Govt to go ahead with export restriction despite protests

Rabby Pramudatama, The Jakarta Post, Jakarta | Business | Fri, July 06 2012,
The government will go ahead with its plan to tax unprocessed mineral exports despite strong protests from businesspeople both at home and overseas, Deputy Energy and Mineral Resources Minister Rudi Rubiandini said.

Rudi said the export tax was needed in order to prevent overexploitation of mineral ores ahead of the implementation of the regulation, which prohibits exports of unprocessed metals beginning in 2014.

Under the new regulation, miners should establish smelters or cooperate with other companies to process their mineral ores for export.

Rudi said that mining companies would be allowed to export unprocessed ores only after they received a clean and clear status from the Energy and Mineral Resources Ministry.

He said an increasing number of mining companies had applied for the so-called clean and clear status since the decree, which applies to the export of 65 mineral commodities, excluding coal, was enacted on May 6. Under the regulation, a 20 percent tax on exports is imposed.

“One hundred and fifty-four companies have applies for the status since we issued the regulation. Previously, only 24 companies had applied,” he said.

The clean and clear status is a kind of certificate that shows that the mining areas have complete documents and no overlapping areas. It also indicates that they have a concrete plan to build a smelter or have their ores processed by other firms.

The Energy and Mineral Resources Ministry’s Directorate General of Mineral Resources recorded that until mid-2011, 9,662 mining permits (IUP) had been issued by local administrations. Of the total IUP, only 3,778 permits have clean and clear status.

An energy expert from the ReforMiner Institute, Pri Agung Rakhmanto, said the government policy was positive. “It [the regulation] is positive on the context of giving added value to mining products, increasing state income, as well as controlling mining exploitation operations,” he said.

Minerals accounted for 16.94 percent of Indonesia’s non-oil and gas export value in 2011.

Agung said the government, however, must help facilitate the domestic mining business in building the smelters needed to process raw mining products.

“The government should also ensure the electricity supply for the smelters’ operations.”

Shelby Ihsan Saleh of the Indonesian Nickel Association (ANI), who opposed the government policy, revealed that most mining companies were not ready to construct the much needed smelters.

“It would take a long time and huge investment, and we are reluctant to bring in smelters from foreign companies because they would get most of the profit,” he said.

Earlier, the Indonesian Chamber of Commerce and Industry (Kadin) said that the ministerial decree was a considerable stumbling block for mining activities as companies had to apply for the clean and clear status. They claim that red tape has been hindering them in applying for the clean and clear status.

Kadin also complained about the 20 percent export tax stipulated in the regulation.

Overseas countries such as Japan or China have shown opposition to the regulation. Japan, the world’s second largest nickel consumer, has called on Indonesia to repeal the ministerial decree and has threatened to file a complaint with the World Trade Organization (WTO). Japan imported 3.65 million tons of nickel ore last year, of which 53 percent came from Indonesia.

Indonesia exports unprocessed metal to 13 countries, including China, Japan and the US, which make up around 70 percent of total exports.

Amid the mining regulation discourse, some mining labor unions have also expressed concern because 3 to 4 million workers currently depend on the mining sector for a livelihood.