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Jakarta Post

Govt may lift mineral export ban

  • Rendi A. Witular, Viriya Paramita and Fedina Sundaryani

    The Jakarta Post

Jakarta   /   Mon, December 19, 2016   /  07:29 am
Govt may lift mineral export ban Dig deeper – A heavy vehicle passes an open pit mining site at gold and copper miner PT Freeport Indonesia’s open pit facility in Grasberg, Tembagapura, Mimika, Papua. (JP/Nethy Dharma Somba)

The government is drafting a regulation offering further relief in the export of raw and partly processed mineral products — a policy that, if passed, would again contravene the 2009 Mining Law that requires a total ban on such exports.

Easing the policy will only benefit a few politically wired mining companies at the expense of others that have poured billions of US dollars into the construction of smelting plants to process the raw products for export.

A draft regulation prepared by the Energy and Mineral Resources Ministry, a copy of which was recently obtained by The Jakarta Post, will not only extend the current export relaxation on copper concentrate but also expand the product list.

Partly processed or raw nickel, bauxite, anode slime and copper telluride will be given the go-ahead for overseas shipment, while unprocessed gold, silver, tin and chromium will remain on the export ban list.

For companies to get a five-year export license, the draft requires miners to pay an export tax and construct a smelter. The government will revoke the license if the miners fail to show progress in smelter construction.

“The [relaxation] plan is still under discussion,” Deputy Energy and Mineral Resources Minister Arcandra Tahar told the Post recently.

“It is not yet final, but we expect to have it issued, hopefully, next week [this week].”

Energy and Mineral Resources Minister Ignasius Jonan refused to go into detail on the draft, saying only that the ministry was still discussing a new policy.

The government is rushing to decide whether to maintain the current relaxation or to fully enforce the ban, as mandated by the Mining Law before the Jan. 11, 2017 deadline.

The law stipulates that mineral ore miners must complete their smelters by 2014, when the export ban should have been fully put in place. The smelters are expected to bring in added value to the end products, as opposed to exporting ore in its raw form.

However, because none of the proposed smelters had been completed, the deadline was extended to 2017 by then-president Susilo Bambang Yudhoyono when he issued Government Regulation No. 1/2014 as an amendment to Government Regulation No. 23/2010 on the management of mineral and coal businesses.

If President Joko “Jokowi” Widodo maintains the relaxation, he will draw criticism similar to that raised in 2014 when Yudhoyono was accused of violating the law because a government regulation cannot overrule a law.

The alleged violation at the time did not spiral into further controversy, as the nation was occupied with legislative and presidential elections, and Yudhoyono handed over his presidency to Jokowi on Oct. 20, 2014.

“The previous administration clearly violated the law. We don’t expect the current one to do the same,” said House of Representatives legislator Satya Yudha of the Golkar Party, who is a member of Commission VII overseeing energy and mining.

“We warned the government in a recent hearing against continuing with the export relaxation. If they want to extend it, the policy should be in the form of a government regulation in lieu of law (Perppu), not through a government regulation,” he said.

Maintaining the relaxation has particularly benefitted gold and copper miner PT Freeport Indonesia, a local unit of US mining giant Freeport McMoRan Inc., and copper producer PT Newmont Nusa Tenggara, which was recently taken over by local energy firm PT Medco Energi Internasional from US-based Newmont Mining Corp.

They have been allowed to export their copper concentrates as they have pledged to construct smelting plants and agreed to pay export taxes with rates linked to the progress of construction, which has been stalled.

State-run miner PT Aneka Tambang (Antam) will also profit from the planned relaxation, as it has lobbied the government to lift the ban on nickel ore exports because some of its low-grade ore cannot be economically processed by local smelting plants.

“Issuing a government regulation to settle the problem is not a solution, as it will clearly violate the law,” said Bisman Bakhtiar, a mining law expert. “Only three available options comply with the law, revise the law, or issue a Perppu.”

However, even if the government manages to come up with a sound legal avenue to allow the relaxation, smelter businesses, particularly nickel, will be at risk due to worries of supply shortage, as miners will opt to export raw products.

Shipments of nickel and bauxite were banned in 2014 to encourage the development of domestic processing and to prevent mining wealth from being exploited by overseas businesses.

According to the Processing and Smelting Companies Association (AP3I), 32 new smelters — 24 of which are nickel smelters — have been built in the past four years with total investment value of more than US$12 billion, mostly from China.

“We are still evaluating the impact be [on the smelter businesses] if we allow or limit [the exports],” the Energy and Mineral Resources Ministry’s director general for Minerals and Coal Bambang Gatot
Ariyono, said.


Other key issues in draft regulation

• Exports of partly processed minerals are permitted for a maximum five years for companies with a mining license (IUP) or special mining license (IUPK or former holders of contract of work).

• A company eligible for exports is required to construct a smelting plant of its own or by cooperating with others, and pay an export tax with rates linked to the progress of construction.

• An IUP/IUPK holder that cannot economically construct a smelter plant can cooperate with state companies or other parties that have a smelting plant to export products.

• Energy and Mineral Resources Ministry to evaluate progress in smelting plant construction every six months.

• New list for exports include partly processed or raw nickel, bauxite, anode slime and copper telluride.

• Overseas shipment is prohibited for unprocessed gold, silver, tin and chromium.

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