President Joko ‘Jokowi’ Widodo’s administration has taken a decisive step by closing the door on bauxite ore exports starting from June 10, 2023. The main intention of ban on bauxite export is driving growth of the bauxite processing and refining industry within the country. This move is in line with the provisions of Law No. 3 of 2020 concerning Mineral and Coal Mining (UU Minerba).
“Starting in June 2023, the government will enforce a ban on bauxite ore exports and encourage domestic bauxite processing and refining industries,” said Jokowi, on December 21, 2022.
Impact on employment and export figures
The ban on bauxite ore exports is predicted to have a significant impact on the labor market. Ministry of Energy and Mineral Resources (ESDM) estimated that approximately 1,019 workers involved in bauxite production and sales may face potential unemployment.Â
Furthermore, the ban will lead to a reduction of bauxite exports by approximately 8.09 million tons, with a value equivalent to US$ 288.52 million or around IDR 4.3 trillion in 2023.
These figures are projected to increase to US$ 494.6 million or approximately IDR 7.4 trillion in 2024. It is worth noting that there is an excess of approximately 13.86 million tons of bauxite that is not absorbed by domestic industries.
“Moreover, there will be a decrease in state revenue from bauxite royalties amounting to US$ 49.6 million,” said Arifin Tasrif, the Minister of Energy and Mineral Resources, on June 12, 2023.
Government’s response
To mitigate the potential negative impact of the export ban, the Ministry of Energy and Mineral Resources has outlined a strategy to optimize the existing bauxite smelters.Â
Tasrif stated that four operational smelters can be leveraged to maximize the processing and utilization of bauxite, thereby reducing the need for exports.
“Currently, we have four operational smelters, but they have not been able to operate at full capacity due to a lack of raw material supply. These smelters can be used to maximize the absorption of goods that were previously prohibited for export,” said Tasrif, on June 9, 2023.
Minister Tasrif further explained that by optimizing the processing capabilities of these existing smelters, an additional US$ 1.9 billion can be generated through increased export value. This would also create employment opportunities for approximately 8,646 individuals.
“Therefore, the community will still benefit from the downstreaming of bauxite in the form of an export value of US$ 1.5 billion and the employment of 7,600 people,” he added.
The shift towards domestic industry
The government’s decision to ban bauxite ore exports is currently in line with its strategic vision to enhance the domestic bauxite industry.
By prioritizing local processing and refining, the administration aims to stimulate economic growth, generate employment opportunities, and increase the value-added contribution within the sector.
While concerns regarding job losses in the bauxite mining sector persist, it is crucial for the government to provide support and facilitate a smooth transition for affected workers.
Efforts should be made to equip them with the necessary skills and training to participate in the expanding bauxite processing industry.
Looking ahead, the successful implementation of this ban on bauxite ore exports will heavily rely on the collaboration between the government, industry stakeholders, and workers.
