Indonesia
is one of the world's largest exporters of raw materials. But now the
government wants to promote domestic processing by banning mineral ore exports.
The ban, however, threatens the livelihoods of many miners.
It is
arguably one of the most far-reaching economic policy decisions the Indonesian
government has taken since President Susilo Bambang Yudhoyono came to power
some ten years ago. The new law, which came into effect on January 12,
stipulates that only "processed" minerals may be shipped to other
countries - although some exceptions were made. The government argues the
long-planned ban on mineral ore exports is designed to strengthen the
state-owned manufacturing industry.
Controversial
legislation
According
to Sutan Bhatoegana, chairman of the Indonesian Parliament's House Committee
for Mining Affairs, the Southeast Asian nation will "benefit greatly"
from this law because "we will no longer sell raw materials for little
money."
 |
The
government announced it would allow
certain copper concentrates to be exported
until 2017
|
The new law
is highly controversial. International mining companies as well as some
Indonesian labor market experts were up in arms against the ban, which was in
the making since 2009. Only minutes before the legislation was passed, the
government finally relented and gave in to some of the major demands of the
mining companies, resulting in materials such as copper, iron ore, lead and
zinc being excluded from the export ban.
This was
mainly a concession to two large American mining companies that together
account for about 97 percent of the nation's total copper mining output. The
Ministry of Industry announced that it would allow certain copper concentrates
to be exported until 2017. However, "we will impose a progressive export
tax: the lower the degree of processing of copper ore, the higher the tax,"
said Industry Minister MS Hidayat.
Dismissals
or new jobs?
It remains
unclear whether the country will benefit from an export ban in the long run.
Producers of nickel ore and bauxite are particularly hard hit by the decision.
Although the new law is aimed at creating jobs, major American mining companies
have so far failed to make the necessary investments.
They have
had to scale down their operations and now they are threatening to lay off
thousands of workers. Sutan Bhaetogana also admits that this "will have
negative consequences in the short term," and result in a temporary drop
in government revenues. But the member of parliament is nonetheless convinced
that this will last only for three to four months and that the nation will
recover.
However,
small, local traders have a different view. Their livelihoods are threatened as
they cannot afford to build and run their own processing plants. According to
the Indonesian Mineral Entrepreneurs Association, some 30,000 mine workers have
already lost their jobs, prompting people to take to the streets of Jakarta in
protest. Indonesia will hold both parliamentary and presidential elections this
year. Analysts expect the dispute surrounding the mining industry to become one
of the top campaign issues.
Rising prices
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| Indonesia is one of the world's largest exporters of raw materials |
Rising prices
The first
effects of the export ban can already been seen on the world's commodity
exchanges, with the price of nickel rising by more than six percent within a
span of four days. Indonesia is the world's largest exporter of nickel ore, a
material used in the production of stainless steel. Thus far, about 90 percent
of exports are sent to China for processing. Nickel ore is an important raw
material in China, where it is used to manufacture small electrical appliances.
It is also used in the automotive industry and the construction sector.
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