In another twist to the controversy surrounding Indonesia’s ban on raw mineral exports, officials are allowing major miners extensions to build their own smelters—or sign pacts with smelters already under construction—before the 2014 regulation takes effect.
Acknowledging the strong objections the law has received from foreign investors and Indonesians alike, Mining Minister Mohamad S. Hidayat said, “We can give them extra time, and if at the end of 2014 the smelters are not ready, we can talk about them later.”
Most foreign miners say next year is far too soon to develop smelters in ASEAN’s largest economy. Indonesian mining industry groups also object to the measure, citing potential annual export losses at $10 billion. The mining companies affected by the law are PT Vale Indonesia, a subsidiary of Brazilian iron ore giant Vale; PT Freeport Indonesia, a unit of Freeport McMoRan; and Newmont Nusa Tenggara.
Regarding the rule itself, however, Jakarta remains steadfast. “One thing is for sure, contract holders must build their smelters soon,” said Hidayat. “They have to follow our rules and regulations—no exception.”
Indonesia is enjoying one of the world’s biggest mining-driven economic booms, in no small part from massive industrial growth on mainland China, the largest consumer of its thermal coal and other metals. Indonesian government officials now say they want a bigger slice of the profits.
But Jakarta’s 2009 mining law, and its lack of clarity, has led to confusion and disappointment among mining companies that have already invested billions, while scaring off many others. In April, Indonesia was ranked the world’s least attractive place for mining by the Fraser Institute, a Canadian think tank.