* Trade data to start reflecting mineral ore export ban
* Ban, rate hikes, Fed tapering among headwinds to weaken
* Economic impact from ban difficult to calculate
By Randy Fabi and Rieka Rahadiana
JAKARTA, Feb 12 Ibris Nickel Pte Ltd has not
made a shipment from its remote mine in Indonesia's Southeast
Sulawesi for six weeks and is bleeding $12 million a month, one
of hundreds of small miners squeezed by a controversial mineral
export ban imposed last month.
The problems at privately owned Ibris illustrate one of
several headwinds facing Indonesia, Southeast Asia's biggest
economy, despite a spate of surprisingly strong economic data.
Indonesia is not only confronting a mining crisis, but also
the delayed effects of the central bank's aggressive monetary
tightening, political uncertainty in an election year, a
slowdown in China, and the tapering of U.S. monetary stimulus.
"We very much doubt the economy has bottomed and expect the
downturn to resume form in the current quarter," said Robert
Prior-Wandesforde, an economist at Credit Suisse.
Recent data has looked good: December's trade surplus, at
$1.52 billion was double the market consensus, the largest in
two years and the third straight monthly surplus, the government
said last week.
Also last week, the government reported a
better-than-expected 5.72 percent rise in fourth-quarter gross
domestic product, from 5.62 percent in the previous three
months. That broke five straight quarters of weakening growth.
This Friday should bring more positive news with an expected
big improvement in Indonesia's current account.
The widest measure of the flow of goods, services and money
in and out of Indonesia has remained in deficit for eight
quarters, driven by price declines for its most lucrative
commodity exports - from coal to tin and palm oil.
The shortfall reached an unexpectedly large $9.8 billion in
the quarter ended June 30, the biggest since before the 1997/98
Asian financial crisis and equivalent to 4.4 percent of GDP.
But commodity exports surged late last year and some
economists expect Friday's data to show the current-account
deficit was at about 1.8 percent of GDP in the fourth quarter,
down from 3.8 percent the previous quarter.
But they caution that in three weeks, the statistics bureau
will release its January trade data, the first to reflect the
impact of the shutdown of one of the world's biggest mining
sectors due to the mineral export ban that began on Jan. 12.
No one is expecting an economic crash since mining only
represented 7 percent of the 2013 gross domestic product, but it
is one of several looming factors that analysts believe will
force a further slowdown in growth this year, possibly causing
the current account deficit to widen again.
"Export growth will be hit by the government's recent ban on
unprocessed mineral ore, while the lagged effects of the central
bank's 175 basis point of rate rises ... should mean that
domestic demand growth slows further," said Prior-Wandesforde at
Bank Indonesia is juggling several policy priorities this
year. Its five rate rises since the middle of 2013 have put a
floor under the rupiah currency, capping losses against the
dollar at 21 percent last year, and halted foreigners from
fleeing the country's high-yielding debt.
Foreigners own more than 30 percent, or about $27 billion,
of outstanding government bonds.
But when adjusted for inflation, interest rates are
negative. Analysts say real yields have to be positive, both to
attract foreign investment and to curtail the rapid consumption
that is causing imports to balloon. Stability in the rupiah,
which is traditionally prone to wild swings, is vital to the
But signs of moderating demand are already starting to
trickle down through the economy, with industries ranging from
hotels, restaurants, airlines and construction companies
adjusting their growth targets.
"Although economic growth rebounded in Q4 2013, it is not
likely to be the pivotal point as we believe the impact of
monetary tightening has yet to fully bloom," said Mandiri
Sekuritas economist Aldian Taloputra, who forecasts 2014 GDP
growth to slip to 5.6 percent, down from 5.78 percent last year
and the lowest since 2009.
Political uncertainty is also a concern with many foreign
investors waiting on the sidelines until a new president is
elected later this year.
One of the biggest unknown factors that could cloud
Indonesia's economic outlook this year is the ongoing mining
Confusion over the new rules have caused monthly ore and
concentrate shipments worth around $500 million a month to grind
to a halt.
Bank Indonesia Governor Agus Martowardojo warned days before
the ban took effect that the current account deficit could stay
above 3 percent of GDP if the new law is not managed carefully.
"The most worrying is if the mining firms do not make any
shipments at all, there will be no profits (and) GDP will also
slow down," said David Sumual, an economist at PT Bank Central
Asia, who estimates the ban could widen the current account
deficit by as much as 0.6 percent.
The social and political costs of the ban could already be
Ibris Nickel, a unit of Singapore-based Ibris Group, is no
longer able to find work for half of its 1,200 work force - 80
percent of whom are from three remote villages in Southeast
"This is going to have a very big impact on these remote
areas that depend on the mines and where contributions from the
government are fairly limited," said Agus Suhartono, the
company's chief operating officer.
"Suddenly there is no revenue coming in. How are they going
to alter their lives? I really don't know that answer."
(Editing by Vidya Ranganathan and Raju Gopalakrishnan)