The Indonesian government’s push to increase revenue from the troubled mining industry by 50 per cent this year could force it to rethink bad policies, according to a lawyer from an Indonesian firm specialising in mining law.
The Indonesian mining industry is facing tough times due to the plummeting prices of some of its key exports including coal, tin and nickel and protectionist policies that ban the export of unprocessed minerals.
Coal production dropped by 21 per cent in the first three months of 2015 compared to the same period last year and mineral producers are laying off workers, mothballing high-cost mines and postponing capital expenditure.
Australian miners with exposure to Indonesia include BHP Billiton, Rio Tinto, Newcrest Mining and Cokal Ltd.
“The current difficult economic times for the mining industry and the government are going to force a change of policy,” Bill Sullivan, from Indonesian law firm Christian Teo Purwono & Partners, told a forum in Jakarta.
Mr Sullivan pointed to comments made by Said Didu, the head of the government’s advisory team on smelter development, in The Jakarta Post on March 24. As of April, just 27 smelters were in production, with 96 still at the feasibility stage.
Mr Said had suggested temporarily lifting the ban on the export of unprocessed bauxite because many smelters had stalled due to financial problems.
These comments could be seen as an early step in developing a “cover story” for a change in mining industry policies.
The Indonesian government has committed to spend $US490 billion on infrastructure over the next five years. This spending is at the heart of its pledge to achieve annual growth of 7 per cent.
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