Resource Nationalism-Indonesia Tightens Minerals Exports

UNCLAS JAKARTA 000918 DEPT FOR EAP/MTS and EB/ESC/IEC DOE FOR CUTLER/PI-32 STATE PASS TDA FOR STEINGASS SENSITIVE SIPDIS E.O. 12958: N/A TAGS: EMIN EINV ECON ID SUBJECT: Resource Nationalism-Indonesia Tightens Minerals Exports ¶1. (SBU) The Government of Indonesia said May 8 that it will institute greater scrutiny on mining export shipments beginning in July, according to a senior trade ministry official. GOI officials say they want to curb illegal exports of coal, as well as copper, nickel, bauxite, lead, zinc and gold ores and concentrates. A similar clampdown on tin in February 2007 resulted in tighter supplies and global prices hitting 20-year highs. In 2006, Indonesian tin exports were 118,555 tons worth $913 million. After the regulation, tin exports dropped to 86,304 tons but rose in value to $1.2 billion, according to government data. ¶2. (SBU) GOI officials said they will pay greater attention to verifying the export volumes reported by miners as well as the quality of ore and condensate exports. Under the current system, exporters provide reports to customs, which makes little effort to reconcile actual shipments with the declarations. Our contacts say the GOI is particularly concerned about losing revenue from coal exports, given the doubling of global coal prices in the last year and the surging volumes of Indonesian thermal coal exports. Indonesia produced almost 200 million metric tons of coal in 2007 and exported almost 80 percent of that production. ¶3. (SBU) Several of our expatriate mining contacts expressed mixed reviews of the new policy, but tempered their remarks given the limited amount of information the GOI released on their plans. They noted Indonesia has a long history of announcing export taxes and other types of controls only to let them lapse or withdraw them in the face of public criticism. In general, our mining company contacts welcome higher prices but worry that continued strong increases on global markets may lower world growth, which will eventually cause the minerals boom to bust. They also expressed concerns about GOI backsliding on investment climate issues. They see a danger of complacency stemming from the higher revenues and fear it will prompt GOI officials to continue pursuing policies that suppress even further the already anemic levels of minerals exploration investment. HUME