JAKARTA, Indonesia–Indonesia, a major exporter of minerals like nickel, bauxite and copper, is weeks away from banning the export of ores that earn the country billions of dollars a year. The government says the move—based on a 2009 law—is necessary to force miners to build smelters and refine minerals domestically, adding value to an industry that is Indonesia’s greatest source of foreign direct investment. Many miners say smelters are too expensive to build, and that they need more time and certainty to comply.
Susilo Siswoutomo, deputy minister of Indonesia’s Ministry of Energy and Mineral Resources, says the government is working on a last-second compromise that will allow some miners to continue exporting ores.
In an interview, Mr. Siswoutomo told the Wall Street Journal’s Ben Otto that building smelters makes economic sense, that some miners may be excused from the ban, and that the government has been slow in addressing investor concerns.
Edited excerpts follow.
WSJ: Many companies say building smelters isn’t feasible.
Mr. Siswoutomo: What do you expect? The companies just want to shovel the dirt and sell it. But no, they should have made feasibility studies a long time ago. The value added in processing minerals will be 10-fold.
WSJ: They point to weak commodity prices and a lack of energy supply and other infrastructure in the remote regions where many mines are located. Do they have a point?
Mr. Siswoutomo: Under the current circumstances, probably yes. But companies like Freeport, Newmont and Vale have enjoyed lots of income from their business for decades. It’s going to be very difficult for the Indonesian people and the lawmakers to understand their view that it doesn’t make economic sense. But it’s a mindset. It’s very difficult for companies to accept the argument that they have enough to make a smelter.
WSJ: Should the government have carried out feasibility studies prior to creating this law?
Mr. Siswoutomo: No. The government will only create the law stipulating that all of our natural resources have to be processed and refined in Indonesia, because natural resources have to be exploited for the benefit of the people. We are not just talking about shoveling the dirt [onto ships] and selling it. That’s against the constitution.
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