* Freeport, Newmont may emerge unscathed from Jan. 12 export
* Worsening economic climate forces government's hand
* Policymakers wary of job losses, civil unrest ahead of
By Michael Taylor and Kanupriya Kapoor
JAKARTA, Jan 10 Indonesia's mineral ore export
ban, an ambitious policy aimed at getting more money for its
resources, will hit domestic miners who have already begun
shedding jobs and leave foreign firms unscathed.
The mineral ban is an attempt to transform Southeast Asia's
biggest economy from being simply a supplier of raw materials
into a producer of finished goods, boosting government coffers.
The new rules, one of the biggest policy moves by Indonesian
President Susilo Bambang Yudhoyono in nearly a decade in office,
force firms to commit to invest millions on processing minerals
if they want to ship their goods out.
"The problem with this policy is that the smaller miners
have no capacity or money to invest in smelters," said Sofjan
Wanandi, head of the Indonesian Employers Association (APINDO).
"We gave input to the government that those that haven't
been able to give that (smelter) guarantee will have a hard time
if there is a total ban but ... we can't protect the small
miners for too long."
The damage is already being felt. Almost 30,000 mine workers
have been laid off as more than 100 junior miners halt
operations, according to the Indonesian Mineral Entrepreneurs
The government has been scrambling in recent months to water
down the law, initially introduced in 2009, on fears it will
widen a large current account deficit and add to the falling
rupiah's woes. Some miners, betting on a backdown on the policy,
have done little to boost their infrastructure ahead of the ban,
raising the spectre of a big decline in export revenues.
Indonesia is the world's top exporter of nickel ore, refined
tin and thermal coal, and a major producer of copper, iron ore
and bauxite. Its mineral wealth accounts for about 5 percent of
total exports. Mining contributes around 12 percent to its GDP.
Yudhoyono's administration has backed several policies aimed
at generating greater profits and creating more jobs from
natural resources with some success in tin, cocoa and palm oil.
After weeks of wrangling between officials, legislators and
mining companies, last-minute government proposals will allow
U.S. giants Freeport-McMoRan Copper & Gold and Newmont
Mining Corp to continue shipping copper concentrate.
Nickel ore and bauxite remain banned, hurting shipments from
smaller miners like state-owned PT Aneka Tambang,
unlisted PT Harita Prima Abadi Mineral and Singapore's Ibris
Nickel Pte Ltd.
The government argues that copper undergoes at least some
processing into copper concentrate before it is exported, while
nickel and bauxite ores are completely unprocessed, shipped out
as earth dug up and dumped into barges.
But it is these smaller, low-cost operations that are
locally run and employ thousands of workers.
The planned revised ban will cut government revenue by as
much as $820 million this year, the finance minister said on
Mining industry figures in Indonesia have long criticised
the time given to develop downstream industries and build
smelters, citing the lack of power and infrastructure in remote
areas where mines are often located.
Ample global smelting capacity, coupled with weak metal
prices, have also been given as reasons why new smelters would
not be economically viable.
For the government to force miners to stop work would also
result in large job losses - both at mines and their supporting
industries - stoking political and civil tensions in some of the
more volatile provinces.
"This policy will result in mass layoffs for workers in the
mining sector," said Subiyanto, general secretary for
All-Indonesia Workers Union, speaking at a 1,000-strong protest
outside the mines ministry on Thursday. "We asked that it be
"We agree in principle but ... the government has done
nothing to prepare the infrastructure (for smelters) since the
law was proposed."
Seen as an example of a creeping resource nationalism in
Indonesia, the government's last-minute scrambling highlights a
perceived dithering by Yudhoyono, who will step down after
elections later this year.
Parliamentarians blocked an attempt by the government in
December to amend the law, prompting the president to pursue the
last-minute regulation. Lawmakers argued that, in the long run,
the completion of new smelter projects would create jobs.
"Everybody is expecting that nationalistic fervour will
reach a fever pitch with the elections so nobody will pull back
on this until the elections are over - if ever," said Hans
Lukiman, a commissioner at privately-held Indonesian nickel,
iron ore and coal miner Ascend.