Indonesia's Energy and Mineral Resources Minister Luhut Pandjaitan informed local media that the government of Indonesia may allow more time for the nation's miners to build smelting facilities. Law No. 4 of 2009 on Mineral and Coal Mining originally banned mineral ore exports from Indonesia by January 2014 (forcing miners to process the material domestically into value-added products first). However, due to the lack of adequate smelting facilities this ban was delayed by three years (January 2017).
Still, this delay was not enough as local miners were reluctant to build costly smelting facilities amid the world's low commodity price environment. Moreover, given the government's notorious flip-flop policies, there are still miners who believe that the government may not push for the full implementation of the mineral ore export ban and therefore any investment in smelters would be in vain.
Now, only some three months before the mineral ore export ban should come into affect, it would be a dramatic choice to stick with this export ban as exports would decline sharply, implying many miners will face financial trouble while the government will also see its earnings from natural resources plunge.
Due to insufficient smelter development since the announcement of the delay in January 2014 the government is currently discussing the possibility of issuing another delay before banning mineral exports completely. Postponing the export ban by three to five years should be enough time for miners to complete their smelter projects, Minister Pandjaitan said. Those miners who will fail to have established smelting facilities by the next deadline, may see their mining permits revoked by the government, he added.
If the government indeed decides to postpone the full implementation of the mineral ore export ban by several years, miners will have to face an export tax that will be imposed in stages according to progress made with miners' smelter development. This would basically be the same structure that has already been in practice since mid-2014. Miners such as Freeport Indonesia and Newmont Nusa Tenggara have obtained a series of six-month permits for the resumption of copper concentrate exports; the further progress with smelter development is booked, the lower export taxes become.
The government is expected to make a decision on the mineral ore export ban before November 2016.
Timeline of the Export Ban 'Debacle' in Indonesia's 2009 Mining Law:
- January 2009; Indonesian President Susilo Bambang Yudhoyono signs Law No. 4/2009 on Mineral and Coal Mining (2009 Mining Law). Two articles in this law require all local miners to refine or smelt their raw materials in case they want to export mining materials. This move would enhance the country's downstream industries, give it added value, and reduce the nation's dependence on imports.
- January 2014; the export ban is pushed back by three years by President Yudhoyono. Companies can resume exports of mineral ore but need to comply with several demands, including higher export taxes (but these can decline in case smelter development progresses) and be committed to the development of smelters (including the mandatory payment of a deposit).
- October 2014; after the passage of Law No. 23/2014 on Regional Government (which stipulates regional governments no longer have the authority to issue and revoke mining licenses), voices are heard in the DPR that the 2009 Mining Law should be revised.
- January + February 2016; talks about revising the 2009 Mining Law start and the plan is included in the 2016 National Legislation Program.
Poll Indonesia Investments:
What is your opinion on Indonesia's New Mining Law (Law No. 4/2009)?
Voting possible: -
- It's a mistake as protectionism scares away much-needed foreign investment (53.1%)
- It's good because it brings Indonesia more benefit from its own mining sector (23.5%)
- It's good but requires time to bear fruit as commodity prices have plunged (16.3%)
- I don't know (7.1%)
Total amount of votes: 98