Feb 4 (Reuters) – Indonesia’s mines minister, Jero Wacik, has been on an unusual mission in recent months: finding a way out of implementing his own government’s policy.
A smiling, well-rehearsed politician, Wacik was earlier tourism minister, pushing the charms of his native Bali island and other Indonesian attractions. In 2011, he was given the role of supervising the country’s $6 billion-a-year mining sector despite having no experience of the industry.
At the time, part of his job was to enforce a law President Susilo Bambang Yudhoyono had pushed through, a bold ultimatum to the mining industry: process your ores in Indonesia by 2014 or stop exporting.
But around the middle of last year, the government came to the conclusion that a ban on the export of ore would hurt the economy and lead to job losses that would be damaging in the 2014 election year. Wacik tried postponing the law, but parliament, already tired of the administration’s ambiguities, wouldn’t play ball. He then tried to water it down, but was not successful.
Now the ultimatum has come into force, a self-inflicted crisis in a sector that accounts for 12 percent of the GDP of Southeast Asia’s biggest economy.
“If this law was implemented completely, stopping everything, there would have been mass layoffs,” Wacik told reporters. “But if there was to be zero layoffs, the law could not be implemented.”
“This was impossible. But the government had to find a way.”
Indonesia is the world’s biggest exporter of nickel ore, refined tin and thermal coal and is an important producer of copper and gold.
U.S. mining giants Freeport-McMoRan Copper & Gold Inc and Newmont Mining Corp are among the hundreds of miners that have suspended ore and concentrates shipments.
When the law was enacted in 2009, it went down well at home, appealing to nationalist political sentiment at a time when commodity prices were still booming. It gave miners five years to stop exporting unprocessed ore and start investing in the refineries and smelters they would need to stay in business.
But the policy looked less promising as commodity prices came off the boil because of the slowdown in China. It also became clear that very few miners were able to comply or ever took the law seriously – and the result is that Indonesia’s biggest export industry has come to a shuddering halt.
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