March 12, 2014 / 3:30 AM / in 4 years

Indonesia's next leader unlikely to ease tough mineral export rules

JAKARTA, March 12 (Reuters) - Indonesia’s next president is unlikely to make major changes to the country’s controversial mining rules, after major political parties backed an export ban that has led miners to halt $6 billion in annual mineral exports.

The broad political support will disappoint miners, like Freeport-McMoRan Copper & Gold, Newmont Mining Corp , that may have been hoping the tough new rules were only temporary measures imposed by a lame duck administration.

Political parties representing presidential front runners for the July election told Reuters they support the current government’s moves to ban mineral exports and tax concentrate shipments, aimed at forcing miners to build smelters in Indonesia.

Freeport has cut copper output by 60 percent due to a prolonged dispute over the export tax imposed by President Susilo Bambang Yudhoyono, who is barred from running for a third term.

Opinion polls show Jakarta Governor Joko Widodo of the Indonesian Democratic Party-Struggle (PDI-P) as the most popular presidential pick. If he decides to run, his main competition will likely be ex-general Prabowo Subianto of the Great Indonesia Movement Party (Gerindra) and wealthy businessman Aburizal Bakrie of the Golkar Party.

“Golkar will not alter (the export ban policy), instead we will underline the importance of value-added (commodities),” Harry Azhar Azis, a senior member of the Golkar Party’s economic team, told Reuters.

Gerindra said the president’s handling of the new mining rules had caused widespread investor confusion, but the political party would not change the mining rules if its candidate, Prabowo, wins the presidency.

“We want there to be a consistent message that tells people like Freeport and Newmont to just do it (and build smelters). There may be short term pain, but in the medium to long term it will be better for the economy,” Hashim Djojohadikusomo, Prabowo’s brother and a senior party member, told Reuters.

PDI-P also fully supported the new mining laws and would not significantly revise them, said Hasto Kristianto, the party’s deputy secretary general.

Freeport, whose Indonesian unit runs the world’s fifth-largest copper mine, has refused to pay an escalating export tax introduced on Jan. 12 as part of a package of new mining rules, and has been in talks with the government on the issue.

Maintaining the mineral ore export ban would provide legal certainty for foreign mining firms, like Russia’s United Company Rusal, that are looking to expand into Indonesia and invest billions of dollars on new smelters.

“If Indonesia sticks strictly to the rules, the investment will come,” said Maxim Sokov, first deputy CEO of En+, the parent company of Rusal, which signed an MOU last month to invest as much as $3 billion in smelters.

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