Debate over Indonesias export ban

(1 Vote)

Indonesia’s government plans to introduce a controversial ban on the export of raw mineral from its country next year.

The ban will require miners to process all raw commodities, including gold, copper, tin, iron ore and coal, before exporting it.

The Government says using smeltering and other methods to process minerals onshore will boost the value of mineral commodities being offered from the South-East Asian nation.

While such a plan has clear benefits, including the potential to boost job opportunities and increase wealth for Indonesia-based mining companies, the plan has been fiercely criticised.

Critics claim the new regulations, which are set to come into force next year, will cost the Indonesian economy up to $10 billion a year in lost exports and push smaller mining companies out of the picture.

A ban on exports was already scrapped by Indonesia’s supreme court in 2012, however the Government has is moving forward with an amended version of the ban.

The biggest problem with the government’s plan seems to be the fact that the mining industry was given little warning or time to prepare for the ban – and the details of the ban have not been fully explained.

It has been reported that mining companies, regardless of their size, are being forced to build smelters without any financial support and at short notice.

Back in January, Indonesian Mining Experts Association’s (Perhapi) newly-elected chairman Achmad Ardianto told the Jakarta Post that while his association fully supported the regulations, mining companies might need government support to be able to export processed ores as scheduled.

“We understand that the government wants to add value to the downstream sector. At the same time, companies are calling for the repeal of the decree. The government has done the right thing but they should only execute the plan when companies are ready,” he told the newspaper.

“The regulation requires companies to build smelters to continue shipping ores abroad and it’s going to take time and money to do that. The scheme will hurt companies if the government doesn’t help them.”

Critics are arguing that the government is not making the requirements of the new regulations clear. It has been reported that companies may be able to continue to export raw materials, but they will be heavily taxed for doing so.

Seven mining-related associations have formed a committee to demand the government fully explain its new regulations. Last month the group issued a 12-point statement that highlights the government’s lack of understanding and internal agencies’ insufficient coordination regarding policies in the mining industry, the Jakarta Globe reported.

Martiono Hadianto, Chairman of the Indonesian Mining Association, which is a member of the committee, told the Jakarta Globe the government has to bring more to the table in order to attract miners to build smelters, adding that the push for value creation should not be the same for all mining commodities.

The Association argues that for lead, zinc and copper, building smelters is not economically viable because of the size of Indonesia's reserves and the slim refining margins, Reuters reported last month.

Just last week, Indonesia’s Industry Minister told Reuters that major miners in Indonesia, such as Freeport and Newmont, would get extra time to build smelters or sign pacts with smelters under construction, as they move to comply with the exports ban.

“If they don't do anything now and in 2014 they ask the government to relax a policy, the government will ignore them. However, if they start building a smelter now, even if it's not finished by 2014, the government could consider relaxing policies for them,” Minister Mohamad S. Hidayat told Reuters.

So, with all of this in mind, Indonesia’s mining industry – and the rest of the world – are eager to see what the finer details of the ban will be.

References: 20121101_1_smelter-factbox-indonesian-south-sulawesi 2hqnj.html oid=131779&sn=Detail export-ban/ ore.html industry-body/554331/

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