Indonesia trying to skirt its own ban on mineral ore exports

JAKARTA Mon Dec 9, 2013 6:00am EST

JAKARTA Dec 9 (Reuters) - Indonesia's government is still trying to find a way around a mineral ore export ban that the country's parliament is refusing to allow it to sidestep, chief economic minister Hatta Rajasa said on Monday.

The ban, which comes into effect next month, is designed to increase the value of the country's mineral exports. Indonesia has for decades and with limited success tried to create more value from its vast array of natural resources.

In this case, a smelter shortage has meant that none of the major mining companies can meet the requirements to process their ore before it is exported.

"We are trying to find a way, to find a solution. But that doesn't mean we are going to break the law ... We are going to talk again to parliament," Rajasa told reporters.

The ore export ban has come at an unwelcome time for the government. Indonesia is scrambling to cut a large current account deficit that has been undermining confidence in its currency, Asia's weakest this year after falling around 20 percent to the dollar.

Any cut in exports will only mean a bigger deficit. The authorities have been deliberately slowing growth in an attempt to cut imports and the current account deficit.

Late last week, lawmakers rejected a government bid to water down the ban by allowing mining companies to export unprocessed ore if they were able to show they were building smelters or were prepared to pay higher export taxes.

The Indonesian Mineral Entrepreneurs Association is also against the ban, which it argues will destroy the domestic mining industry by cutting into profit margins.

The association said the law favours big international mining firms like Freeport-McMoran Copper & Gold Inc and Newmont Mining Corp that can afford to build smelters.

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