COLUMN-Australia, Indonesia, Mozambique’s take different commodity paths – by Clyde Russell (Reuters India – October 25, 2013)

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LAUNCESTON, Australia, Oct 25 (Reuters) – Australia, Indonesia and Mozambique appear quite disparate countries, but they all have one thing in common insofar as they want to supply Asia with large volumes of coal and liquefied natural gas.

But the paths being taken by the three governments in pursuit of this are vastly different, and will ultimately decide which nation is most successful in using its natural resources to its best advantage.

Perhaps the most stark contrast is between neighbours Australia and Indonesia, which are pursuing almost polar opposite policies.

Australia’s new Liberal-led government introduced legislation on Oct. 24 to scrap a tax on super profits from mining coal and iron ore.

This was part of a pledge made before the September general election that a Liberal administration would get rid of the Mineral Resource Rent Tax (MRRT), the carbon tax and cut red and green tape for natural resource projects.

It’s part of new Prime Minister Tony Abbott’s message that Australia, the world’s largest coal, iron ore and soon to be LNG exporter, is once again open for business after six years of Labor Party rule that saw a raft of new taxes introduced.

In Indonesia the debate isn’t about scrapping taxes, it’s about how to raise them higher.

The government of President Susilo Bambang Yudhoyono plans to introduce higher royalty charges and an export tax for coal miners next year, as well as restrictions on the export of unprocessed mineral ores such as nickel and bauxite.

Unsurprisingly, the mining industry is opposed to these new charges and regulations, with coal producers saying output could plummet by as much as 40 percent next year.

Indonesia is the world’s biggest exporter of thermal coal used in power plants, shipping about $2 billion of the fuel every month, mainly to China and India.

Like the former Labor-led government in Australia, Indonesia is seeking to retain a larger share of its mineral wealth.

In both countries left-of-centre politicians found policies aimed at taking money from large, global mining corporations and ostensibly giving to the people in the form of state spending were popular with voters.

The problem was that in Australia it simply didn’t work, and it’s unlikely to work in Indonesia either.

Instead, what happened in Australia was the government ran headlong into weaker commodity prices, which blew away the forecast revenue, thereby hurting the fiscal position as it had already spent the anticipated windfall largely on welfare.

It also found that Australia’s political risk ratcheted up, and this, along with other factors like a strong local currency and high labour costs, resulted in a swathe of project delays and cancellations.

Former Labor prime minister Julia Gillard introduced the MRRT and the carbon tax, the former aimed at harvesting revenue from the China-led commodities boom and the latter at cutting carbon emissions in one of the world’s highest per capita polluters.

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