Promoting Indonesia’s Downstream Mineral Sector
Export structure and incentives to encourage Indonesia’s downstream mineral sector
Indonesia’s Ministry of Investment is encouraging businesses to rapidly set up downstream mineral operations. The Ministry is currently structuring its export segment and adding to its investment incentives. This is part of the Government’s strategy to sustain and boost its economic development. These measures aim to promote Indonesia’s downstream mineral sector with a particular focus on the mining industry.
The Ministry is mindful of the challenges in this industry. It is aware that banning exports, such as tin, is necessary but cannot be seen as the final solution. Instead, the development of downstream activities would afford better opportunities for all stakeholders. It is also the right time for Indonesia to focus on and pursue the downstream sector.
The Ministry will restrict or prohibit certain commodity exports as part of the restructuring exercise to institute better regulatory controls. Further, these measures will limit export rights to entrepreneurs with existing smelters or have 80% of one already built. Companies with existing downstream mining businesses will get to apply for investment incentives. This includes the capital expenditure or Capex of tin.
Indonesia’s downstream mineral sector stands to benefit from this mix of export restrictions and incentive schemes. The recent export ban relaxation aims to add value to Indonesia’s mineral resources, including gold and copper. It also reinforces the Government’s view on pursuing better sector-driven downstream policies.
The Mineral and Coal Mining Law 2009 was the basis of the 2014 Presidential Decree that brought about the export ban. The initial prohibition did not sit well with the private sector and investors. The short-term impact and resulting fall in revenues became enough to restructure the export regulations on unprocessed minerals.
Towards Downstream Sustainability
Indonesia is the largest global tin exporter and has the world’s largest nickel reserve. However, with the upcoming regulatory controls in this industry, entrepreneurs will need to focus on downstream activities. This will not only sustain economic development but will also contribute to job creation and stabilise the commodities market conditions. The new regulations and incentives will ensure Indonesia’s downstream mineral sector thrives.
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