By Ryan Wiratama Bhaskara, Research Associate: Countries around the globe are pushing towards the net-zero emissions goal. The energy transition needed to support this goal hinges on strong political will and support, yet policymakers often face the dual challenge of balancing environmental objectives and economic growth. Navigating efforts towards the net-zero target requires the capacity to install and implement clean technologies, as well as the decarbonisation of heavy-emitting sectors, particularly energy. A key challenge of this transition is the substantial need for what is called ‘critical minerals’.

The clean energy transition is driving unprecedented demand for critical minerals, with their market value projected to exceed US$770 billion by 2040. However, this rapid growth presents significant challenges, as critical mineral production is highly concentrated in a few regions, leading to supply vulnerabilities. Current investments in mining and processing fall short of meeting future demand, with the International Energy Agency (IEA) estimating that only 70% of copper and 50% of lithium needs will be met by 2035. Geopolitical disruptions, such as Russia's invasion of Ukraine, have further strained supply chains. Further, a likely possibility of US-China trade wars under the Trump presidency will bear another geopolitical risk. Addressing these challenges necessitates a concerted global effort to diversify supply, enhance recycling technologies, and promote international cooperation to ensure a secure and sustainable mineral supply chain.

ASEAN is well-endowed with critical mineral resources. Cumulatively, the region possesses 46% of the world’s nickel reserves, 22.7% bauxite, 20% rare earth elements (REE), and 6.9% cobalt, according to 2023 data from the United States Geological Survey (USGS). ASEAN also leads global production for nickel (63%) and tin (42%). Other minerals such as manganese (3%), REE (8%), and copper (4%) have also been mined and produced as ores in the region. These minerals play a vital role in the manufacturing of clean technologies such as batteries and solar photovoltaics (PV).

⁠However, China is currently handling the processing and downstreaming for most of these resources. Data from the World Bank’s World Integrated Trade Solution reveals that in 2022, over 95% of Nickel (both in ore and refined forms) were exported from Indonesia and the Philippines to China. Myanmar also exported almost all of its manganese, REE, and tin ores to China in the same year. 

On the downstream side, some ASEAN countries have the production capacity to process minerals for manufacturing solar PV, batteries, and electric vehicles (EVs). Indonesia, for example, has announced its plan to develop a vertically integrated battery industry, leveraging its vast nickel abundance. Vietnam and Malaysia are advancing their respective domestic EV industries, with Vietnam-based Vinfast emerging as a key player. Holding a 15% share of the domestic auto market, the EV firm is expanding overseas, including to the US. Together, Vietnam, Malaysia, Cambodia, Indonesia, and Thailand contribute 9% to 10% to global solar PV cell and module production. However, only Malaysia and Thailand have the capacity to produce the polysilicon and metallurgical-grade silicon, essential for solar PV manufacturing.

By capitalising on its critical mineral resources, ASEAN could become a clean-tech powerhouse and champion its net-zero targets. Strengthening local industries will also bring positive economic growth and increase green jobs across the region.

Each ASEAN country has their own critical mineral and downstreaming strategies, but these have intensified competition rather than fostering cooperation. Indonesia, for example, reintroduced a ban on the export of unprocessed nickel ores in 2020, aiming to promote domestic processing industries and attract more investment in downstream industries. Despite concerns about environmental degradation and escalating social conflicts within the local mining and refining industries, the strategy was deemed successful in increasing nickel production and the added value from refined products.

In response to this, the Philippines considered following in Indonesia’s footsteps. In early 2023, the Philippine government announced its plan to also impose a similar export ban. However, the proposal was dropped following massive protests from the mining sector, which raised concerns on the ban’s possible negative impact on businesses. Recently, the Philippines took another route by promoting a ‘China-free’ nickel supply chain to attract investments from the US and its other politically aligned countries.

Such strategies and approaches may pose more complicated geopolitical risks in the future, particularly amongst countries with overlapping resources and key industries. Competing national strategies, without a coordinated regional framework, could hinder ASEAN’s ability to fully leverage its critical mineral wealth. To minimise such risks, a synchronised effort will be crucial, with each country leveraging its strengths in critical minerals and supply chain management. Thailand, Indonesia, Malaysia, and Viet Nam, with its more established upstream industry, could focus on this area, while other nations such as Philippines, Myanmar, and Cambodia prioritising on upstream and midstream roles. Furthermore, more investments in other key measures such as battery recycling and sustainable mining and processing are necessary to bolster the minerals’ supply security and sustainability.

To fully harness its critical mineral wealth, ASEAN could adopt a regional cooperation framework akin to the European Union's Critical Raw Materials Act. This framework would involve a coordinated strategy for resource sharing, value chain integration, and policy harmonisation across member states. For instance, ASEAN nations could establish a Critical Minerals Alliance to centralise efforts in mineral exploration, sustainable mining practices, and the development of refining and recycling facilities. By pooling resources and expertise, the region could collectively overcome bottlenecks in processing and reduce dependence on external actors like China. Such collaboration would also enable the establishment of regional standards, attract multinational investment, and create a robust supply chain network for clean technologies, positioning ASEAN as a global leader in the green economy. Ultimately, the key is to foster cooperation over competition at the regional level, especially in securing supply chain and improving production capacity across ASEAN.

This opinion piece was written by Ryan Wiratama Bhaskara, Research Associate, ERIA, and has been published in Borneo Bulletin. Click here to subscribe to the monthly newsletter.

Disclaimer: The views expressed are purely those of the authors and may not in any circumstances be regarded as stating an official position of the Economic Research Institute for ASEAN and East Asia.