Violence at Chinese-owned nickel smelter in Indonesia raises alarm

4 Min
Violence at Chinese-owned nickel smelter in Indonesia raises alarm

Recent clashes at a Chinese-owned nickel smelting facility in Indonesia are likely to spread to other parts of the country if the government and Chinese owners fail to address issues of safety, analysts say.

Protests, some violent, have occurred sporadically in recent years on the mineral-rich island of Sulawesi, which is experiencing an investment boom for mining nickel, a key ingredient in electric vehicle batteries. Indonesia is keen to leverage its world-leading reserves of the metal and develop a domestic EV industry.

But issues of dangerous work environments, compensation and tensions between Indonesian and imported Chinese workers are casting an uncertain shadow over that scenario.

In the most recent clash, on Jan. 14, an Indonesian and a Chinese worker were killed at the Gunbuster Nickel Industry (GNI) smelter, owned by China’s Jiangsu Delong Nickel Industry, in the Morowali region of Central Sulawesi province.

Indonesian media site reported protesters demanded better safety conditions and pay. Several company vehicles were set ablaze, and about 100 dormitory rooms were damaged, according to Reuters.

Minggu Bulu, a member of a protesting labor group and a former GNI worker, cited deadly safety issues at the facility during the past year, including an explosion at the smelter, Reuters reported.

“Work health and safety implementation is very poor, so we asked the company to implement it according to the law,” Reuters quoted the protester as saying.

Nikkei contacted GNI and Jiangsu Delong seeking comment but did not receive responses by publication time.

Muhammad Zulfikar Rakhmat, research professor at the Korea Institute for ASEAN Studies, said it is essential that GNI meet worker demands, especially regarding wages and safety.

“If the Indonesian government and GNI do not fix this problem, similar protests will spread to other regions of Indonesia, especially in areas where Chinese workers are present,” Zulfikar told Nikkei Asia.

In a statement issued a day after the violence, GNI said it had launched an investigation with authorities. But nervousness over the potential business impact was clear.

“The company invites all parties to maintain the continuity of the GNI investment, which is a business that provides benefits not only for the benefit of the company, but also for the surrounding community and the country,” it said. A description of its values on the company website says, “Safety is everybody’s responsibility. We care for our people and workplace.”

The situation drew the attention of President Joko Widodo, further underscoring the sensitivity of the nickel industry to the country.

Listyo Sigit Prabowo, chief of the national police, said at a news conference on Jan. 16 that Widodo had directed the force to investigate the clash, ordering “firm action.”

At the event, held at the Presidential Office, Listyo said that about 71 people had been arrested and the Indonesian military was working with police to “oversee and maintain the situation to ensure that operational activities can run normally.”

One factor behind the protests is Indonesians’ sentiment toward Chinese laborers in an industry that might otherwise hire more locals. The companies say the Chinese are skilled workers brought in to help start operations and that they account for only a small portion of workers.

“The resentment is there, maybe because the proportion of Chinese workers is relatively high compare[d] to other multinational corporations,” said Yose Rizal Damuri, executive director of the Jakarta-based Center for Strategic and International Studies (CSIS).

“In GNI the proportion is around 10%, and many are blue collars,” Damuri said. “In Japanese MNCs [multinational companies] the proportion is much less than that. Unless more local workers have training to replace them, such frictions will always be high.”

Police Chief Listyo said GNI employed 1,300 Chinese workers and 11,000 Indonesians at the Sulawesi plant. He also said the company plans to increase the number of Indonesian workers there to 30,000.

Chinese account for close to half of all foreign laborers in Indonesia. According to Indonesia’s Ministry of Manpower, as of November there were more than 52,331 Chinese working in Indonesia, out of 111,746 foreigners.

Ardhitya Eduard Yeremia, a lecturer in international relations at the University of Indonesia, cautioned that issues in nickel smelting go beyond Chinese operations.

“I expect more troubles if there is no concrete follow-up from the Indonesian government to oversee how the companies — not only the Chinese companies — carry out their obligation to ensure the safety, health, housing and welfare of all workers,” Ardhitya said. “The issue of safety is [a] big problem in this industry.”

Ardhitya, who has conducted field research on Indonesian and Chinese workers at Chinese-owned companies on Sulawesi, says Chinese laborers share the same fate as Indonesians due to lax safety standards.

“These Chinese workers do some of the most dangerous jobs at the smelter plants like going very close to the fire,” he said.

While Indonesian workers have a union, no one speaks for the Chinese, and some are victims of scams from unscrupulous job agencies, he added.

“Chinese workers are the easiest target for Indonesian workers’ resentment as they see them every day,” he said. “What Indonesian workers don’t realize is that the Chinese workers suffer too.”

Though GNI expressed concern about the impact on its investment, Damuri of CSIS expects labor unrest in the nickel industry to ultimately have little consequence on Chinese companies’ willingness to put money into Indonesia.

“I don’t think it will affect the investment badly, especially in the long term because Chinese investment has started diversifying to sectors outside natural-resources based [ones], including to more technological intensive sectors,” Damuri said, adding labor friction there is less likely.

China “is still eyeing the huge market of Indonesia and tapping its potential,” he said, referring to Southeast Asia’s biggest economy.