No Tesla factory? Satellites will do for now as Indonesia pivots ties with Elon Musk

SpaceX and Tesla founder Elon Musk arriving at the I Gusti Ngurah Rai Bali International Airport on May 19. - PHOTO: REUTERS

JAKARTA (The Straits Times/ANN): The launch of billionaire Elon Musk’s internet service in Indonesia is the culmination of the archipelago’s multi-year courtship of the Tesla founder, which has seen its focus shift from electric vehicles (EVs) to satellites and sustainability.

The pivot in their relationship shows that while investment plans can sometimes fail to bear fruit, Indonesia remains flexible about other forms of collaboration with its partners, a sign of how eager the country is in transforming the economy and achieving higher development status.

Mr Musk, who also founded the world’s largest satellite operator SpaceX, arrived in Bali on May 19 to launch internet service Starlink for Indonesia’s health sector.

Starlink, which owns around 60 per cent of the roughly 7,500 satellites orbiting earth, would help secure internet access to millions in far-flung parts of Indonesia, he said.

It was launched at three Indonesian health centres, including two in Bali and one on the remote island of Aru in Maluku, which is in the east of the archipelago.

At the launch, a video was screened, showing how faster internet enabled the input of data to better tackle health challenges such as stunting and malnutrition. Reports from doctors said internet speed increased more than 20 times with Starlink.

Indonesia is the third country in Asean to which Starlink has extended its operations, after Malaysia in 2023 and the Philippines in 2022.

The government has also invited Mr Musk to contribute to Indonesia’s restoration of mangrove forests, which help trap large amounts of carbon dioxide, the main greenhouse gas, and are potential sources of carbon credits that businesses can buy to offset their own carbon footprint.

Indonesia believes that Mr Musk and Tesla, which says that it is focused on accelerating the world’s transition to sustainability, can support the country’s aim to plant more of the trees.

While Mr Musk has not announced any concrete agreement, he did mention on May 20 at the World Water Forum, which is taking place in Bali, how Indonesia’s work on mangrove trees was “impressive”.

His visit has been a long time coming, as Indonesia has been trying for years to convince Tesla to construct manufacturing plants for EVs. This is because the country wants to become an EV powerhouse by tapping its rich nickel resources.

Indonesia President Joko Widodo met Mr Musk on May 14, 2022, at the latter’s Texas headquarters to discuss potential collaboration, and the billionaire was supposed to attend the Group of 20 summit in Bali that year to presumably take discussions further.

He attended the summit virtually instead, and so far there has been no concrete announcement between Tesla and Indonesia.

When asked on May 19 whether he plans to invest in Indonesia’s EV industry, Mr Musk said he is focused on Starlink first, and “the benefits that connectivity brings to remote islands”.

The shift from EVs to satellites, and possibly mangrove rehabilitation, appears to reflect a commercial decision that will be a win-win move for Mr Musk and Indonesia, said Dr Mustafa Izzuddin.

Dr Mustafa is a senior international affairs analyst at policy and business consultancy Solaris Strategies Singapore and a visiting professor in international relations at the Islamic University of Indonesia.

“Greater connectivity, which can uplift the lives of the Indonesian people, will likely enhance the domestic political support for the government of the day. For Mr Musk, Indonesia is a huge consumer market that, tapping it through Starlink, can generate massive profits for his company.”

Mr Fabby Tumiwa, executive director of the Institute for Essential Services Reform think-tank, said given that Tesla has existing manufacturing plants in Shanghai to cater to the China and South-east Asia markets, it is not likely that the company will build more of such facilities in the region for now.

“Besides, Tesla has announced it will expand the Tesla gigafactory in California and Germany. Its investment will prioritise these two plants in the short term,” he added.

Mr Musk’s visit came after two other big names in the tech industry visited Indonesia. On April 17, Apple chief executive Tim Cook met Mr Widodo in Jakarta, where he hinted at how the iPhone maker could possibly start manufacturing there.

Microsoft chief Satya Nadella visited Indonesia less than two weeks later, on April 30. His visit, which also included an audience with Mr Widodo, came with an announcement that Microsoft would be investing US$1.7 billion (S$2.3 billion) in new cloud and artificial intelligence infrastructure in Indonesia.

Observers told The Straits Times that while the visits by these industry titans can potentially bring big investments to Indonesia, this will take time.

“The Indonesian government has for the past three years been trying to ask Elon to invest in (the EV industry)... Thus far, there has been no certainty on whether Elon is serious about investing in Indonesia,” said Mr Fabby.

He was referring to how talks between Tesla and the country started even before President Widodo and Mr Musk met in 2022.

Some observers also highlighted that it might not always be immediately clear how Indonesians will reap the benefits of these flashy announcements of investments.

During a trip to Jakarta in June 2023, TikTok chief executive Chew Shou Zi announced that his company would be pumping “billions of dollars” into small and medium-sized enterprises in South-east Asia over the next few years.

Concrete details, however, are still not available.

Foreign investors will spend their money only when the value proposition is strong, and it should not be assumed that Mr Musk’s current investments in Starlink in Indonesia will lead to future Tesla tie-ups, said Mr Dedi Dinarto, lead Indonesia analyst at strategic advisory firm Global Counsel.

Just like with other foreign investors, additional investments from Mr Musk, be it in trees, EVs or anything else, will depend on Indonesia’s ability to offer supportive policies.

“Further investments from foreign investors, including potentially more from Musk, are contingent upon the Indonesian government’s ability to create and maintain policies that are favourable and supportive to these investors,” added Mr Dedi.

Mr Rudy Syamsuddin, a Makassar-based roofing materials businessman, agreed, noting that companies like Tesla, Apple and Microsoft may make promises now, but will only deliver in the future when certain conditions in Indonesia improve.

“If we talk about electric vehicles, those are products for the upper class here, who are not a meaningful part of the population. Indonesia needs to further boost buying power and ensure regulations and laws are not prone to frequent changes so our market is really attractive,” he said. - The Straits Times/ANN

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Indonesia , Elon Musk , Major Links


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