Library of Congress

Law Library of Congress

The Library of Congress > Law Library > News & Events > Global Legal Monitor

Indonesia: Businesses Object to Ministerial Decree on Export of Natural Resources

(Mar. 7, 2012) On February 9, 2012, Indonesia's Ministry of Energy and Mining Resources [ESDM] issued a regulation that will ban the export of some raw materials. (Peraturan Menteri ESDM No.07 Tahun2012 Tentang Peningkatan Nilai Tambah Mineral Melalui Kegiatan Pengolahan dan Pemurnian Mineral [Ministerial Regulation of the ESDM, No. 7, 2012, Concerning Adding Value to Minerals Through Processing and Refining Activities], ESDM website.)

The purpose of the new regulation is to benefit Indonesia by keeping natural resources in the country for processing. A complete ban on the export of raw commodities from Indonesia will become effective in 2014; furthermore, no new contracts for the export of raw materials can be signed after May 7 of this year. (Tunggadewa Mattangkilang, Some Resource Titans Not Thrilled with Indonesian Export Ban, THE JAKARTA GLOBE (Mar. 5, 2012).)

Although the 2014 ban was established under the Mineral and Coal Mining Law (Law 4/2009), the May 2012 deadline for arranging new export deals came as a surprise to some in the business world who expected to be able to set up export deals until 2014. (Joel Hogarth & Ratih Nawangsari, Indonesian Mining Industry Reacts to New Decree on Mineral Processing and Refining, O'Melveny & Myers LLP website (Feb. 20, 2012).) Some critics argued that the new rules would hurt the coal industry. Slamet Brotosiswoyo, who heads the Indonesian Employers Association in East Kalimantan Province, spoke about the issue on March 5, 2012, stating, “[w]e explicitly refuse this policy. This will cause many coal mining companies to collapse. This policy was made in a rush and we believe the government must review it.” (Mattangkilang, supra.)

The Chamber of Commerce and Industry of East Kalimantan released a statement arguing that although the basic idea of the regulation is good, the government should take into account “the capability of the country's businesses. Large investments have been made. If these companies have to bear the losses, it will have a massive multiplier effect.” (Id.) East Kalimantan's economy is heavily dependent on extraction of natural resources. (Andre Oosternan, Economic Profile of East Kalimantan (1999), Indonesian Ministry of Forestry website.) In 2011, 95% of the province's experts were coal. (Mattangkilang, supra.)

According to the Minister of Industry, M.S. Hidayat, Indonesia's foreign trading partner nations, including India and Japan, have questioned the new regulation. He defended the new rules, however, stating the change was needed “for the sake of Indonesia's national industrial growth.” (Id.)