The Indonesian House of Representatives (DPR RI) has proposed lifting the bauxite export ban enforced in June 2023. This proposal is supported by ongoing evaluations from the Ministry of Energy and Mineral Resources (MEMR), which is currently assessing the feasibility of reinstating bauxite exports. The original intent behind the ban was to stimulate domestic processing of bauxite into alumina. However, complications related to the capacity of local smelters have presented significant obstacles.
Export bans on minerals are not new in Indonesia. The first ban, introduced in 2014, applied to various minerals, including bauxite and nickel ore, but was soon lifted. In 2020, the government reintroduced stricter restrictions on the export of unprocessed mineral products and planned a gradual and comprehensive ban on raw mineral exports. With the ban imposed in June 2023, the government hoped to replicate the success of the 2020 nickel ore export ban, which was seen as significantly benefiting the national economy.
Indonesia, the world’s sixth-largest producer of bauxite, aims to boost value-added processing and create more jobs through domestic bauxite processing. By banning bauxite exports, the government hoped to increase national revenue from the sector significantly, from 21 trillion rupiah (approximately 129.8 million USD) to 62 trillion rupiah (approximately 383.3 million USD). However, the negative impacts of this policy are beginning to raise concerns within the industry.
The bauxite export ban directly affects national revenue. According to statistics from the MEMR, bauxite exports are expected to decrease by around 8.09 million tons, equivalent to 4.3 trillion rupiah (about 265 million USD). Additionally, around 13.86 million tons of bauxite cannot be processed domestically, resulting in a reduction in government revenue from bauxite royalties by 739.2 billion rupiah (approximately 45 million USD). This impact clearly affects both national revenue and mining companies in the short term.
In terms of employment, the ban could force mining companies to cut production and lay off many workers, according to the Indonesian Bauxite and Iron Ore Companies Association (APB3I). This could seriously impact the livelihoods of employees and their families. Furthermore, the ban might violate free trade principles upheld by the WTO. The ban could be seen as a trade barrier, potentially breaching WTO regulations, and major bauxite-importing countries might lodge complaints.
The policy also faces challenges related to production capacity. With existing smelter capacity, only about 14 million tons of bauxite can be processed into alumina per year, while national bauxite production far exceeds this amount. This results in a significant imbalance between production and processing capacity, impacting bauxite processing.
The decision to reconsider the bauxite export ban reflects the government’s challenge in balancing economic development with resource management. The DPR RI and the MEMR argue that reopening bauxite exports could boost economic growth in bauxite-producing regions. However, the mismatch between smelter capacity and bauxite production volume remains a key issue. Solutions such as increasing the number of smelters and processing capacity need to be considered to address this problem.
Relaxing the bauxite export ban is a pragmatic step to alleviate production pressures and promote local economic development. However, it is crucial for the government to find a balance between encouraging exports and developing domestic processing capabilities to ensure sustainable resource management and long-term economic benefits.
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Author:
Dewi Susanti