Indonesia Court Scraps Mineral Export Regulations: Industry Body

By webadmin on 02:39 pm Nov 05, 2012
Category Archive

Yayat Supriatna and Fergus Jensen

[Updated at 8:32 p.m. Monday, Nov. 5, 2012]

Indonesia’s supreme court has upheld a challenge to a government ban on
the export of unprocessed minerals, a decision that could pave the way
for a resumption of exports by junior miners who have been hit hard by
the restriction imposed in May.

The verdict effectively annulled
parts of new mining regulations introduced on May 6, said the Indonesian
Nickel Association (ANI) and the Chamber of Commerce and Industry
(Kadin), which showed Reuters a copy of the ruling on Monday.

Trade
Minister Gita Wirjawan said he was looking into the issue, a comment
echoed by Susyanto, head of the legal bureau at the Ministry of Energy
and Minerals.

“We will seek information on the Supreme Court
verdict as quickly as possible. After that the government will study the
decision and take steps,” Susyanto told Reuters. There was no immediate
comment from the court on a decision the government may appeal.

The
ruling is likely to prompt further uncertainty in a $93 billion sector
reeling from a series of regulatory changes this year, although it is
unclear whether it will lead to an immediate increase in exports.

Analysts
said it represents a setback for the government of President Susilo
Bambang Yudhoyono, which instituted the rules to increase revenue,
conserve resources for domestic needs and boost the downstream mining
sector.

Mining constitutes 12 percent of GDP of Indonesia, which
is already the largest economy in Southeast Asia and seeks to become a
global top 10 economy by 2025.

Indonesia is the world’s largest
exporter of refined tin and nickel ore and a significant exporter of
iron ore and bauxite. The rules do not apply to big players such as
Freeport McMoRan Copper & Gold and Newmont Mining Corp, which, along
with coal, are not covered by this part of the regulations.

More Uncertainty

The
rules aimed to push miners into processing raw ores domestically to
export higher-value finished metals, but mining executives said they
hurt the sector at a time when commodity prices and investment faced
pressure due to a global slowdown.

ANI and the Association of
Indonesian City and Regional governments (Apkasi) brought the case in
which they asked the government to drop four chapters of the
regulations.

“The supreme court agreed with some parts of our
case and has ordered the central government to drop four chapters of the
regulation, including chapter 21 on the mineral export ban,” ANI
chairman Shelby Ihsan Saleh said.

Shelby told Reuters he was referring to Energy and Mineral Resources Ministry Regulation no. 7 on mineral processing.

The supreme court verdict was published on Sept. 12, an ANI official said.

One
of the four chapters to be removed banned miners from exporting raw
minerals. This was revised with a clause that allowed ore exports if
miners complied with rules on downstream processing, duties and adhered
to good mining practices.

“With the supreme court decision all
the chapters [of the ban] have to be dropped as soon as possible and
mineral exports will be regulated by the Trade Ministry,” Natsir
Mansyur, a senior official at the chamber of commerce, told Reuters.

“The
Energy and Mineral Resource ministry has no right any more to regulate
exports, including determining the mineral export quota,” Mansyur added.

‘Major Embarrassment’

The regulations sent exports of nickel and other minerals soaring ahead of the ban and then plummeting when it was implemented.

In
one example, Indonesia’s total iron ore exports climbed 24 percent to
1,912,220 tons in April, and then dropped 80 percent to 371,468 tons in
May.

It hit exporters who operate with government-issued mining
permits hard, especially small scale producers in areas such as the
island of Sulawesi.

The case is linked to a separate
Constitutional Court challenge to regional autonomy over mining, and any
government decision on the matter would have to wait until this was
resolved, Susyanto said.

“What is being challenged at the Constitutional Court is a law. That has a higher legal standing,” he said.

Kadin,
which has been tasked by the government to assist miners in adapting to
its rules, said it was asking the Trade Ministry for help drafting new
mineral export rules.

“This is certainly a major embarrassment
for the government which has actually seen a lot of interest in the
establishment of processing plants in the country as a result of the
threat to stop exports,” said Keith Loveard, head of risk analysis at
Jakarta-based Concord Consulting.

“The government is now going to
have to persuade investors to go ahead with plans for processing plants
even though the threat of an export ban has been removed,” he said.

Reuters