Indonesia should quickly impose a tax on mining exports, the industry minister said on Thursday in comments likely to worry miners in the world’s top exporter of thermal coal and tin.
Government officials have previously said a 25 percent tax on mining exports is being considered for this year and a 50 percent tax for next year, though miners and industry analysts have speculated that such plans are likely to be toned down.
“The mining export tax has to be imposed as soon as possible,” Mohamad S. Hidayat told Reuters.
The tax plan is the latest in a series of proposed regulations that have rattled Indonesia’s mining sector both because they could increase the cost of business and because of a perception of inconsistent policymaking.
Mining is vital to Southeast Asia’s largest economy, which grew at 6.5 percent last year in part because the sector.
Other new regulations include a plan under which some foreign mining companies must divest 51 percent within 10 years and a proposed ban on the export of some unprocessed metals by 2014.
Even so, the outlook for Indonesia’s mining sector remains stable despite stringent regulations that are likely to drive up the cost of business, ratings agency Standard & Poor’s said on Thursday.
“Standard & Poor’s Ratings Services believes that while mining regulations will become more onerous in Indonesia, the government is unlikely to carry out some of its more extreme regulations,” the agency said in a report.
The report posed a question that has exercised many in the mining sector in recent weeks: will mining policy be driven solely by attempts to derive more state benefit from the sector, a policy sometimes called “resource nationalism”?
Or will that drive be tempered by fear of scaring off mining investment from a country that is the world’s largest exporter of thermal coal and refined tin?
S&P said that ultimately prudence would determine policy and Indonesian officials were mindful of the global competition for investment in the mining sector, which contributes about 11 percent of GDP.
“The high economic importance of the mining sector to Indonesia’s central and regional governments provides a strong incentive for the government to adopt reasonable regulations that do not materially dent the sector’s performance or its attractiveness to investors,” said Standard & Poor’s credit analyst Xavier Jean.
S&P is likely to release a report soon on the Indonesian government’s sovereign rating.
Fitch and Moody’s agencies upgraded the country to investment status in recent months in a reflection of its stable fiscal policy framework, large domestic market and strong growth rate. -By Matthew Bigg