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PrintThe mining industry has welcomed government plans to stimulate investment in the sector but flagged as concerns the preservation of a 20 percent tax on mining exports and a lack of policy detail.
As part of a package of policies announced after a cabinet meeting on Friday, companies in natural resources, including nickel, bauxite and copper, will be eligible for tax holidays and allowances.
The government also plans to relax its mineral export quotas, which determines the proportion of resources that are not quarantined for domestic consumption.
Agus Suhartono, the vice chairman of the mineral entrepreneurs association Apemindo, said the government’s policies demonstrated priorities in conflict with the industry’s.
“Mining companies don’t have a problem with the quota,” said Agus, adding that the industry had increased output volumes despite the quota system.
Indonesia Mining Association executive chairman Tony Wenas agreed, citing the growth in the nation’s nickel exports, which stood at 40 million tons for the first half of this year, up from 26 million tons in the same period in 2012.
Tony said the mining industry welcomed any government commitment to provide incentives, but added that the announcement lacked detail.
“If they want to provide incentives, then they need to detail what’s involved, the parameters of the tax holiday, the amount of the allowance and so on,” he said.
He said the mining industry could help the government narrow the trade deficit and bolster state currency reserves, since mining companies do business with foreign currencies.
“More mining activities mean increased exports, which, in turn, will improve Indonesia’s foreign exchange reserves,” Tony said.
But Apemindo’s Agus said the decision to relax export quotas would not directly result in an increase in output volume.
“If miners plan to ramp up production, then they have to place more orders for heavy equipment and tools, which usually take two or three months [to arrive at] mining sites,” he said.
“What the industry needs is to reduce costs, and the way to do that is by removing export taxes.”
He added that the ban on the export of unprocessed mineral products from 2014 would not help the industry.
“There are only a few months left in 2013. I wouldn’t increase production activities just for the sake of increasing export volumes, especially not with just a few months remaining in the calendar year,” Agus said.
He noted that a rise in exports would put pressure on prices, including in the domestic economy, where inflation has spiked in recent months.
On the Indonesia Stock Exchange on Friday, mining stocks responded positively to news of the policy changes, with the sector gaining 1.6 percent, clawing back some recent losses.
Vale Indonesia, the nation’s largest nickel mining company, jumped 9.4 percent to Rp 2,325, its highest closing position since June 19.
State-controlled gold and nickel miner Aneka Tambang rose 1.5 percent to Rp 1,380. State-controlled tin producer Timah rose 2.3 percent to Rp 1,330.
Indonesia is the world’s top exporter of nickel ore and refined tin and a significant exporter of bauxite and iron ore.
The government’s quota and tax rules are intended to encourage value-adding business activities in the mining sector.
The rules do not apply to big players such as Freeport McMoRan Copper & Gold and Newmont Mining.
Global prices of many commodities have fallen in recent month amid slowdowns in major import markets China and India.
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