Indonesia sticks to bauxite export ban to force develop smelters and create jobs

In an effort to add value to the country’s mineral resources and more importantly to create jobs Indonesian government has decided not to relax its ban on export of bauxite and other minerals in its upcoming stimulus policy package.

This is significant because the ban has already cost Indonesia, the once world’s top nickel exporter and a major bauxite supplier, billions of dollars. Sticking to the decision of not doing away with the ban would mean more lost revenues. The slowing Indonesian economy can hardly afford to bear that and is eagerly awaiting government intervention for revival. Still, the government is in favour of sticking to the present regulations.

Earlier, the government had said it was mulling the option of relaxing its bauxite and mineral export policy in order to prop up the economy. The proposed initiative aimed at improving investor sentiment would allow smelters that were at least 30 percent complete to export aluminium ore for a year. But Mining Minister Sudirman Said told reporters on Monday, "The risks of these incentives are bigger so the plan has been cancelled." The risks include legal and environmental issues.

The economy stimulus policy package, expected to be released this week, is likely to include tax holidays and an easing of regulations in the manufacturing, trade and agriculture sectors. Said pointed out that several of the smelter projects under construction would be completed in 2016; so, any tweaking of regulations should be better expected around that time.

Maritime Affairs and Resources Minister Rizal Ramli added "The law itself has problems because not everybody can build smelters in Indonesia. The investment is huge." There were only around 10 companies that can afford to build economically viable smelter projects in Indonesia, and they include U.S. mining giants Freeport-McMoRan Inc and Newmont Mining Corp. So, before the country has a decent number of large-scale smelter projects it cannot really afford to export its mineral resources. That would dampen the economy in the long run.