[SMM Analysis] Policy Adjustments by Indonesia's New Government: Challenges and Opportunities for the Nickel Industry

Economic Growth and Resource Taxation
Firstly, Prabowo's government has set a target to increase the economic growth rate from 5% to 8%, which is a favourable macro front for Indonesia's nickel industry. If this growth target is achieved, it will drive overall economic development, potentially increasing the demand for nickel resources. However, it is worth noting that the government's high expectations and adjustments for economic growth may have varying impacts on the nickel industry. On one hand, the positive goal of high economic growth may drive the expansion of Indonesia's nickel industry capacity, especially with the introduction and expansion of hydrometallurgy projects for downstream applications in the new energy sector, creating a more diversified development landscape for Indonesia's nickel industry chain. On the other hand, the government's plan to increase the proportion of fiscal revenue to GDP from 12% to 23% means that there may be increased taxation on nickel mines and other related nickel products. Once specific tax indicators are implemented in the nickel industry, the risk of increased operational costs for enterprises will also rise.

Fuel Import and Blending Ratio Adjustment
The new policy proposes to increase the blending ratio of palm oil with diesel from 35% to 50% to reduce fuel imports. If successfully implemented, this policy may reduce Indonesia's dependence on imported diesel and could lead to a long-term decline in ocean freight rates. For the nickel industry, this may affect logistics costs and also indicate Indonesia's strategy towards energy diversification, which could indirectly improve the current perception of Indonesia's overall market as not being "green" enough.

Tax Adjustments and Investment Environment
In terms of tax policy, potential adjustments include considering lowering the corporate income tax from 22% to 20%. This would improve the investment environment, potentially attracting more foreign investment into the nickel industry and promoting the expansion and technological upgrading of existing enterprises. Although this news, along with the potential plan to increase VAT from 11% to 12%, is not yet confirmed, if implemented, it could have a certain potential impact on the production costs of enterprises involved in all aspects of Indonesia's nickel industry.

Management Burden of Government Structure Adjustment
In the new government structure, the number of ministers has increased from 34 to 53, with an additional 56 deputy ministers, expanding the total number to 109. While this may lead to more efficient decision-making and policy implementation, it also increases the government's fiscal burden, making the increase in the proportion of government revenue to GDP more challenging. This fiscal pressure may be reflected in tax policies across various industries, including those related to the nickel industry.

Professional Team and Policy Continuity
Finally, taking the management positions in Indonesia's Ministry of Energy and Mineral Resources and the Ministry of Investment and downstream departments as examples, a relatively high proportion of ministerial-level officials are from the previous Jokowi administration. On one hand, having experienced personnel in relevant fields may bring policy continuity and professionalism, benefiting the sustained development of the nickel industry. On the other hand, this also provides the possibility for the stability and continuity of subsequent policies. However, the actual effect of the professional team's role in governance needs time to be verified.

Considering these factors, the policy adjustments by Indonesia's new government have complex and multifaceted impacts on the nickel industry. Although the improvement in the investment environment may bring benefits, changes in tax and other policies need to be closely monitored to assess their actual impact on the long-term development of the industry.