By Clyde Russell
LAUNCESTON, Australia Jan 9 The key point with any laws or regulations is not that they are on the statute book, it's whether they are applied and enforced, and this will be the case with Indonesia's ban on metal ore exports.
As is often the case with Indonesia and government policy, the only certainty is uncertainty and whether the prohibition on exporting unrefined ores goes ahead, and in what form, is far from clear.
In the case that the ban goes ahead as planned from Jan. 12, it seems likely that nickel ore and bauxite, with a value of up to an annual $2 billion will be the hardest hit.
Indonesia is the world's biggest exporter of nickel ore and supplies about two-thirds of top buyer China's imported bauxite.
But Indonesia's mining ministry is seeking to pass regulations to ease the ban and phase in the requirements for domestic processing over a longer period of time.
The proposal recommends that raw mineral ores can be exported until 2017, after which all would have to undergo domestic processing.
It must be pointed out that this proposal still needs the approval of President Susilo Bambang Yudhoyono, who is believed to be supportive of the changes.
But it also may fall foul of Indonesia's parliament, which has taken a fairly hardline stance that miners must beneficiate locally in order to meet a policy goal of keeping more of the Southeast Asian nation's mineral wealth within its borders.
What is happening currently is that all sides in the debate are lobbying as hard as they can, often with the effect that a muddied picture is presented.
Take the warning that as many as 200,000 bauxite miners will lose their jobs, issued on Jan. 8 by the Indonesian Chamber of Commerce and Industry.
This is most likely a worst-case scenario, which is unlikely to occur, but does make for headlines and puts pressure on the government to ensure that bauxite, which is used to make alumina and then aluminium, can continue to be shipped overseas.
If 200,000 bauxite miners were thrown out of work, the political ramifications would be profound, so the end result is that at some point a compromise will be reached.
That is what the mining ministry's proposal seems to do, by lowering the required percentage of ore that must be processed domestically.
For copper, this would drop to 15 percent from 98 percent, thus ensuring the major producers will be able to continue normal operations until 2017.
BIG PLAYERS LARGELY UNSCATHED
U.S. giants Freeport-McMoRan Copper & Gold and Newmont Mining Corp dominate Indonesia's copper output, producing about 97 percent, but only refining about a third of this domestically.
While the big corporations are being given time to invest in domestic refining capacity, it's by no means clear that they want to, given the high cost of building new facilities and the view that existing and under-construction global refining capacity is sufficient.
The real losers from any ban on exporting raw metal ores are likely to be smaller-scale miners, who lack the ability to process ores by themselves.
They are reliant on the plans of bigger companies to set up refineries, and they will likely be last in the queue to get their output processed, even if the capacity is available.
Smaller operations are also more likely to be geographically disadvantaged as their mines may be located far from existing or planned processing capacity.
The irony is that the whole beneficiation push is aimed at generating more wealth domestically, but in reality it may hit the locally owned smaller miners hardest.
If this does become the case and Indonesian companies, investors and workers actually start to lose money and jobs, then the changes to the export ban will be rapid.
All this uncertainty damages Indonesia's image as a place to do business, but whether this will actually deter any new investments is doubtful since the country's poor reputation on policy stability is well-known and long-established.
While the final design of the ban on exporting unprocessed ores is still uncertain, the trend is clear: At some point miners operating in Indonesia will either have to invest in processing domestically or get out.