REPUBLIKA.CO.ID, JAKARTA -- Indonesia must quicken the development of its mineral smelters so that reduced revenues from mineral ore exports will not be ongoing following the ban on exports of raw minerals, which begins next month.

"The Indonesian Chamber of Commerce and Industry (Kadin) hopes that the development of smelters in the country will be accelerated for the interest of the nation," Kadin Deputy Chairman for Regional Empowerment Natsir Mansur said.

The Indonesian government will implement Law No.4/2009 on Mineral and Coal Development, which will ban the export of raw minerals beginning January 12, 2014. Under the law, mining companies are required to process minerals inside the country before exporting them.

"Based on the law, we are no longer allowed to export (raw minerals) as of January 12, 2014. We should consistently abide by it," Coordinating Minister for Economic Affairs Hatta Rajasa said on Thursday.

Information from the ministry of energy and mineral resources, in the January-October 2013 period, indicates that Indonesia exported 465 million tons of nickel ores, 16.11 million tons of iron ores and sand, 47.01 million tons of bauxite and 1.02 million tons of copper concentrate.

He said that with the coming into effect of the law, mining companies were expected to speed the development of their smelters to process raw minerals before they exported their products.

The minister acknowledged that the banning of raw mineral exports would temporarily reduce state revenues by about US$4 billion and had the potential to increase the country's trade deficit.

Indonesia's processed mineral exports stand at US$4.9 billion. The new law will lead to a decline in unprocessed mineral exports in 2014, which could lead to a decline in overall exports. The decline in unprocessed mineral exports could also affect the country's trade balance.

However, the deficit is not expected to grow too large because the government has been trying to reduce its oil and gas imports, particularly after it issued a policy on the use of bio-diesel to offset diesel oil consumption.

"We can still have its positive aspects because we can reform our industry at home. After processing by using smelters, we can earn US$5 billion in exports," Minister Hatta said.

He predicted that if regulations for minerals were consistently enforced, Indonesia's trade would become balanced in 2016. Possibly, it could gain a surplus of about US$1.8 billion.

Deputy Finance Minister Bambang Brodjonegoro said the ban on unprocessed mineral exports could increase the trade deficit in the mining sector by US$10 billion. But the deficit will decline in 2015, and trade in the mining sector will record a surplus in 2016, after companies begin operating smelters.

The same opinion was expressed by Finance Minister Basri Chatib. He said Indonesia's processed mineral exports could significantly increase in 2015 if the mineral and coal mining law is implemented and smelters have begun operating.

"Our processed mineral exports, which currently stand at US$4.9 billion, could increase to US$9 billion by 2015," he said here on Friday.

He noted that Indonesia will also fully implement its biodiesel policy in 2014. This year alone, Indonesia is expected to save US$200 million in foreign exchange because of the biodiesel policy. "We hope our savings increase to US$4 billion in 2014 because of a decline in oil and gas imports," Basri Chatib said.

In addition, the government plans to increase the tax on imported goods under article 22. This step is expected to save the government another US$3 billion in foreign exchange. All of these measures should help Indonesia to limit its current account deficit," he added.

"By implementing these various policy measures, we can save about US$7 billion, so our foreign trade could have a neutral impact on the trade deficit," he pointed out.

Therefore, to help reduce the deficit, the development of smelters must be boosted.

"It is very important for Indonesia to accelerate the development of its smelters to cement its interests as an industrial nation," Natsir Mansyur of Kadin said.

He added that the condition of Indonesia's industry has not been healthy because of high imports of raw materials, causing it to depend upon other countries. This had an impact on its monetary sector and state budget.

"We hope Indonesia will rise as a major industrial country in the world and is supported by huge raw mineral reserves and processing industries," Mansyur said.

Mansyur, who is also president director of PT Indosmelt, recalled that downstream mineral development programs will have high added values and extraordinary multiple effects on Indonesia, for it has a large potential of minerals that have not been well exploited.

Thus, downstream mineral development programs are vitally important for the state and nation.

Manysur said the development of smelters by businesspeople constituted a contribution to the development of Indonesia as an industrial state.

"This is for the interest of the nation. Its effect will trickle down and be enjoyed by the nation. Therefore, Kadin is of the opinion that the development of smelters must be accelerated," Mansyur said.

According to the ministry of energy and mineral resources, there are plans to build 112 mineral smelters in the country, and some are nearing completion. By November, 23 smelters were more than 80 percent completed and ready for commissioning.

Other smelter projects are still in the early phase of implementation, with some not even having conducted feasibility studies. The construction of the smelters followed the law requiring producers of minerals to process their ores in the country.

In the meantime, the House of Representatives (DPR)'s Commission VII on energy affairs urged the government to consistently implement Law No. 4/2009 on Mineral and Coal Development, which bans raw mineral exports and requires mining firms to build smelters.

"The government must be firm and implement the law. It should not be afraid of threats by businesses," Gito Guinduto, of the House's Commission VII, said.

He noted that the government should stop exports by companies that violate the law. Other countries, he noted, have for many years banned the exports of raw minerals and built their own smelters. (Andi Abdussalam)

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