Responding to Japan’s threat to bring Indonesia to the World Trade Organisation over its new policy on mineral exports, a top government official says that Japan has misunderstood the nature of the policy and that any attempt to challenge it on the international stage would be a mistake.
Thamrin Sihite, the director general for minerals and coal at the Energy and Mineral Resources Ministry, told reporters on Tuesday that the threat arose from a misunderstanding that Indonesia would completely ban the export of minerals.
“We have met with representatives of the Japan’s Ministry of Economy, Trade and Industry and explained the regulation to them. The case can only be brought to the WTO if we ban exports, but we haven’t,” he said.
The Energy and Mineral Resources Ministry, in tandem with the trade ministry and the finance ministry, issued a set of new regulations on May 6 that demanded tougher requirements pertaining to the export of 65 types of raw minerals – excluding coal – and imposed a 20 percent export tax.
The requirements include an obligation for mining companies operating under the Mining Permit (IUP) to obtain “clean-and-clear” status for their activities, to pay all tax an non-tax financial obligations and to submit a comprehensive proposal on their business plans for the creation of added-value to their mining products.
A clean-and-clear status indicates that the activities are in line with the government’s environmental policies and that all legal requirements, including those on land usage, have been met.
The creation of added-value is required by the 2009 Mining and Coal Law, which stipulates that within five years of the law taking effect, Indonesia will no longer permit the export of raw minerals and will curb the exploitation of non-renewable natural resources. The provision also applies to coal.
The government argues that the new policy on raw mineral exports is a measure to prepare mining companies ahead of the 2014 deadline. The government has encouraged companies to either build smelters, whether individually or through joint ventures, or to prepare other plans for the downstreaming of raw mineral commodities.
Takayuki Ueda, the director general of the manufacturing industries bureau of Japan’s trade ministry, said on Monday in an interview with Bloomberg that Japan would prefer to negotiate a solution to prevent a full ban on mineral exports.
However, he said, Japan might file an objection with the WTO should Indonesia proceed with a complete ban.
“There are no other countries that would immediately replace Indonesia,” said Toshio Nakamura, the general manager of stainless raw materials at Mitsui & Co, Japan’s biggest trader of nickel. “We will have to consider how we will secure raw materials under the new regulations for the mining industry.”
According to the finance ministry’s data, Japan imported 3.65 million tonnes of nickel ore in 2011. Of that amount, 1.95 tonnes or 53 percent came from Indonesia. Japan expects that the 20 percent tax on the commodity would ratchet up prices by an average of 17 percent to $20,000 per metric tonne by the fourth quarter of this year.
Sihite said the 2014 ban applied only to raw minerals, not process-ed minerals, including smelted minerals.
“The Japanese government thought we would ban all exports, including processed products. We have cleared up that misunderstanding,” claimed Thamrin.