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Jakarta Post

Lower export duties come with close monitoring

  • Raras Cahyafitri

    The Jakarta Post

Jakarta   /   Tue, August 5, 2014   /  12:04 pm

While imposing lower export duties on companies committed to building smelters, the government will closely monitor the development of the refining facilities to ensure construction runs as scheduled.

Finance Minister Chatib Basri issued on July 25 a regulation regarding the lower export duties that became effective seven days later. Under the new regulation, sales of mineral concentrate overseas are subject to export duties of a maximum 7.5 percent.

The regulation is applicable only to mining companies building mineral refining facilities in the country either on their own or under joint projects. Meanwhile, concentrate exporters not committed to building the facilities will still have to pay a progressive export tax ranging from 20 to 60 percent.

Despite the lower tax, the smelter developers will be subject to close monitoring by the Energy and Mineral Resources Ministry. Director general for mineral and coal at the ministry, R. Syukhar said his office would evaluate the progress of smelter development every six months.

'€œEvery six months, development must reach at least 60 percent of its target. If the target is missed, we will halt the companies'€™ exports,'€ Syukhar said.

The progress of smelter development is calculated based on the amount of money companies spend during certain stages, according to Syukhar.

Companies are also required to deposit a surety bond amounting to 5 percent of total spending for the projects. The surety bond payment is included in the calculation of smelter development progress.

The country expects to see the development of a number of smelters and refineries following the implementation of the 2009 Mining Law. Under the law, all minerals must be processed before being exported.

Implemented on Jan. 12, the policy that has created jitters among mineral diggers.

Due to the ban, the country'€™s mineral exports were 27 percent lower during the January to June period compared to the same period last year, according to figures from the statistics bureau. Mineral exports were valued at US$11.38 billion in the first half of the year versus $15.6 billion year-on-year.

Despite the strict ban on ore exports, the government is allowing semi-finished products, such as concentrates, to be exported until 2017 as long as companies show commitment to building smelters and pay the progressive export duties.

Mining companies have criticized the export duties. However, the lower tax has been accepted by PT Freeport Indonesia, a subsidiary of US-based Freeport McMoRan Inc.

Freeport Indonesia president director Rozik Boedioro Soetjipto said his company expected to resume export by Wednesday Aug. 6.

'€œThis maiden shipment will be to China for 10,000 DMT [dry metric tons], hopefully on Aug. 6 if we can finish all matters with the tax and excise,'€ Rozik said.

After a six month standstill, Freeport reached a deal with the government last week in which it agreed to pay the duties and build a smelter in the country. Freeport will be allowed to export 756,000 tons of copper concentrate by year-end.

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