Quad-ASEAN Technology Cooperation for Critical Minerals Supply Chains

Backdrop

The interaction between the two regional institutions, ASEAN and Quad, faces many questions regarding their respective complementarities and contradictions vis-à-vis divided ASEAN loyalties between China and the US.

The Association of Southeast Asian Nations (ASEAN)[1] has played a dominant political, diplomatic and economic role in the Indo-Pacific region over the last three decades. The rise of China facilitated the success of this role, as did the United States’ commitment to Indo-Pacific security and the avoidance of any direct US-China conflicts in the Indo-Pacific region during 1991-2010. However, during the 2010s, the region witnessed major reconfiguration with China’s growing influence, the US’s declining impact, and the increased likelihood of conflicts between China and the US. ASEAN has divided loyalties between China and the US. India and Japan wish for sustainable and stable growth of the Indo-Pacific region and have been collaborating with the US and Australia to strengthen the Quadrilateral Security Dialogue (Quad). The interaction between the two regional institutions, ASEAN and Quad, faces many questions regarding their respective complementarities and contradictions vis-à-vis divided ASEAN loyalties between China and the US.[2]

Like the rest of the world, the Indo-Pacific region should be mindful of grave implications for regional, national, human, and ecological security. Most of the countries in this region have prioritised climate action through their respective net-zero emissions programmes. However, the lack of climate finance and geopolitical frictions may delay the decarbonisation transition. One aspect of climate security includes reliable access to low-carbon technologies needed for the net-zero transition – and critical minerals are the crucial raw material inputs required to manufacture this equipment. While there may be a view in favour of decoupling existing supply chains away from China to reduce the supply risks of relying on a single country for raw materials, this may not be feasible, given China’s massive dominance over the extraction and processing of several critical minerals required for the energy transition. Instead, it would be apt for ASEAN to make optimal use of their domestic capacities, further integrate supply chains within ASEAN, and, where required, participate in global supply chains with a diverse range of partner countries in mining, processing, assembly, and final-use activities.[3]

Quad countries have tried to integrate with some of the ASEAN member countries through a Quad-plus Indo-Pacific Economic Framework (IPEF), an open and inclusive Indo-Pacific framework launched in May 2022

Quad countries have tried to integrate with some of the ASEAN member countries through a Quad-plus Indo-Pacific Economic Framework (IPEF), an open and inclusive Indo-Pacific framework launched in May 2022. The IPEF comprises 14 economically and culturally diverse countries: four from Quad, seven from ASEAN (all barring Cambodia, Laos, and Myanmar), Fiji, New Zealand, and the Republic of Korea, covering high-income countries and emerging market economies.[4]

IPEF has four broad pillars: i) trade, ii) supply chains, iii) clean economy, and iv) fair economy.[5] While successful cooperation on these pillars would provide opportunities for transferring civilian technology on climate change and critical minerals between the Quad and ASEAN, it raises some challenges to its acceptance on account of the ASEAN centrality. Quad can, however, use this platform and direct engagements with ASEAN and its member states to provide financing support for infrastructure, collaborate on research and development and skilling, and invest in the mining and metals industries.

ASEAN Focus on Mining and Mineral Development

The 43^rd ASEAN summit was hosted by Indonesia in September 2023, with the theme “ASEAN Matters: Epicentrum of Growth.”[6] The Chairman’s Statement reiterated ASEAN’s agreement with the COP-28 goals of global climate action at the regional, national, and sub-national levels. It also highlighted the importance of promoting sustainable infrastructure development. The Statement commended the efforts to reduce emissions and accelerate energy transitions and the increased focus on efficiency in energy-intensive sectors and electric vehicles (EVs).

ASEAN thus requires a resilient availability of critical minerals needed to manufacture the requisite low-carbon technologies to catalyse its growing mining sector, which has already helped bring socio-economic and infrastructure development to the region.

ASEAN thus requires a resilient availability of critical minerals needed to manufacture the requisite low-carbon technologies to catalyse its growing mining sector, which has already helped bring socio-economic and infrastructure development to the region. The minerals sector has been considered crucial in helping achieve the ASEAN Economic Community (AEC) goals in their Blueprint 2025.[7] This sentiment began at the first ASEAN Ministerial Meeting on Minerals (AMMin) in August 2005, when the ASEAN cooperation in the minerals sector was first institutionalised. This year also saw the adoption of the ASEAN Minerals Cooperation Action Plan (AMCAP) through the AMCAP-I (2005-2010), followed by the AMCAP-II (2011-2015). Most recently, the AMCAP-III was formulated in two phases, Phase 1 (2016 to 2020) and Phase 2 (2021 to 2025), as the blueprint for ASEAN minerals cooperation to enhance the dynamic development of the sector further.

Phase 2 (2021-2025) of AMCAP-III seeks to create an advanced and progressive ASEAN minerals sector for socio-economic prosperity and environmental well-being through “Promoting ASEAN as a Sustainable Minerals Investment Destination”.[8] It discussed promoting the region as an investment destination for sustainable and responsible mineral development, developing critical mineral value chains, and increasing mineral cooperation within ASEAN and with other global partners. One of the six broad topics discussed in the meeting included Fostering Mineral Cooperation with Partners, focusing on the ASEAN+3 countries – China, the Republic of Korea, and Japan (also a member of Quad).

An ASEAN internal Study on Building Policy Prospectivity: Defining Policy, Regulation and Governance Standards to Attract Exploration Investments, finalised in April 2022, has been a part of the project on Strengthening ASEAN Cooperation in Minerals supported by the ASEAN-Australia Development Cooperation Programme 2.0. While ASEAN AMMin meetings document fostering mineral cooperation with ASEAN+3 and some exploration cooperation sought from Australia, Quad-ASEAN mineral cooperation was not mentioned.

Mining Potential of ASEAN

ASEAN possesses reserves of some of the key critical minerals needed for the energy transition: 27% of global nickel (to manufacture EV and storage batteries), 32% of tin (used in solar panels), and 36% of rare-earth elements (for various applications, including permanent magnets in wind turbines). However, perhaps due to data unavailability and certain regulatory hurdles, exploration investments in the region have declined from nearly US$400 billion in 2016 to under US$300 billion in 2020. On the other hand, the minerals and metals sector has seen a significant increase in production in the same timeframe, outpacing the global increase in supply for certain minerals. For example, ASEAN produced only 0.64% of rare earths in 2015; in 2020, the share had risen to 9.35%.[9]

ASEAN also plays a significant role in processing these critical minerals, which involves extracting valuable metals from the waste material and converting them to a more usable form. Table 1 shows the global supply shares of extraction and processing of select critical minerals required for the green transition between ASEAN, Quad, and China. China dominates the supply chains of mining and processing. Indonesia and the Philippines are crucial in mining and processing nickel, with Indonesia being its largest producer globally. The Philippines is China’s biggest nickel ore supplier, replacing Indonesia after its ban on raw material exports.[10]

These countries also participate in the downstream green technologies value chains and are consumers of critical minerals in various forms. Vietnam and Malaysia are, respectively, the second and third largest manufacturers of solar photovoltaic modules (after China).[11] Thailand is a regional hub for automotive manufacturing, with other ASEAN countries looking to set up EV manufacturing industries. As ASEAN already produces various lithium-ion battery minerals (particularly nickel, manganese, and cobalt), there is scope for vertical integration in EV supply chains. Trade would be required for minerals not readily available in the region, such as lithium from Australia or China.

The Role of Quad in the Indo-Pacific

An early precursor to the Quad was the Tsunami Core: Australia, India, Japan, and the US provided coordinated assistance to the devastation caused by the 2004 tsunami in the Indian Ocean region. The first meeting of Quad officials was held in May 2007 on the sidelines of the ASEAN Regional Forum summit in the Philippines. After an intermission of around a decade, the next meeting was held in November 2017 for consultations on connectivity issues. The Quad is seemingly an informal intergovernmental Indo-Pacific organisation, which some view as a talk-shop, while others consider it a military alliance. Though Quad aims to ward off long-term security challenges from China to its members and the Indo-Pacific region, its informality lies in avoiding creating a formal security agreement.[12]

During the first two Quad Leaders’ Summits (QLMs), held in March and September 2021, various working groups were constituted to enable increased cooperation in several fields: vaccines, climate change (for which ASEAN has a Working Group too[13]), critical and emerging technology, infrastructure, space, and cyber issues.[14] The issue of providing technological cooperation to the ASEAN countries, earlier elaborated in the Quad 2021 summit meetings, was further highlighted during the QLM, along with the need to boost cooperation between the blocs on the issues of green technologies and critical minerals.

A ‘Quad Climate Change Adaptation and Mitigation Package’ (Q-CHAMP) was launched during the Quad 2022 summit, which includes some activities delegated to the Working Group on Climate, such as strengthening clean energy supply chains and carbon recycling. The fifth QLM, held in May 2023, emphasised the focus on “regional countries’ priorities” and responding “to the region’s needs” in Southeast Asia, explicitly recognising that the ASEAN has its institutional singularity. A Clean Energy Supply Chains Initiative was also announced to support energy transition in the Indo-Pacific.[15]

India- and Quad-ASEAN Critical Minerals Cooperation

The criticality of 43 minerals has been assessed in a CSEP paper published in April 2023.[16] The Government of India released its first list of 30 critical minerals in June 2023.[17] Along with this declaration, several recommendations were made on how the country can ensure a resilient supply of these minerals. The report proposed increasing cooperation with Australia on research and development and establishing a wing in India’s Ministry of Mines, focusing on critical minerals supply chains. India also recently amended its mining legislation to encourage private-sector investments in the exploration and mining of critical minerals.[18] Additionally, Khanij Bidesh India Ltd. (or KABIL, a government organisation responsible for identifying strategic critical mineral assets abroad) has committed to investing US$25 million in lithium exploration projects in Argentina over the next five years.[19]

India, all other members of Quad, Canada, South Korea, and several European nations are also a part of the Minerals Security Partnership (MSP). This US-led international initiative seeks to “accelerate the development of diverse and sustainable critical energy minerals supply chains”.[20] To this end, the MSP functions along four tracks: (1) sharing information between partners, (2) promoting investing and financing, (3) elevating environment, social, and governance (ESG) standards, and (4) encouraging recycling.[21] Quad partners can use the MSP collaboration to find and invest in relevant projects in ASEAN to bolster critical mineral supply chains while underscoring environmentally and socially responsible mining practices.

The success of Quad-ASEAN cooperation would depend on avoiding any anti-China rhetoric. ASEAN would prefer to remain free from the aftermath of any US-China defence rivalry in the Pacific Ocean. The Quad has several technological capacities to offer to ASEAN through public goods, which refer to goods or services from which a large section of society can benefit. These include the vaccine and health security partnerships, access to infrastructure investments, cable connectivity and resilience to support undersea cable networks in the Indo-Pacific, digital public infrastructure, strengthening supply chain resilience, and improved regional digital connectivity through access to advanced telecommunications technology, including 5G networks.

[22]

For resilient mineral supply chains, ASEAN may determine a list of minerals critical to the member states and the region. Quad can invest in mineral exploration and support baseline geological data collection. Quad can finance the expansion of existing and new mining operations and support establishing ESG standards throughout the mineral supply chain.

For resilient mineral supply chains, ASEAN may determine a list of minerals critical to the member states and the region. Quad can invest in mineral exploration and support baseline geological data collection. Quad can finance the expansion of existing and new mining operations and support establishing ESG standards throughout the mineral supply chain. Minerals for which Quad countries have expertise in mining and processing of select critical minerals have been identified in Tables 2 and 3. For example, major copper mining countries, the United States and Australia, can share their expertise with Vietnam and the Philippines to help expand their mining operations. Japan and Australia can share their cobalt processing capabilities with the Philippines and Indonesia. Likewise, Quad countries can also gain from ASEAN countries, such as Indonesia, providing expertise on nickel mining for India to tap its mineral production. Both regions can participate in all elements of the mineral value chain, including R&D, skilling, and recycling, and the Quad Investors Network (QUIN) may become a mechanism to facilitate investments in strategic technologies, including clean energy, critical minerals, and semiconductors.[23]