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he Indonesian Chamber of Commerce and Industry (Kadin) has warned the government of the possibility of more layoffs in the mining sector as a result of higher taxes for miners.

Didie W. Soewondho, Kadin'€™s mineral downstream task force chief, said around 100,000 workers would lose their jobs because companies might reduce production, or suspend activities, due to duties levied on the exportation of semifinished mineral concentrates.

The layoffs would follow earlier terminations of employment resulting from the ban on mineral ore exports that began on Jan. 12, he added.

There are roughly 400,000 to 600,000 workers in the ore mining industry, according to Didie.

'€œProducers of semifinished mineral concentrates are reluctant to sell abroad due to concerns over the high export duties and only produce to supply domestic market. They will only manage demands in this situation without performing layoffs for one month,'€ Didie said.

Under the implementation of the 2009 Mining Law mining firms are required to process mineral concentrates in domestic facilities. The government implemented the ban on exports of raw materials last month.

However, following heavy criticism and concerns over potential massive layoffs, the government decided to lower the minimum grade for several minerals to be exported, including semifinished concentrates.

As a disincentive for the semifinished products, the government decided to impose progressive export duties, which is set at 20 percent and will be raised to 60 percent at the end of 2016, to force mining firms to build facilities to produce end products of metal by 2017. Export duty for copper concentrates will initially be set at 25 percent.

The export duties are seen as too high as the profit margin for producers of semifinished minerals is only about 10 to 15 percent of their revenues, according to Didie.

Kadin suggested that the export duties should be reduced to 5 percent.

Finance Minister Chatib Basri has said that the export duties were part of efforts to ensure mining companies would no longer renege on the obligation to process minerals domestically as stated in the 2009 Mining Law.

'€œOur experience over the last few years shows that there has been no pressure, no punishment for mining firms to build smelters. We could not afford to repeat the same mistakes again,'€ Chatib said.

The 2009 Mining Law gave a five-year period for mining firms to build their smelters and refineries before the regulation became effective. Members of the House of Representatives Commission VII overseeing energy said that it had consulted mining companies about whether they would be able to meet the deadline.

However, five years after the law was passed, only one processing facility, Chemical Grade Alumina, which belongs to state-owned PT Aneka Tambang was finished and ready to absorb bauxite and process it into end product of alumina.

Other companies said that building smelters or refineries were not economically feasible for their business capacities and that the appropriate supporting infrastructure facilities were not available.

Natsir Mansyur, Kadin'€™s deputy chairman for trade, distribution and logistics and the owner of PT Indosmelt, which is working on a plant designed to process copper concentrate, said the export duties also made companies think twice about their planned investments.

'€œThe potential investment that has been withdrawn reaches Rp 45 trillion [US$3.69 billion] as some think it'€™s better to pull out now rather than later when they could fall into debt,'€ Natsir said.

Figures from the Investment Coordinating Board (BKPM) showed the country'€™s commitment to move the ore mining industry into refined metal products would make the company to see around Rp 150 trillion in investment for mineral smelting and refining plants. The amount will be equal to a third of this year investment target of Rp 450 trillion.