UPDATE 1-Indonesia may loosen export ban on metal ores

Wed Aug 28, 2013 8:10am EDT

By Rieka Rahadiana and Fergus Jensen

JAKARTA Aug 28 (Reuters) - Indonesia will push for a relaxation of its controversial 2014 ban on metal ore exports amid a scramble to support the rupiah and restore confidence in Southeast Asia's largest economy.

Indonesia is the world's top exporter of nickel ore, coal and refined tin and its mining industry contributes around 12 percent of gross domestic product (GDP).

However, the ban on unprocessed mineral exports from January 2014 has hit the industry and uncertainties over the country's mining rules have dented its credibility with foreign investors.

If approved, the reversal of mining policy will upset metal industries banking on a tightening of ore shipments that have increased significantly in the lead up to the ban. However, some in parliament doubted the government would manage to overturn the rule.

Under the proposed revision, mining companies with smelters under construction would be allowed to continue to export unprocessed minerals, but would be charged a progressive duty on the shipments depending on how close to completion their projects are, Industry Minister Muhammad Sulaeman Hidayat told reporters.

"Miners that have not (started) building smelters yet will not be allowed to export minerals," Hidayat said.

The proposed changes were confirmed by energy and mineral resources minister Jero Wacik.

"This is an emergency measure, with global conditions like this we have to increase our exports," Wacik said, referring to the government moves to increase mineral exports to maintain the country's trade balance and rupiah stability.

Wacik also said the government may amend its export policy after 2014 to encourage investment in the sector.

The proposal comes after Indonesia said this week it would scrap its export quota system for minerals.

But former parliamentarian Agusman Effendi, who helped create the export ban as part of the 2009 law on mining, said the amendment would not be possible.

"We formed a regulation that is very rigid. After four years (from the date the law was introduced) everything must be smelted in Indonesia. If it's that easy to change the law, why didn't they do it earlier?"

Parliamentarian Satya Widya Yudha said the revision would be unlikely to be passed by parliament.

"We can't annul what has been decided in this law. If they aren't consistent it will make foreigners question the Indonesian government's attitude."

But Finance Ministry fiscal policy chief Bambang Brojonegoro said the progressive export duty could be imposed without parliament approval.

No further details were provided on the range of the progressive export duty or method for its calculation. Officials at the Energy Ministry were not immediately available for comment.

The Indonesian mining industry's net revenue is expected to climb from 25 trillion rupiah ($2.29 billion) in 2012 to around 33.1 trillion rupiah this year, according to government data.

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