TheJakartaPost

Please Update your browser

Your browser is out of date, and may not be compatible with our website. A list of the most popular web browsers can be found below.
Just click on the icons to get to the download page.

Jakarta Post

Lower export duties proposed; Freeport, Newmont want more

The Energy and Mineral Resources Ministry says it has proposed to the Finance Ministry to lower export duties that must be paid for by semifinished mineral producers for their commitment to developing the downstream industry

Raras Cahyafitri (The Jakarta Post)
Sat, April 12, 2014

Share This Article

Change Size

Lower export duties proposed; Freeport, Newmont want more

T

he Energy and Mineral Resources Ministry says it has proposed to the Finance Ministry to lower export duties that must be paid for by semifinished mineral producers for their commitment to developing the downstream industry.

United States-based mining giants PT Freeport Indonesia and PT Newmont Nusa Tenggara, however, have asked for lower export duties than what the Energy and Mineral Resources Ministry has proposed.

The Energy and Mineral Resources Ministry'€™s mineral and coal director general, R. Sukhyar, said on Friday that his office had informed the Finance Ministry of the mining companies'€™ inability to pay up to a 25 percent export tax on semifinished mineral products.

'€œWhether the Finance Ministry will approve it or not, is different story,'€ he said.

The Energy and Mineral Resources Ministry'€™s director for mineral, Dede Suhendra, said his office had proposed a 10 percent export tax to the Finance Ministry.

'€œWe'€™ve proposed that the export tax should be no more than 10 percent because mining companies have already agreed to pay surety bonds,'€ he said.

'€œHowever, Freeport and Newmont want it to be 5 percent.'€

The Energy and Mineral Resources Ministry is planning to ask miners to deposit their money in surety bonds to make them keep their promise of developing smelters.

In a recent remark, Deputy Finance Minister Bambang Brodjonegoro said the surety bond would only further complicate things.

'€œIf we want to pressure companies, an export tax is better than surety bonds, as well as relaxation of the export tax,'€ he said.

A progressive export tax on semi-finished mineral products was introduced by the Finance Ministry following the implementation of the ban on mineral ore exports on Jan. 12.

The government had initially allowed only finished mineral products to be sold overseas as a consequence of the implementation of the controversial 2009 Mining Law, which requires all miners to process their mineral ores locally into end metal products before exporting.

But the government then decided to relax the regulation by allowing exports of semifinished products, such as concentrates, with a progressive export tax until 2017, after threats of massive layoffs and economic losses from mining giants.

The Finance Ministry set a 20 percent export tax for exports of concentrates of iron, manganese, lead, zinc, ilmenite and titanium, among others. The export tax for copper concentrate is set higher at 25 percent.

The government will raise the export tax gradually up to 60 percent in the second half of 2016.

Mining companies planning to continue exporting concentrates have criticized the policy, saying the tax is unbearable because their profit margins are only around 15 percent and paying the duties will hamper development of their smelters and force them to cease operations.

Most concentrate producers have halted their exports since Jan. 12, while they keep working on ensuring the government that they are committed to processing their semifinished products into end products.

Sukhyar said on Friday that his office would send a recommendation letter to the Trade Ministry for mining companies to get export permits, which are locally known as SPE, next week.

Last month, his office sent a recommendation letter for a number of companies to obtain a status as a registered exporter.

Sukhyar said recommendations for export permits would be issued to five companies, namely Freeport Indonesia, Newmont Nusa Tenggara, PT Sebuku Iron Lateritic Ore, PT Lumbung Mineral Sentosa and PT Daya Swasta.

{

Your Opinion Matters

Share your experiences, suggestions, and any issues you've encountered on The Jakarta Post. We're here to listen.

Enter at least 30 characters
0 / 30

Thank You

Thank you for sharing your thoughts. We appreciate your feedback.