Indonesian President Joko Widodo speaks during a press conference at the presidential palace in Jakarta, Indonesia on November 21, 2022.
Credit: Facebook/President Joko Widodo
Indonesian President Joko “Jokowi” Widodo announced yesterday that the country will ban bauxite exports from June 2023, underscoring his government’s determination to develop a domestic mineral processing and refining industry.
“The government is committed to continually building sovereignty in our natural resource sector and adding value to the national economy. [products] in order to open as many jobs as possible, increase foreign exchange and create an even economic growth”, said the president, while announcing the policy at the presidential palace in Jakarta.
As with a previous ban on exports of raw nickel ore, the ban on washed bauxite ore is intended to force foreign companies to invest in bauxite processing facilities in Indonesia, to increase the country’s revenues. for its natural resources.
Jokowi acknowledged that, in the short term, the ban would likely reduce bauxite shipments to foreign buyers before the benefits of the policy begin to be felt. According to one report on timeIndonesia could lose between $500 and $600 million per year for the first few years.
“Usually there is a decrease in export value at the beginning, but in the second, third, fourth year [of the policy implementation], the jump may start to be visible,” Jokowi said. “So don’t hesitate, I tell the ministers not to worry about this policy, we have to have confidence.” The Indonesian leader estimated that the ban would eventually increase state revenue from 21 trillion rupiah ($1.35 billion) to 62 trillion rupiah ($3.9 billion).
The export ban, which had been heralded by comments from Indonesian officials, followed Jokowi’s announcement that Indonesia would appeal a recent sentence of the World Trade Organization (WTO) for its three-year ban on exports of nickel ore.
Indonesia, formerly the world’s largest exporter of nickel ore, declared a ban on the export of the raw ore in August 2019, and introduced domestic processing requirements that have required companies to process or purify the raw materials in Indonesia before exporting them. These measures entered into force in early 2020, shortly after the European Union filed a complaint with the WTO.
In its ruling late last month, the WTO panel agreed with the EU’s statementasserting that neither the nickel export ban nor the inland processing requirement (DPR) violated world trade rules.
But Jokowi said Indonesia would not abide by the dictates of the WTO, especially when the world’s most powerful countries often refuse to do so. “We want to be a developed country, we want to create jobs”, Jokowi said at the time. “If we are afraid of being sued and we step back, we will not be a developed country.”
James Guild, economics columnist for The Diplomat observed this week that this is consistent with Indonesia’s longstanding determination to develop its own industries, rather than allow its raw materials to generate wealth abroad. As he himself said, “Nickel is on Indonesian soil and the government wants to extract as much value from it as it can, whether it conforms to free market principles or not. If that means shaking up markets and rejecting free trade, that’s perfectly fine.”
Guild also noted that Indonesia’s actions were part of a growing trend of economic nationalism in an era of growing strategic competition. “Countries around the world are resorting to what we might call economic statecraft, the use of political tools like tariffs and export bans to intervene in markets in pursuit of national strategic objectives,” she wrote.
The question is how many other commodities will receive similar treatment in the coming months and years (Jokowi has already flagged possible export restrictions on tin and copper), and how this could affect Indonesia’s relations with its main trading partners.