Echoing global unease about resource nationalism in one of the world’s most mineral-rich nations, Indonesia’s mining association has cast doubt on one of its most radical export regulations.
Indonesian Mining Association Executive Director Syahrir A.B. has voiced doubts that Jakarta’s 2014 requirement for mining companies to process their raw materials will meet its own deadline.
Inadequate basic infrastructure and materials for processing facilities have made the tight deadline for the controversial law unrealistic, Syahrir told The Jakarta Post. Despite an economic boom from mineral exports to China and elsewhere, Indonesia is becoming an increasingly difficult place for foreign investors.
Syahrir, for one thing, questioned the readiness of state utility firm Perusahaan Listrik Negara to provide adequate electricity to proposed smelters. Some miners, he added, are instead building their own coal-fired power plants, rather than to wait for PLN supplies. Costly investments have ensued. State-owned miner Aneka Tambang, for instance, is developing a $1.6 billion nickel smelting facility in North Maluku—$600 million of which will go toward a power plant.
“If a smelting project is economically feasible based on a study, but there is no electricity available, can we do it?” asked Syahrir. A lack of adequate domestic ports, he added, means raw mineral transportation from mining to smelting facilities will be difficult and expensive.
Ongoing investment plans and the abundance of resources, however, mean raw minerals like bauxite, nickel ore and iron sands may be deadline-ready.
Metals like zinc and copper, meanwhile, may also meet 2017 requirements, according to Syarir; mining association representatives, he added, will meet with government officials before government’s timetable runs out in the next nine months.
The 2009 law requires that domestic processing include miners under previous Contract of Work (CoW) regimes must process their minerals domestically by 2014. The association represents 50 companies, most operating under CoW regimes Jakarta intends to change into “mining business permit” schemes. In 2012, Finance Ministry officials imposed a 20% tax on 65 minerals to buttress the domestic smelting industry.