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Opinion: Finding ways to cure the Indonesia natural resource curse – Edi Suhardi (Malaysian Insider – November 23, 2013)

http://www.themalaysianinsider.com/

Indonesia’s vast natural resource wealth has been the backbone of its economic growth for years. It started with the oil bonanza in 1970-1980s, followed by timber and forest extraction in the 1980-1990s, mining spree in the 2000s and palm oil windfall in the last 10 years.

Such diversity of valuable resources if managed under prudent governance would indeed be a viable driver to propel the country to prosperity. However, as in any third world country, Indonesia is also plagued with the “resource curse” or the paradox of plenty that the resource-rich countries have less economic growth compared with countries which have less natural resources.

The country has failed to capitalise on the abundance of resource wealth to spur sustained economic growth due to poor governance and mismanagement. As a result, the contribution of natural resource development to the country’s economic growth has been disproportionately minimal.

A number of studies show that Indonesia is one of the most resourceful countries in term of mining potential and cultivation land. However, its resource mismanagement and poor governance regime have failed to make the country attractive for investment and instead choked the otherwise effective engine for the economic growth.

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Japan’s nickel smelters to be hit hard by Indonesia export ban (Reuters U.S. – November 21, 2013)

 http://www.reuters.com/

TOKYO – Nov 21 (Reuters) – Japanese nickel smelters will be severely impacted by Indonesian bans on exports of unprocessed mineral ores due in January as Japan imports 43 percent of ferro-nickel materials from Indonesia, the head of mining industry body said on Thursday.

With a current account deficit at a near-record high, the Indonesian government is scrambling to ease nationalistic resource rules that were passed more than a year ago, including a ban on mineral ore exports from January 2014.

Southeast Asia’s largest economy is the world’s top exporter of nickel ore, thermal coal and refined tin, and home to the world second-biggest copper mine.

“So far, Indonesia has not come up with any specific actions to ease its new mining law. We are worried about it,” Hiroshi Yao, Chairman of Japan Mining Industry Association (JMIA), told a news conference. “If Indonesia’s export restrictions of unprocessed mineral ore go into effect next year, an impact on Japanese nickel smelters will be big,” he said.

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China’s $100,000 aid ‘measly,’ judged by its Philippine mining take – by Jarius Bondoc (The Philippine Star – November 20, 2013)

http://www.philstar.com/

Talk about fair-weather friend. “As hundreds of thousands of Filipinos struggled to find food, water, shelter and the bodies of loved ones in the wake of Typhoon Haiyan, China quickly dipped into its world-leading $3.7 trillion of currency reserves and came up with … all of $100,000.” That Bloomberg news lead captured the general recoil at how the world’s second-largest economy treats an Asian neighbor. Other headlines stated “cheapskate,” “paltry,” “miserly” and, in one mainland-Chinese daily, “ungenerous.”

Beijing could not have missed the effects of history’s strongest ever typhoon to make landfall. Global networks had tracked Haiyan’s ruin of the Philippines, where three-fourths of families have Chinese blood. Undeterred by Philippine mountain ranges, the storm crossed over the sea to hit China. One drowned and seven went missing in Hainan, and many areas were flooded in Guangxi provinces. Beijing came upon a chance to show amity and soft power. Yet it chose to be petty, due to sea disputes with Manila. With trade overshooting $36 billion in 2012, China often calls the Philippines “partner.”

In the first hours of Filipinos’ distress, the world sprang to the rescue. The US rushed in an aircraft carrier group laden with emergency crews and $20-million relief. Britain, Japan, and Korea sent trucks, food, and cash of, in turn, $16 million, $10 million, and $5 million. Donations poured in from Australia, $28 million; European Union, $17 million; Vatican, $4 million; Indonesia, $2 million; and Taiwan, which China labels its province, $200,000.

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COLUMN-China’s single-handed gold support act may not last – by Clyde Russell (Reuters U.S. – November 19, 2013)

http://www.reuters.com/

Clyde Russell is a Reuters market analyst. The views expressed are his own.

LAUNCESTON, Australia, Nov 19 (Reuters) – The most frightening concept for a gold miner or trader currently would be to contemplate a world without China.

Global gold demand fell to the lowest in four years in the third quarter, according to the World Gold Council, and the 21 percent drop from the same quarter in 2012 would have been far worse if it wasn’t for China. China is set to overtake India as the top gold consumer this year, and is already ahead on a rolling four-quarter basis.

Demand in China rose to 209.6 tonnes in the third quarter, up from 177 tonnes in the same quarter last year, largely driven by a 29 percent jump in jewellery demand.

In contrast, India’s consumption slumped 32 percent to 148.2 tonnes in the third quarter from the same period in 2012, as the government’s efforts to restrict imports became more effective.

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Indonesia Weighs Ore Ban as Citigroup Increases Nickel Forecast – by Yoga Rusmana & Eko Listiyorini (Bloomberg News – November 19, 2013)

http://www.bloomberg.com/

Indonesia will press on with a ban on raw-mineral exports next year, while signaling the curbs may be amended in practice, according to two officials who addressed a conference in the largest mined nickel producer. Prices rose.

“If we look at the existing law, yes by 2014 we are sure to implement this, but we also consider the effect and discuss it with parliament, how to deal with this,” said Bambang Adi, deputy to the coordinating minister for economic affairs.

Dede Suhendra, director of mining at the Energy and Mineral Resources Ministry, told the gathering: “We have to appreciate companies that are serious about building smelters.”

Indonesia is seeking to boost the value of commodity sales, and while a blanket ban is mandated by the 2009 Mining Law, the government may exempt companies that are operating or planning to build processing plants. Nickel is this year’s worst base-metal performer on the London Metal Exchange amid record stockpiles. Citigroup Inc. raised its nickel forecast yesterday, saying the proposed curbs are being mispriced by the market.

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Samsung seeks rare earth alternative, in list of future tech investments – by Ryan Huang (ZDnet.com – November 18, 2013)

http://www.zdnet.com/

Summary: The conglomerate unveils the first 27 projects under its US$1.4 billion 10-year research drive, which includes finding a substitute for rare earth material, neuromorphic processors and hybrid holographic 3D displays.

South Korean conglomerate Samsung will invest in the search for alternatives to rare earth materials, as part of its major research drive for new technologies.

Last week, it unveiled the first 27 projects under its Future Technology Cultivation Project, which will be backed with funding of 1.5 trillion (US$1.41 billion) of funding over the next 10 years, according to Joongang Daily. This is part of a wider push by South Korea announced in May to develop new growth engines for a creative economy.

There will be 7 areas of research for new materials This includes a project to develop optoelectronics materials that can substitute the use of rare earth materials, which is essential for making TVs, smartphones and other electronics. The supply of the material is currently dominated by China, and is subject to its export quotas.

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COLUMN-China reforms to extend commodity boom, boost competition – by Clyde Russell (Reuters India – November 18, 2013)

http://in.reuters.com/

(The opinions expressed here are those of the author, a columnist for Reuters.)

Nov 18 (Reuters) – China’s planned economic and social reforms should have the effect of extending the decade-long boom in demand for commodities, while at the same time making that demand more price sensitive.

While the 60-point reform plan still needs to be fleshed out, initial indications are that the appetite for resources by the world’s biggest commodity buyer is far from finished. From a longer-term perspective the most important parts of the plan include lifting the restrictions on rural migration to smaller cities and easing them for medium-sized cities.

This alone should ensure that China’s demand for iron ore, copper and other base metals remains robust as housing and infrastructure is created across the country to cater for rising urbanisation.

Much of this activity will also fly beneath the radar, as it will take place away from the mega-cities such as Beijing and Shanghai, but this doesn’t mean the commodity demand will be any less real.

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3 Major Reasons Why China’s Commodities Super-Cycle Is Toast – by Stuart Burns (Metal Miner.com – November 14, 2013)

http://agmetalminer.com/

Some would argue the super-cycle is already over and in terms of double-digit growth, it almost certainly is.

But even Chinese growth of 7% today is sucking up commodities at a faster rate than 10-12% was in 2007, simply because it is 7% of a much bigger GDP number.

Miners have taken heart from recent rises in the rate of GDP growth to sustain their belief the economy has bottomed and will continue to rise into next year. And indeed it may: as we wrote recently, the Chinese economy is benefitting from a mini-stimulus this summer that supported investment in infrastructure and seems to have boosted the fortunes of the crucial construction industry.
But – and you know there is nearly always a but with us – some are not so sanguine about China’s medium- to longer-term growth prospects.

The Chinese communist party is meeting this month for the third plenum of the party’s 18th Central Committee to announce policy initiatives aimed at steering the economy through the major challenges it will face over the next 10 years and beyond.

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Implications of Indonesia mining law clear but consequences are not – by Peter Alford (The Australian – November 13, 2013)

http://www.theaustralian.com.au/business

IT took 4 1/2 years for regulations to be published giving teeth to the foreign investment provisions of Indonesia’s mining law – but what teeth!

Ministry of Energy and Mineral Resources Regulation 27/2013, when it appeared two months ago, crystallised almost everything that worried foreigners about the tone and intent of the mining law passed in 2009.

Although one key intent was to re-create a reliable framework for foreign investment – which, outside coal, remains critical to developing Indonesia’s mineral resources – the law is characterised by a general suspicion of mining activity, a particular impatience with foreign ownership, unsparing regulation and government rent-seeking.

Under MEMR 27/2013 the divestment schedule for mine production licences (production IUPs) is as severe as foreshadowed – from maximum 80 per cent foreign ownership in year six to 49 per cent in year 10 – with national, provincial and local governments having first rights of acquisition.

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Mongolia gears up for the fight of its mining life – by Frik Els (Mining.com – November 11, 2013)

http://www.mining.com/

On November 3 Mongolia’s new, friendlier foreign investment law came into force. Probably not a day too soon. The Asian nation of three million citizens, dependent on the mining sector to fuel growth, is desperate to turn around the slump in its economy and the steep fall-off in foreign investment.

Foreign direct investment in the country dropped 49% to September 2013 compared to last year which already marked a 17% year-on-year decline, the value of the currency, the tugrik, is down 20% this year, inflation has returned to double digits and the Mongolian central bank’s off-balance sheet spending is burning through foreign reserves as foreign debts balloon to 55% of GDP.

The path to prosperity for Mongolia, ranked 155th in the world according to GDP per capita, has always been a rocky one. The country has been bailed out by the IMF no fewer than five times and it suffers a domestic bank failure on average every 18 months.

While the changes to the 2012 Strategic Entities Foreign Investment Law (SEFIL) including greater certainty surrounding mining taxes and royalties and the scrapping of the distinction between private foreign and domestic investors are being universally welcomed as a positive step, a number of issues remain unresolved.

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China Tries to Clean Up Toxic Legacy of Its Rare Earth Riches – by Kieth Bradsher (New York Times – October 22, 2013)

http://www.nytimes.com/

TIANJIN, China — In northern China, near the Mongolian border, radioactively contaminated leaks from two decades of rare earth refining have been slowly trickling underground toward the Yellow River, a crucial water source for 150 million people.

In Jiangxi province in south-central China, the national government has seized control of rare earth mining districts from provincial officials after finding widespread illegal strip-mining of rare earth metals.

And in Guangdong province in southeastern China, regulators are struggling to repair rice fields and streams destroyed by powerful acids and other runoff from open-pit rare earth mines that are often run by violent organized crime syndicates.

Communities scattered across China face heavy environmental damage that accumulated through two decades of nearly unregulated rare earth mining and refining. While the Chinese government has begun spending billions of dollars to clean up the damage, the environmental impact is becoming an international trade issue, with a World Trade Organization panel in Geneva expected to issue a crucial draft report on Wednesday.

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Better Than Ping Pong: Panda Diplomacy Builds [Resource] Relationships – by Cassie Ryan (Epoch Times Oct. 31 – Nov. 6, 2013)

http://www.theepochtimes.com/

Cute bears involved in uranium sales and free-trade agreements

A new study from Oxford University holds that the 50 something giant pandas on loan around the world are aimed at building ‘guanxi’ or deep, long-lasting relationships in exchange for “trades and foreign-investment deals.”

Australia, France, and most recently Canada received panda loans when uranium deals were struck with the Chinese regime. Panda transactions also took place with Asian nations like Malaysia and Thailand as part of free-trade agreements.

Published in the journal Environmental Practice, the study points to an emergent third phase in the Chinese Communist Party’s strategy of gifting and loaning pandas, whereby countries with important resources and technology can lease the black and white bears for a hefty fee. This new pattern appears to be related to the 2008 earthquake that struck Sichuan Province and damaged the Wolong Breeding Center, meaning that the 60 pandas there needed rehousing.

In phase one, during Mao Zedong’s era in the 1960s and 1970s, pandas were gifted to build strategic friendships. During Deng Xiaoping’s regime, starting in 1978, phase two involved loaning the bears in a capitalist lease model based on financial transactions.

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China National Gold Said to Weigh Investments in Ivanhoe Assets – by Zijing Wu (Bloomberg News – November 6, 2013)

http://www.bloomberg.com/

China National Gold Group Corp. is considering investing in mines owned by Robert Friedland’s Ivanhoe Mines Ltd. (IVN), including the Platreef project in South Africa, a person with knowledge of the situation said.

China’s largest gold producer values the Platreef platinum and copper mine at about $1 billion, said the person, who asked not to be identified as the information is private.

State-owned China National Gold has also looked at other Ivanhoe projects located in the Democratic Republic of Congo and Gabon, though prefers more developed countries like South Africa, the person said. No terms for a purchase of the Platreef mine have been finalized, and China National Gold could instead consider buying a stake in Ivanhoe itself, the person said.

China National Gold, which ended talks in January to acquire Barrick Gold Corp. (ABX)’s African unit for about $2.3 billion, is also exploring opportunities to buy gold and copper assets in Canada and Australia, the person said.

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Foreign investors cry foul as Mongolia revokes mine licenses (Reuters India – November 7, 2013)

http://in.reuters.com/

ULAN BATOR – Nov 7 (Reuters) – Mongolia has annulled more than 100 exploration licenses as part of an investigation into mining sector corruption, raising further concerns among foreign investors about the risks of doing business in there.

Mongolia-focused Kincora Copper said on Thursday that it had received a letter from the Mineral Resources Authority saying that two of its licenses had been revoked following a criminal investigation into former government officials accused of illegally issuing a total of 106 exploration licenses between 2008 and 2009. All of the 106 licenses have been cancelled.

Kincora Copper said the move, which will affect the licenses of an estimated 11 foreign and 67 domestic firms hoping to explore for a range of minerals, highlighted the uncertainty facing a growing legion of foreign investors.

“Security of tenure and a transparent legal system are key cornerstones for both domestic and foreign private sector investment,” said Sam Spring, president and chief executive of Kincora Copper, in an email.

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China to further open its mining industry – by Du Juan (Xinhuanet – November 4, 2013)

http://www.xinhuanet.com/english/

BEIJING, Nov. 4 (Xinhuanet) — China will further open its mining sector to overseas investors and encourage them to participate in resource exploration and utilization and the development of shale gas, said a senior official on Sunday.

“The Chinese government has attached great importance to the mining industry’s contribution to the country’s economic growth,” said Jiang Daming, minister for land and resources, at the 2013 China Mining Expo in Tianjin.

He said the establishment of the China (Shanghai) Pilot Free Trade Zone signifies that China has stepped into a new stage of openness.

The government will simplify the approval process and management of mining resources, with the aim of improving the convenience and efficiency of investment in the sector, according to Jiang.

At present, social capital accounts for up to 70 percent of mining exploration investments in China, as investors have grown increasingly diversified.

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