Government plans to require miners to give added value to their exported commodities could end up costing the country income, a mining association official said on Monday.<\/p>\n
Priyo Pribadi Sumarno, an executive director at the Indonesian Mining Association, said the domestic market for minerals such as tin, gold, copper and nickel was relatively small compared to the export market.<\/p>\n
\u201cWe support the idea of giving added value to our commodities, but requiring these added values as a requirement for export will be more problematic and it will reduce export revenue,\u201d he said.<\/p>\n
A 2009 mining law requires miners to upgrade their mineral commodities, with mineral producers needing to comply by 2014 and coal producers by 2016.<\/p>\n
Priyo said the law would require local miners to process their commodities before exporting them. Companies would export ferronickel instead of raw nickel, for example, while copper would be required to have 99 percent metal content and coal at least 5,600 calories.<\/p>\n
Exports of tin, Indonesia\u2019s top commodity, would have to be 99.85 percent metal.<\/p>\n
To meet that requirement, he said, companies would have to invest more in technology by building or upgrading their smelters. A simple smelter could cost about $50 million, while a more advanced smelter could cost at least $500 million.<\/p>\n
\u201cThe government\u2019s attempt to boost the downstream mineral sector might cost the miners themselves,\u201d Priyo said. \u201cAlso, the basis for these added-value requirements is still unclear and we\u2019re pessimistic that the domestic market can absorb most of these commodities.<\/p>\n
\u201cI don\u2019t think the regulation is necessary for coal, which accounts for more than 80 percent of our mineral exports, because coal already has its own domestic market obligation.\u201d<\/p>\n
According to data from the Central Statistics Agency (BPS), Indonesia\u2019s mining sector was worth $26.67 billion last year, making up 17 percent of total exports.<\/p>\n
Priyo said his association would ask the government to review the value-added law and recommend that the plan be implemented in phases while miners upgraded their downstream capability.<\/p>\n
\u201cThe domestic demand for minerals is too small to absorb the potential excess of commodities,\u201d he said. \u201cIf this regulation is enforced, big companies like Newmont, Aneka Tambang and Inco will be the ones affected the most.\u201d<\/p>\n
Gold miner Newmont Nusa Tenggara, a local unit of the giant US firm, said complying with the value-added law could prove to be problematic.<\/p>\n
\u201cWe understand the spirit of the law, but our studies have shown that building a smelter is not economically feasible,\u201d Kasan Mulyono, NNT\u2019s spokesman, told the Jakarta Globe on Monday.<\/p>\n
\u201cCurrently, there is a global shortage on smelter supplies as many smelters are operating under their capacity.\u201d<\/p>\n
Bambang Gatot Ariyono, the director of mining development at the Energy Ministry, was unavailable for comment.<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/miners-say-value-added-law-will-hurt-in-the-long-run-1299574243", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }