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Indonesia: Revision of Mining Regulation

(Jan. 24, 2017) On January 11, 2017, Indonesia’s government issued a fourth revision to a government regulation of 2010 on the management of mineral and coal businesses. (Viriya P. Singgih, Indonesia Pledges Leeway for Obedient Miners, JAKARTA POST (Jan. 16, 2017); Implementation of Mineral and Coal Mining Business Activities, Government Regulation No. 23/2010 (the Regulation) (Feb. 1, 2010, as amended Feb. 21, 2012), GLOBAL BUSINESS GUIDE.) The Regulation implements the Law on Mineral and Coal Mining. (Law of the Republic of Indonesia Number 4 of 2008 [sic] Regarding Mineral and Coal Mining (enacted Jan. 12, 2009) (the Law) PWC.COM (unofficial translation).)

The purpose of the revision was to renew a provision that had been due to expire to allow local miners to export their products if they show a commitment to build their own smelters to process ore and send at least 30% of the mined ore to domestic smelting enterprises. The revision emphasizes that the ores that may be exported include washed bauxite, copper concentrates, and low-grade nickel ore.  (Singgih, supra.) According to Energy and Mineral Resources Minister Ignasius Jonan, the government would “monitor [the progress] every six months. If they fail to fulfill the commitment to build the smelters, there will be no export licenses for nickel and bauxite miners.”  (Id.)

Jonan added that the revised regulation had been misunderstood as forcing local miners to each have at least 30% of their nickel or bauxite ore sent to local smelters, in order to be permitted to export the rest. In fact, the requirement is calculated based on the capacity of Indonesian smelters. As an example, he said that at present the amount of nickel that domestic smelters can handle in a year is 16 million tons; therefore nickel mines must sell about 4.8 million tons to those local smelters during the year, to meet the 30% requirement.  (Id.)

Background

The 2009 Law had described minerals as non-renewable natural resources, to be used for the benefit of the nation, and it stated that the national interest could be served by control of exports. (The Law, Preamble & arts. 2 & 5; Constance Johnson, Indonesia: Export Ban on Unprocessed Minerals Comes into Effect, GLOBAL LEGAL MONITOR (Jan. 23, 2014).) In order to stimulate domestic industry, regulations imposed a ban on export of such ores as nickel, bauxite, chromium, gold, silver, and tin, due to come into force in 2014. (Johnson, supra; Singgih, supra.)

In 2014, the Minister of Industry stated that concentrate exports would be permitted until 2017, and at the same time the Ministry of Mines and Energy proposed a three-year exemption from the export ban to allow exports from mining companies committed to building smelters to process ore in Indonesia. These changes were included in a January 11, 2014, revision of the 2010 Regulation. (Johnson, supra; Sacha Winzenried & Fandy Adhitya, Export Ban on Unprocessed Minerals Effective 12 January 2014 – Three-Year Reprieve for Some, but Uncertainty Remains, PWC.COM.)

The limitation on exports has been seen as a boon to foreign competitors, who have been able to increase their share of the international market. The Philippines in particular became the largest supplier of nickel in the world. With the new, 2017 revision, the exemptions allowing domestic companies to export some of their products are extended. (Singgih, supra.)