TEMPO.CO, Jakarta - Declining performance of the mining industry in the past few years have resulted in high non-performing loan (NPL) ratio for the sector. Aviliani, an economist from the Institutie for Development of Economics and Finance (Indef), predicted that the mining industry will recover in 2018 or 2019, at the soonest.
"Because [mining businesses] are waiting for smelters to be operational," Aviliani said on Thursday, October 13, 2016.
Aviliani asserted that the mining industry's performance is suffering from the ban on unprocessed minerals, which was imposed back in 2014 in accordance with Law No 4 of 2009 on Mineral and Coal Mining (Mining Law). The Mining Law states that mining companies must construct their own smelters and are forbidden from exporting unprocessed mineral ores.
"This affects the mining sector business performance, although currently, [mining] commodity prices are improving," Aviliani said.
Chairman of the Financial Services Authority (OJK) Muliaman D. Hadad said that the mining sector continues to dominate the overall NPL ratio. Gross value of the Indonesian banking industry NPL is currently recorded at 3.2 percent, while the net value is recorded at 1.4 percent.. "The NPL was carried over from 2015, especially from the mining sector and its supporting industries," Muliaman said.
As of July 2016, the NPL ratio for the mining sector is recorded to be at 6.77 percent, a number twice higher compared to the same period last year. On average, the banking industry NPL ratio as of July 2016 is recorded at 3.18 percent, 48 base points higher compared to the same period last year.
Earlier, the government plans to apply a more relaxed mineral export policy in 2017. The policy however, will only apply to companies that have showed its commitment in constructing a smelter in Indonesia.
GHOIDA RAHMAH | ROBBY IRFANI
