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Jakarta Post

Indonesia defies Freeport on export tax

  • Satria Sambijantoro

    The Jakarta Post

Jakarta   /   Thu, January 30, 2014   /  12:17 pm

The Indonesia government said Thursday that it would stick to its guns on the export tax for unprocessed ores, defying stern oppositions and lobbying attempts from US-based mining giants Freeport-McMoran Copper & Gold Inc. and Newmont Mining Corp.

Finance Minister Chatib Basri said Thursday that the export tax scheme would be necessary to support the country'€™s value-added industry, a statement that came a day after Freeport CEO Richard C. Adkerson paid a visit to his office, holding a closed-door meeting to discuss the issue.

'€œThis is a fiscal instrument to compel company to build smelters '€“ it isn'€™t a policy for revenue collection,'€ the minister said in an economics seminar in Jakarta.

As an implementation of the new Mining Law, the government effectively banned export of raw ores from such as bauxite, nickel, among others, beginning Jan. 12, in its effort to curb the country'€™s dependency towards raw resources by pushing miners process the ores domestically and to export more value-added goods.

The government already gave exemption for copper ores, allowing Freeport and Newmont, which control 97 percent of total domestic copper production, to continue exporting them.

However, the reform-minded Chatib recently introduced an export tax of 20 percent for companies that process ores below their purity level, with the tax set higher at 25 percent for copper concentrates, in a policy that is seen as specifically targeting Freeport and Newmont.

The new export tax took Freeport by surprise, CEO Adkerson said during a conference call with analysts, as quoted by Bloomberg.

However, Chatib explained that the government needed to apply carrot-and-stick approach to ensure that the new Mining Law would be imposed consistently.

'€œOur past 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."

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