Mining Policy Overhaul Sparks Standoff with Stakeholders

Once again, Indonesia’s key mining sector is in controversial turmoil with the policy shift on mineral exports triggering frustration for firms struggling to make it in Southeast Asia’s largest economy.

While natural resources are plentiful in the archipelago, critics are constantly pointing fingers at the government for its lack of effective national policies to help the country capitalize on them. Now, with the latest shift in mining policy, a potentially damaging dead heat is brewing between the Indonesian government and one of the world’s mining giants, which is a major investor in the country.

In early 2014, the government announced that starting in January of 2017, all shipments of copper concentrates will be banned, as part of efforts to help the country’s transformation from being a supplier of raw materials to being recognized as a producer of finished goods. Instead of strengthening the country’s smelting industry, policy shifts led to workers being laid off, mine closures and a fall in government revenues.

While the rollback will stand to benefit some companies, it has stirred uproar among stakeholders who have invested millions of dollars in the country’s smelting industry, the process where metals are extracted from their ores.

Some companies are infuriated with the policy shift as the government continues to require them to sign new permits that do not provide as much protection as mining companies need.

US-based mining giant Freeport-McMoRan, which has grabbed headlines for its recent dispute with the Indonesian government, has stopped all its copper shipments and operations in Grasberg, located in the province of Papua near Puncak Jaya and considered the world’s secondbiggest copper pit. Freeport reasons that the government has already enjoyed more than US$16.5 billion in taxes the company has paid since 1991.

The series of regulatory changes from the government has also triggered jitters among other mining giants and investors, with some already planning to leave the country instead of dealing with unpredictable circumstances with the government and concerned industries.

Jakarta-based lawyer and mining expert Bill Sullivan told

AFP that the government’s lack of consistency in terms of endorsing policies and regulations has been one of the inherent problems of the mining industry over the past few years.