Dion Bisara & Francezka Nangoy – The government's plan to ban the export of raw minerals under a deadline three years from now may be feasible and could even create jobs once smelters have been built, according to an analyst and a company executive.
"Excuse of financial loss is impossible," said Kurtubi, an economist at the University of Indonesia and director of the Center for Petroleum and Energy Economics Studies. "Smelters might need large investments, but they can also generate large revenues. If smelters anywhere else in the world can succeed, why not in Indonesia?"
A 2014 regulation would order all miners to process raw commodities including gold, nickel, tin, copper and silver before being shipped overseas. That would force companies to build smelters, Hatta Rajasa, Coordinating Minister for Economic Affairs, said on Friday.
Three years is enough time for miners to build smelters, and mining companies that build smelters close to operations could save on transport costs, while also saving money by using existing infrastructure, Kurtubi said.
"With this regulation, the government also expects to trigger a positive multiplier effect, creating jobs and other value-added schemes," he said. "Mining companies should understand that and follow the rule. Not only the miners, all parties involved should also support this. Stop making excuses."
Some of the world's biggest mining companies operate in Indonesia, including US-based Freeport McMoRan in Papua and Anglo-Australian miner BHP Billiton in Kalimantan.
According to the incoming law, coal miners must export coal that is at least 5,600 kilocalories, a higher threshold than currently exists for many exports.
Earlier this month, Supriatna Suhala, director executive of the Indonesian Coal Mining Association (APBI), said that the cost of building a smelter to boost the quality of coal might be as high as $80 million.
Sukrisno, president director of Tambang Batubara Bukit Asam - a state-controlled coal miner- supported the idea of giving added value to coal, as it would provide many jobs.
There are offers from Chinese and South Korean companies to open processing plants, and Bukit Asam would only pay an operational fee based on the amount of coal processed, he said.
"That scheme is risk-free, as we do not have to invest in anything," Sukrisno said, declining to provide more details because the plan is still at an early stage.
As long as commodity prices stay high, it remains practical to build additional refining capacity. Demand is still increasing from China and India, while other countries, including Japan, may need to use fossil fuel as they turn away from nuclear energy, Sukrisno said.
"In terms of coal prices, I don't worry too much," he said. "There are volatilities but the trend is up, as demand from India and China is still strong. Demand from Japan will also increase as they convert 25 percent of their energy supply from nuclear."