Feb 22 – One of the problems for embattled resource companies is that the legislative environment in which they exist is often no longer reflective of the reality of the current, or likely future, markets in which they compete.
In other words, government policymakers quite often have laws, taxes and regulations designed for a bull market when a bear market is in place, and vice versa.
While it’s easy to have a shot at politicians, in their defence, it can be the case that by the time they manage to go through the protracted processes of introducing new rules and regulations, the situation they envisaged has been substantially altered.
Indonesia’s minerals sector is a good recent example, but not the only one, of how even policies that were relatively well designed and had reasonable aims can backfire because the market has changed.
At the start of 2014 Indonesia implemented rules banning the export of unprocessed metal ores in a bid to encourage the construction of smelters.
At the time Indonesia was the world’s top exporter of nickel ore and China’s biggest supplier of bauxite, the mineral that is the source of aluminium.
The new rules effectively stopped the export of those two minerals, although copper ore exports continued on an exemption granted on the basis that smelters would be built.
For the rest of this column, click here: http://uk.reuters.com/article/column-russell-indonesia-minerals-idUKL3N1611GI