Indonesia’s mining industry will collapse if the government moves ahead with a planned ban on the export of raw minerals, the country’s chamber of commerce has warned.
The southeast Asian nation, which is facing strong economic headwinds, is the biggest exporter of coal for power stations, nickel ore and tin, and a leading shipper of bauxite and copper. But on January 1 it is set to implement a law prohibiting the export of unprocessed metals as part of a drive to refine the ores and potentially generate higher margins.
Mining companies and independent economists are critical, arguing that at current depressed global prices for both raw and refined minerals, it is not a financially viable option in infrastructure- and energy-poor Indonesia, especially with no commitment to invest from the government.
The US Agency for International Development has argued that the push towards refining coupled with the ban would create few jobs and could lead to $6.3bn of lost economic benefits annually by prioritising spending on refineries with “poor commercial prospects” over investment in the country’s decrepit education, health and infrastructure systems. But the government has insisted it will go ahead.
“If the government implements a full ban, the whole industry will collapse,” given that there are only a handful of smelters in the country, warned Garibaldi Thohir, a vice-chairman of Indonesia’s chamber of commerce (Kadin) and chief executive of Adaro, the country’s second-biggest producer of coal for power stations.
He was speaking after a meeting in Jakarta on Tuesday between Indonesian officials, the chamber of commerce and representatives from international mining companies including Chalco, Glencore, Norilsk Nickel, Rusal and Vale.
With just over two months to go before the ban comes in, the government and many mining companies are engaged in a game of brinkmanship. Most investors are betting that the government will not risk losing billions of dollars in tax revenues and royalties by halting exports.
“Both sides are waiting to see who blinks first,” said Maxim Sokov, deputy chief executive of Russian billionaire Oleg Deripaska’s En+ Group, which controls Rusal, the world’s biggest aluminium producer, but has yet to invest in Indonesia.
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