Indonesia to ban mineral ore exports

Indonesia plans to ban exports of raw minerals early next year and develop smelters of its own to increase the production of higher-value products from its minerals and metals industry.

But metal and mining companies have warned the government of potential losses if it bans mineral ore exports while the development of smelters at home is still ongoing.

"In principle, it will be difficult to stop exporting minerals as of January 2014 as the smelters under construction will not be operational until next year," Executive Director of the Indonesian Mining Association (IMA) Syahrir Abubakar said at the 13th ASEAN Senior Official Meeting (ASSOM) in Bali on Tuesday.

He noted that the government should be cautious about issuing a ban on mineral ore exports next year because it could lose billions of US dollars in state revenues. The ban will severely affect several regions across the country, he added.

According to IMA data, the government could lose nearly 45 percent of state revenues arising from taxes and royalties paid by two foreign mining companies, Freeport and Newmont.

Under Law No. 4 /2009 on Mineral and Coal Development, mining companies are required to process minerals in the country before exporting them. The law, which comes into effect next year, bans the export of raw minerals from January.

Producers, therefore, have to either build their own smelters or process the minerals at smelters owned by other companies.

Mining companies noted that the government would suffer revenue losses if it banned mineral ore exports before the smelters are completely constructed.

"The government will lose more than 45 percent, or US$3.2 billion, of the US$8.5 billion in taxes and royalties paid by Freeport and Newmont," Syahrir noted.

The West Sumbawa and Timika districts, which have, so far, relied on the two companies for nearly 92 percent of their revenues, will also be severely affected, he added. "The ban will result in several job losses as well," he pointed out.

The government plans to ensure that 15 new smelters are operational by 2015. These smelters will process raw minerals.

Deputy Minister of Energy and Mineral Resources Susilo Siswoutomo said the government plans to construct 28 smelters.

"At least 15 of the 28 projects are expected to be completed by 2015," Susilo noted after addressing an Indonesian Investment Summit recently.

The projects are located mainly in Sulawesi, Kalimantan and Sumatra, he said.

"These smelters will process copper, nickel, bauxite and iron ore to produce higher-value products," he added.

In contrast to metal and mining companies, the Ministry of Industry is extremely supportive of the ban on mineral ore exports.

"The Ministry of Industry is very supportive and wants to see the implementation of the ban as soon as possible," said Director General of the Ministry of Industry Manufacturing Base Industry Benny Wachjudi on the sidelines of the Indonesian Chambers National Leadership Meeting in south Sumatra earlier this month.

Benny noted that while the ban fell under the purview of the Ministry of Energy and Mineral Resources, the Ministry of Industry strongly supported the move.

According to regulations, mineral companies must carry out programs to create value-addition by introducing processing and purification systems. Benny said several proposals for mineral processing have already been submitted. 

There are 28 proposals with the Ministry of Energy and Mineral Resources. More proposals are expected to be submitted.

Proposals have also been submitted to the Investment Coordinating Board, which will decide if any proposal requires further coordination.

Several observers are skeptical about the ban being implemented early next year since no smelter will be complete by then. That is why the government is drafting a regulation that will allow producers to export in limited quantities once the ban comes into effect in early 2014.

However, the permission to export will be dependent on a producers intention to build smelters, so the export licences will be valid only for a certain period or until their smelters are operational.

The draft regulation has yet to be discussed with the House of Representatives (DPR). Nevertheless, the DPR has indicated that it will not amend the regulation that requires the construction of smelters as required by Law No. 4 /2009 on the development of mineral and coal reserves.

Legislator Dito Gainduto of the House Commission VII on energy and mineral resource affairs said the government must enforce regulations on the development of smelters as required by law.

"The government must be firm and not change its stance because of pressures or threats from businesses," Guinduto added.

He said the government should be consistent in adhering to the Law on Mineral and Coal Development, which was drafted in coopertaion with the DPR.

"The government should not seek excuses. If there is a company that does not abide by the law, the government should halt its exports," the legislator added.

He said that several countries had banned exports of raw minerals, forcing the development of smelters at home. "So, why cant we do the same thing?" he asked. 

The head of the Geological Board at the Energy and Mineral Resources Ministry Sukyar held the view that the ban is fair and similar to policies enforced by several countries, including the Association of Southeast Asian Nations (ASEAN) member states.

"Nearly 20 countries have revised their policies on exporting raw minerals. Even Laos and Myanmar have imposed bans," he noted.

He added that the deposits of at least five mined resources need to be conserved for local demand -- nickel ore, copper, bauxite, gold and iron.

"Domestic demand for nickel ore currently stands at 10 million tons per year. But since production can increase to 60 million tons per year, 50 million tons can be exported," he said.

If exports of nickel ore continued unabated, they will exhaust the national reserves quickly, he pointed out. The ban is, therefore, necessary to boost the national economy, he added

Source: ANTARA

Source: ANTARA