Indonesia’s metal ore and concentrate exports are at a standstill after an ore shipment ban and export tax were imposed on January 12 by the government. In the making since 2009, the vague regulations have prompted thousands of layoffs by mandating companies process ore domestically before shipment overseas.
Jakarta implemented the controversial ban despite last-minute changes to ease impacts on giants Freeport-McMoRan Copper & Gold and Newmont Mining Corp.— two of the country’s largest taxpayers. Negotiations remain under way between both companies and the government as both have ceased shipments; Indonesia’s Mineral Entrepreneurs Association has filed a legal challenge.
The ban left many companies without time to build costly domestic processing facilities in a country beset by poor infrastructure. Indonesia is one of the world’s top exporters of gold, copper, nickel, tin and thermal coal.
The situation is grim for Southeast Asia’s No. 1 economy and its miners ahead of election-driven nationalism, according to analysts. Many fear a shortfall in foreign revenue could widen a record deficit while undermining investor confidence. The ban is expected to cut government revenue by $820 million this year; layoffs have sparked protests in Jakarta.