TEMPO.CO, Jakarta - Hatta Rajasa admitted to being quite occupied following the implementation of an important clause in Law No. 4/2009 on Minerals and Mining. The ban on the export of mineral ores as of January 12 has made the coordinating ministry of the economy the target of intensive lobbying by giant multinational mining companies.
Hatta cited two particular companies lobbying for dispensation: Freeport Indonesia and Newmont Nusa Tenggara. They asked to be given special exception from the export ban as well as from the obligation to build smelters.
According to Hatta, the government firmly rejected the request. He admitted he was not worried that the companies would bring the case to international arbitration. "We will face the situtation when it comes," Hatta told Tempo reporter Y.Tomi Aryanto by telephone, last week.
What is the background on the clause that required mining companies to build smelters?
In the past decades, we have exploited our natural resources excessively and sold them only as raw materials. In the past year, the export of bauxite and nickel alone amounted to 50 million tons. If we compare the gains against the destruction on the land, it's not balanced. In fact, there's been oversupply because we have exported too much, which has led to the price of commodities to decline. This is not sustainable, because there will never be a downstreaming of the industry in this sector. Secondly, there will not be an improvement in the quality of our human resources who work in that sector either. Thirdly, because the mines are mostly in remote areas, there is much smuggling, or inaccurate data between what is exploited and what is reported. So this policy of banning the export of ores is no longer an economic issue, but a strategic one to build the self-sufficiency of the nation. Law No. 4/2009 was drafted with that in mind. But we also realize we cannot stop exports just like that, so we gave the companies five years of transition to build smelters. It should have been enough time.
This time, the government has given an extension until 2017?
It's not really an extension, because it's the Finance Minister's decision to apply quite high taxes that in fact is intended to pressure the companies to build the smelters. And they are unlikely to meet the high export taxes if they don't build the smelters quickly.
Companies holding contracts of work, like Freeport and Newmont, asked for exception because of their legas basis as a lex specialis.
There are articles in the law that can be interpreted in many ways. Some say the contract of work that was signed before the legislation came about must be honored till its completion. This is the hardest part of our contract renegotiation.
Can they take the case to international arbitration?
They can. That happens in any business agreement, although I hope they are also aware that the government has given them a five-year extension on this issue. But if they do sue us, well, the government must face that situation.
What are the government's chances in this case?
I am convinced we will win. This regulation is not always carried out and they have been asked to discuss how to determine that five-year transition.
Read the complete interview in this week's edition of Tempo English Magazine.
