the electric car producer. Another idea is for Musk’s aerospace company SpaceX to build a launch site in Indonesia.
For all that effort, what Indonesia has so far is a disappointingly noncommittal response. According to an Indonesian government statement, Musk told the President that there could be room for “partnerships in many things, because Indonesia has a lot of potential”.
We’ve heard that one before.
Indonesia is keenly aware of the difference between potential investment on the one hand and realized investment on the other, and premature government announcements on incoming funds have in the past created hopes that were then left hanging in the air.
That was meant to change with the Job Creation Law passed in November 2020, which aims to make life easier for businesses in matters of licensing, taxation, employment and investment, all of which have been areas of concern.
The wide-ranging omnibus law, however, has yet to be fully implemented through specific regulations, and even if these regulations should be to the full satisfaction of would-be investors, it is far from certain firms will be lining up to enter the country.
That is because the content of regulations is one thing, but their durability is quite another.
Poorly communicated coal and palm oil exports recently are just the latest examples of last-minute policy changes to crucial regulations. Fickle rules on permit procedures, metal ore processing and foreign ownership caps are still very present in investors’ minds.
Rules that are not subject to abrupt change at the whim of policymakers jumping to accommodate public sentiment or lobby pressure are critical for business continuity, and global firms will look carefully for dependable regulations before committing billions of dollars to projects in any country.
The US State Department in its 2021 Investment Climate Statements for Indonesia noted that “Businesses also face difficulty from changes to rules at government discretion with little or no notice and opportunity for comment, and lack of stakeholder consultation in the development of laws and regulations at various levels”.
This should give the government pause when it comes to sudden policy changes, even though they may be sensible.
The brand of Tesla would perfectly adorn the brand of Indonesia as an aspiring hub of the global electric vehicle industry. While Musk is shopping around for the best place to get to work, the government will have to try and convince him, against the historic evidence, that he can depend on the country for a rock-solid regulatory foundation.
