Indonesia takes a U-turn on bauxite export ban relaxation

Indonesia has decided not to lift the ban on bauxite exports that it had imposed two years back, the country's minister said yesterday. This comes just days after the ministry had considered doing away with mining restriction in order to raise extra cash from the sector.

Indonesia imposed a ban on bauxite and nickel ore exports in 2014 to encourage upstream manufacturing that would significant create employment opportunities. But after re-evaluating the domestic mineral processing requirements the government found that not all metals can be processed within the set deadline of 2017.

The mining sector contributed almost 6 per cent to the country's GDP before imposition of the ban; that percentage has since slid down to about 4 per cent. With a fiscal deficit estimated to widen to 219 trillion rupiah ($16.9-billion) in the current financial year, the government is now being forced to seek new sources of revenue generation. It was due to this economic urgency that the government sought to lift the ban on bauxite exports last week; but has now decided not to.

"We almost definitely won't give a relaxation for nickel (ore) and bauxite," Acting Mining Minister Luhut Pandjaitan said on Wednesday. "What would the use of us exporting be now if we can (process) domestically."

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The statement comes as a relief to investors in Indonesia's budding smelter industry, who were worried that a proposed resumption of bauxite exports could undermine metal prices and put up to $12-billion in investments at stake.

Currently, there are 22 smelter projects in Indonesia, at various stages of development, the mining ministry updated.