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Indonesia: Export Ban on Unprocessed Minerals Comes into Effect

(Jan. 23, 2014) On January 12, 2014, an Indonesian presidential decree prohibiting the export of unprocessed minerals came into force. It had been signed by President Susilo Bambang Yudhoyono on January 11 at a Cabinet meeting. (Indonesia’s Law on Ore Exports Takes Effect,THE <!–?JAKARTA POST (Jan. 12, 2014); Indonesia Implements Ban on Unprocessed Ore Export, THE JAKARTA POST (Jan. 12, 2014).)

The purpose of the decree is to protect local mining businesses and support jobs in mineral processing industries in the country. The Ministry of Finance has now issued instructions to customs officials throughout Indonesia to supervise exports at seaports so that the ban on ore exports can be enforced. (Indonesia Implements Ban on Unprocessed Ore Export, supra.) According to Coordinating Economic Minister Hatta Rajasa, implementing regulations will be issued by the government ministries. (Id.)

The export ban was issued based on the 2009 Law on Mineral and Coal Mining. This law describes minerals and coals as national non-renewable resources, and article 2 of the Law specifies that mining should be managed to benefit national interests and maintain sustainability, among other requirements. (Id.; Law No. 4, 2009, Food and Agricultural Organization of the United Nations website.)

While the ban prohibits the export of raw minerals, processed or refined products may be exported, provided that they meet purity standards. (Yoga Rusmana & Neil Chatterjee, Indonesia Bans Ore Exports in Push for Metal Smelting, BLOOMBERG NEWS (Jan. 13, 2014).) In addition, to ease the adverse impact of the law on minerals businesses, the Minister of Industry, M.S. Hidayat, stated that exports of concentrates will be permitted until 2017, provided that they meet purification levels; such exports will be subject to a tax, however. Furthermore, the Ministry of Mines and Energy has proposed a three-year exemption from the ban for companies that commit to the future building of smelters to process ore in Indonesia. (Indonesia Implements Ban on Unprocessed Ore Export, supra.)

Several mining companies have predicted that they will need to lay off thousands of workers, unless exemptions such as the proposed deferral of the ban for three years for some companies are permitted. Daisy Primayanti, speaking for the U.S.-owned mining company PT Freeport Indonesia, which operates in Papua Province, stated before the Law became effective that “[i]f the ban on export is imposed on Jan. 12, Freeport will only be able to process 40 percent of its production. … One of the impacts is a reduction in the number of employees.” (Indonesia’s Law on Ore Exports Takes Effect, supra.)

While not promising any exemptions, Rajasa did state that the possibility of job losses was taken into consideration as a matter of concern when the ban was adopted. Another negative impact that was foreseen is an estimated decline in government revenues of about the equivalent of US$833 million this year because of the reduction in export taxes and royalties that will result from the ban. (Id.)