Coal barron building world’s biggest green industrial estate
Indonesian business players are building what is expected to be the world’s biggest green industrial estate in North Kalimantan, worth US$132 billion, with politically connected coal barron Garibaldi “Boy” Thohir leading the consortium of investors developing the 30,000-hectare estate, with initial investors from China and Abu Dhabi.
President Joko “Jokowi” Widodo broke ground on the construction of the green industrial estate in Tanah Kuning, Bulungan regency, North Kalimantan, last month, saying the estate would transform the country’s economy from commodity-based to manufacturing-based. “We have been reliant on natural resources, exports of raw materials, and now we are entering downstreaming, industrialization of our raw materials,” he said during the ground breaking ceremony.1
The industrial estate, owned by PT Kalimantan Industrial Park Indonesia (PT KIPI) and PT Kawasan Industri Kalimantan Indonesia (PT KIKI), will target the petrochemical industry, green aluminum, electronic aluminum, stainless steel, new energy battery plants, industrial silicon, polycrystalline silicon and solar panels. The estate will source its electricity from renewable energy, mainly from hydro power plants currently being built by Chinese investors on the Kayan river, and solar energy.2
During the construction, the industrial estate will create up to 60,000 jobs, and when the first stage of construction is complete and the section becomes operational in 2024, it will create a total of 200,000 jobs. Currently, the estate sits on 16,400 hectares land, and it is to be expanded to a total area of 30,000 hectares in the next eight years – the largest in the world.3
Jokowi’s right hand man, Coordinating Maritime and Investment Minister Luhut Binsar Panjaitan, explained that the land allocated for the industrial estate belonged to Boy Thohir, the elder brother of State-Owned Enterprises Minister Erick Thohir. He said he did not know that the land belonged to Boy Thohir until he sent a team to verify the appointed location. “So maybe this is Pak Boy Thohir’s luck,” he said.4
Boy Thohir, who leads the Indonesian consortium of investors, said the estate did not involve the government’s money, as it was an entirely business-to-business initiative. At the initial stage, local investors worked with investors from China and Abu Dhabi. In the later stage, he said, investors from Europe and America would join.5 Boy Thohir added that the green industrial estate was driven by rising global demand for green products. In the future, he said, demand for green products would continue to rise, and it was time for Indonesia to prepare itself for the new trend.6
PT Kayan Hydro Energy, owned by PowerChina, is investing $2.8 billion to build a 900-megawatt hydropower plant on the Kayan River, North Kalimantan, to supply electricity to factories to be built in a green industrial estate located nearby in Tanah Kuning, Bulungan, also in North Kalimantan. The 900-megawatt power plant is the first of five hydropower plants to be built in the area, with a total capacity of 11,000 megawatts (MW) and a total investment of $17.6 billion.7
Kayan Hydro Energy president director Andrew Suryali said recently that the company had secured most of the required permits, including to use forest areas around the Kayan River, and would start construction of the dam early this year. The company has built an 11.2-kilometer access road to the location and a warehouse. Sinohydro Corporation Limited, a subsidiary of PowerChina, will be in charge of the engineering, procurement and construction process of the hydropower plant. Construction is projected to be completed by 2025 and commercial operation will commence one year after.8
The Kayan hydropower project – or better known as Kayan Cascade – will have five dam construction projects. Kayan 1 will have a capacity of 900 MW, Kayan 2 will have 1,200 MW, Kayan, 3 and 4 each 1,800 MW and Kayan 5 will have a capacity of 3,300 MW. Kayan Hydro Energy targets to complete all five projects in 10 years.
According to several sources, the government’s plan to develop a green industrial estate has disappointed North Kalimantan Governor Zainal A. Paliwang because he had hoped that the International Industrial Area and Seaport (KIPI), located beside the green industrial estate, would be developed first. The land acquisition process for KIPI has already started. Those involved in KIPI also expressed their disappointment. They now feel the government is neglecting the project, when in fact, it is one of the country’s strategic national projects.
The slow development of KIPI prompted Luhut to join forces with Boy Thohir to develop the green industrial estate. To Luhut, KIPI’s development has been long-drawn-out. His assessment that KIPI’s investors are not serious about developing the estate also prompted him to look for other investors. By chance, Boy had set his interests on the green industrial estate. However, a number of people involved in KIPI argued that the project’s slow development was caused by conflicts arising from the Environment and Forestry Ministry’s permit to use forest areas. KIPI needed this permit for plans to develop the Kayan hydroelectric project in the area. With at least five dams projected to be used for its development, this may draw the ire of environmentalists.
Another source claims the land used to develop the green industrial estate does not belong to Boy but to a Malaysian palm oil company, whose land-use rights happen to be part of the estate’s land.
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