As per January 12, 2014,
Law No. 4 year 2009 on mineral and coal would be put in effect. Meaning, from
that date on, mining operators were obliged to develop downstreaming of the
mineral and coal industry and they were forbidden to export raw ore. Besides
miner companies were also obliged to build smelters at home in Indonesia.
But don’t be happy too soon, because behind the law ratification,
the Government also issued 2 new regulations, i.e. Government’s Regulation [PP]
on revisions and PP no 23/2010 on Mineral and Coal activities and Ministrial
Regulation [Permen] on Energy and Mineral Resources [ESDM] No 1/2014 on Third
Revision Permen ESDM no 7/2012 on Promoting Added Value of Mineral through
Mineral processing and Purification.
PP number 1 year 2014 and Permen ESDM no. 1 year 2014
would save as legal ground for the implementation of obligation to process and
purify minerals at home. The Ministry of Energy and Mineral Resources Jerro
Wacik was not willing to disclose the required percentage of purity of
processed minerals which were permitted for export.
Some circles suspected the specification of minimum
purity was deliberately hidden by the Government. The objective was to
anticipate strong objections from national mining activists. It’s true, this
was the point that frequently provoked harsh pro and contra. However, from the
various reporting it was disclosed that the permissible copper concentrate to
be exported must have minimum Cu level of 15%. Any yet before the Permen No. 20
2013 was revised the permitted copper concentrate that might be exported was
minimum Cu 99.9%.
With this relaxation of requirement, PT Freeport
Indonesia, PT Newmont Nusa Tenggara and IUP holders escaped from the export
prohibition regulation because Freeport and Newmont were so far only able to
produce copper concentrate of 10% and 30% purity. But to this moment revision
of the regulations was still unknown. Many circles rated that the revision
which eased restrictions were against Law no 4/2009.
That was the reason why some parties planned to run legal
trial to the Constitutional Court on the revision of Ministrial Regulation.
Some politicians were preparing to take the same legal measures. This was
because relaxation of regulation on export of raw mineral had its serious
political consequence. So if there was any regulation which was against the
Law, the public could claim judicial review or legal review.
Then, how did mineral miners respond to the application
of the Mineral Law ? Word was out that the Association of Indonesian Mineral
and Metalurgy [AMMI] responded positively to PP no. 1/2014 on the limitation of
ore percentage content before exported. AMMI rated that the condition was a new
phase in the process of Indonesia’s metal industry development which was more
progressive.
The PP Regulation functioned to bridge supply chain of
industry from upstream to metal manufacturing industry at downstream. AMMI was
appreciating the Government for applying the PP No. 1/2014. So far AMMI had
been seeing other countries building their metal and manufacturing industry
using raw ore materials from Indonesia.
In fact Indonesia had numerous experts and practitioners
who were capable of processing and purifying mineral ores before building
bigger scale industry; but such was never realized because the Government was
always giving permit to export mineral ores.
However AMMI asked that after PP No. 1/2014 was put in
effect, the Government immediately prepared crash program and make effort to
command over processing and purifying technology. The Government must minimize
dependency on foreign technology and learn from China when trying to master
technology.
It was noteworthy that there was a research institute
which had different point of view from AMMI. The Indonesian Mining and Energy Studies
[IMES] persisted not to agree with mineral ores export restriction as regulated
in PP No. 1/2014. According to IMES, the impact of export prohibition of
mineral ores would have its effect on many miner companies being closed.
Data of Ministry of Energy and Mineral resources [ESDM]
had it that by 2013 there were 10,600, mining business permit [IUP] issued.
Closing of these minies resulted in workers’ mass dismissals. The further
effect was that small business as supporting industry to mining like small
coffee shops, house rental, land and transportation, people’s cooperative
societies and supplier of food would be losing business. And the communities
who were mostly living in in remote areas would feel the chain effect.
So IMES rated that the PP No. 1/2014 means fortune for
foreign mining operators but misfortune to domestic mining companies. The
regulation was a by-product of the Minerba Law which prohibited export of
mineral ores as per January 1, 2014 last. According to IMES, contract holders
like Freeport, Newmont, and Valle-INCO could export products based on some
policies.
This unfair situation was because required degree of ore
purity was not 100% tolerated at home and would soon be further regulated in
ESDM Ministrial Reagulation or revised Permen No. 20/2013. So far the public
had been unable to distinguish 2 categories of mining companies : KK and IUP.
KK were mostly foreign companies which since the era of the New Order were
operating in 1960-1970’s while IUP had only been around in the past 3 – 7
years. They were national entrepreneurs. IUP was the “UKM” of mining industry.
IMS rated that the unfair situation was due to
discrepancy in historical track record between KK and IUP companies. KK had
long experience while IUP was only born yesterday. So supposedly export
prohibition should be addressed to KK although they were able to a higher
percentage. Supposedly IUP who had been doing business for a few years be set
free to export ores.
IMES believed that the policy to build smelters at home
needed support of infra structure. The problem was that the regulation to
prohibit export of ore materials was not supported by building of infra structure
like electricity, road and harbor which was reflected in APBN State Budget in
the past 5 years.
To build one smelter unit, technically needed at least
2-3 years, hard cash of USD 2 billion, and 15 million mega watt of power
support; not to mention complicated permit application process and problems in
land clearing. Even if this year 60 – 600 smelters were to be built amidst
people’s settlements, open conflict was bound to happen between companies and
communities, such as land conflict and space planning as miners and the people
fight over land. And there would be environmental pollution caused by smelters
wastage.
In fact the Government had allowed enough opportunities
to miners to build smelters. Since making of the Minerba Law in 2009, there had
been a span of 5 years in which to build smelters, but most miners did not make
the best of the opportunities. They prefer to drain natural resources to the
maximum for export without considering the long term effect.
Business News - January 17, 2014
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