Four Questions About The Mining Ban
BMI View: We answer four pertinent questions we believe many would have in mind following the introduction of the mining ban by the Indonesian government on January 12. We believe that adverse macro implications from the ban are definitely in order, given the importance of the mining sector to the economy. While we highlight that nationalist rhetoric or policies are likely to be ramped up in the coming year, such measures are unlikely to be too restrictive in light of mounting economic headwinds. We believe that Indonesia will be a more compelling growth story if policymakers put structural reforms ahead of near-term political and vested interests.
On January 12, Indonesia introduced a widely contentious ban on mineral exports. This came as the government seeks to revamp the resource sector and carve out more downstream industries that will create more value-added for the broader economy. The move was largely in line with our expectations (see 'Economic Woes To Derail 2014 Minerals Export Ban', August 28), as the policy that came into effect was a watered down version of the initial plan, which called for a blanket ban on the export of minerals (for more colour see 'Mineral Ban Watered Down On Cue', January 15). While nickel and bauxite ore exports are still prohibited, other mineral exports will be regulated by a progressive tax that would rise from 20% at present to 60% in 2016. 66 companies that have committed to processing facilities will be exempted from the export ban until 2017.
What Macro Repercussions Are To Be Expected?
|Indonesia - GDP Current Prices By Sector (2012)|