By September 2016 the Indonesian government plans to have revised regulations regarding exports of mineral ore, part of Law No. 4/2009 on Mineral and Coal Mining (New Mining Law). Per January 2014 mineral ore exports from Indonesia should have been banned altogether as the government aims to boost domestic smelter development and reduce the country's dependence on raw material exports. However, a last-minute regulation, signed in January 2014, softened this ban and allowed exports of copper, manganese, zinc, lead, and iron ore concentrates until 2017. Now the government may decide for a two-year delay up to 2019.

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The Indonesian government seems to abandon or delay its policy of banning mineral ore exports from 2017 onward. In January 2014 the ban on exports of raw minerals, part of the 2009 Mining Law, came into effect. However, due to the lack of domestic processing facilities the government allowed the resumption of certain concentrate exports (such as copper concentrate) provided the miner would be committed to the construction of smelting facilities, and pay higher taxes and royalties. The export ban was highly controversial as it conflicted with existing contracts and therefore caused outrage in Indonesia's mining industry.

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Karena ketidakjelasan menenai kewajiban letters of credit (L/C) yang baru ditetapkan, Pemerintah Indonesia telah memutuskan untuk bersikap fleksibel. Dimulai dari hari Rabu (01/04) para eksportir Indonesia dari empat komoditi kunci - batubara, minyak (inti) kelapa sawit, minyak & gas, dan bahan-bahan mineral - diharuskan menggunakan L/C untuk semua perjanjian ekspor. Kebijakan baru ini dibuat untuk meningkatkan pemasukan ekspor Indonesia dan meningkatkan pengawasan penjualan sumberdaya alam Indonesia. Kendati begitu, pengecualian sementara kini dimungkinkan terjadi.

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The Indonesian Ministry of Energy and Mineral Resources signaled that the government may (again) decide to postpone full implementation of its ban on exports of raw mineral ores and concentrates as the country still lacks sufficient smelting capacity to produce value-added mining products. Through this export ban, stipulated by the 2009 Mining Law, the Indonesian government aims to enhance revenue generation in the country’s natural resources sector by forcing miners to produce and export value-added products instead of raw materials.

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Official data show that in 2014 China, the world’s largest consumer of industrial metals, imported the lowest amount of nickel ore since 2010. Apart from slowing economic growth in the world’s second-largest economy (China’s economic expansion having eased to 7.4 percent year-on-year in 2014), falling nickel ore imports are also caused by Indonesia’s ban on exports of unprocessed minerals (implemented in January 2014) and monsoon rains in the Philippines (limiting production and seaborne trade).

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Indonesia's Minister for Energy and Mineral Resources Jero Wacik opened the possibility for Newmont Nusa Tenggara, subsidiary of US-based gold miner Newmont Mining Corporation, to resume exports of ore concentrates, provided that Newmont shows its commitment to build a smelter in Indonesia as in accordance with the new and controversial 2009 Mining Law. One of the targets of this new law is to boost Indonesia’s downstream mining industry by prohibiting export of unprocessed minerals.

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R. Sukhyar, Director General for Coal and Mineral Resources at the Indonesian Ministry of Energy and Mineral Resources, said that Freeport Indonesia and Newmont Nusa Tenggara, two of the largest copper miners in Indonesia, have shown their commitment to build refining facilities (in line with the 2009 Mining Law) by agreeing to transfer a total of USD $140 million to the government as a deposit guarantee. Freeport will transfer USD $115 million, whereas Newmont will transfer the remaining USD $25 million.

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The Indonesian government revised down its target for the country's manufacturing growth in 2014 to 6 percent year-on-year (yoy) from 6.4 to 6.8 percent (yoy) previously. Main reason for the downgrade was the lower than expected GDP growth result in the first quarter of 2014. Earlier this week, Statistics Indonesia announced that the Indonesian economy expanded 5.21 percent in Q1-2014, the slowest quarterly growth pace since the fourth quarter of 2009. Last year, Indonesia's manufacturing sector grew 6.19 percent (yoy).

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The government of Indonesia has been preparing strategies to face Japan's possible complaint to the World Trade Organization (WTO) about Indonesia's recently introduced export ban of mineral ore (UU Minerba No. 4 - 2009). A special team from Indonesia's Trade Ministry, headed by Gusmardi Bustami, has been set up to handle the dispute. Japan feels forced to bring the export ban case to the WTO because its industry is highly dependent on the supply of certain raw Indonesian commodities, particularly nickel.

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The government of Japan is most likely to file a complaint to the World Trade Organization (WTO) about Indonesia's recently introduced ban on the export of mineral ore (UU Minerba No. 4 - 2009). Although the WTO is yet to receive a formal letter of protest, Indonesian newspaper Investor Daily reported on Friday (04/04) that Trade Minister Muhammad Lutfi has already received a letter from Japan's Minister of Foreign Affairs in which the step was announced. Japan feels forced to bring the case to the WTO as its industry is affected by the ban.

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The central bank of Indonesia (Bank Indonesia) believes that the USD $430 million trade deficit that was recorded in January 2014 is a normal result taking into account the implementation of the ban on exports of unprocessed minerals (which reduces exports of materials such as copper and nickel) and seasonal trends as exports are always lower in January than in December due the end of winter peak demand for raw materials and ongoing contractual negotiations at the beginning of each year.

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The central bank of Indonesia (Bank Indonesia) believes that Indonesia's recently introduced ban on the export of unprocessed minerals, in effect since 12 January 2014, will result in slowing economic growth in several regions in the eastern part of Indonesia as these regions are main sources of mineral production. Doddy Zulverdi, Head of the Economic Assessment Group in Bank Indonesia's Department of Economic and Monetary Policy, said that Sulawesi and Kalimantan will post slowing economic growth this year.

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The current account deficit of Indonesia is expected to ease further in the first quarter of 2014 due to a possible slowdown of imports according to Deputy Finance Minister Bambang Brodjonegoro. This slowdown is estimated to be caused by the implementation of Indonesia's higher income tax on the import of durable consumer goods, effective from January 2014. However, the deficit will not ease markedly from the USD $4 billion deficit (equivalent to 1.98 percent of the country's gross domestic product) recorded in the fourth quarter of 2013.

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Statistics Indonesia (BPS), a non-departmental government institute, expects that Indonesia's trade balance will post a deficit of around USD $4 billion in 2014. The key question is whether increased manufacturing and agricultural exports can replace reduced raw mineral exports. The forecast of BPS is approximately similar to the country's trade deficit in 2013. Last year, Southeast Asia's largest economy recorded a deficit of USD $4.06 billion as the total value of exports amounted to USD $182.57 billion, while imports reached USD $186.63 billion.

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The BKPM announced that three processing and mineral concentrate refineries (smelters) are in the construction phase and expected to be ready for production in Indonesia this year. Two of the three smelters will process and purify iron ore while the third will process bauxite ore into chemical grade alumina. The three smelters are owned by Indonesia Chemical Alumina. This company, a joint venture between Aneka Tambang (Antam) and Japan, operates in West Kalimantan.

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According to Indonesia's Finance Minister Chatib Basri, the country's trade deficit will continue between 2014 and 2016 (although expecting to show an easing trend) but will turn into a surplus from 2017 onwards. One of the most influential factors that will impact on the trade balance is Indonesia's raw ore export ban, in effect as of Sunday 12 January 2014. In the short term, this ban will limit Indonesia's exports but in the long term, from 2017 onward, it will lead to high added-value exports.

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On Sunday (12/01), one of the most important new laws in the recent history of Indonesia came in force. Mining Law Nr.4/2009, which prohibits the export of unprocessed minerals from Southeast Asia's largest economy, was implemented. However, it was not implemented in its original form. The president of Indonesia, Susilo Bambang Yudhoyono, signed a last-minute regulation which softens the impact of the new law by allowing mining companies to continue exports of copper, manganese, zinc, lead and iron ore concentrate until 2017.

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Indonesia's ban on the export of unprocessed minerals, which is scheduled to take effect on 12 January 2014, is expected to lead to a temporary slowdown of Indonesia's total exports and thus will put more pressure on the country's current account deficit. Despite two consecutive months with trade surpluses (October and November 2013), Indonesia's wide current account deficit is still a concern to investors as well as the government although the deficit has shown an easing trend in recent quarters.

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After having reported yesterday (26/12) that Indonesia's ban on the export of unprocessed minerals, stipulated in Mining Law No.4/2009 (which is set to become in force from 12 January 2014), may be delayed, more and more signs are pointing towards a postponement of this law. Minister of Energy and Mineral Resources, Jero Wacik, said that the government is considering to delay the implementation of the law by two or three years as the ban will cause increased unemployment and the cease of mining operations.

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Starting from 12 January 2014, the export of all mineral-ores are banned in Indonesia. This controversial new policy, stipulated by the 2009 Mining Law (on Minerals and Coal Mining), was agreed upon by the nine fractions in Commission VII of the Indonesian parliament (DPR). Through this new law, the government intends to increase the value of exports while reducing dependence on raw exports and thus becoming less vulnerable to price downswings on the global commodities market.

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