Fahmy Radhi, energy economics observer from Gadjah Mada University (UGM) criticized President Joko ‘Jokowi’ Widodo’s partiality with PT Freeport Indonesia (PTFI). Radhi argued that the relaxation of mineral exports provided for PTFI is a form of discrimination against other companies.
Jokowi’s partiality with PTFI
Recently, Jokowi granted export relaxation for copper, iron, lead or zinc commodities until May 31, 2024, to PTFI. Initially, PTFI’s export permits had expired in June 2023.
So far PTFI has been able to freely export without hindrance even without having a completed smelter unit as regulated in Law No, 4 of 2009 concerning Mineral and Coal, as amended by Law No. 3 of 2020 (UU Minerba).
PTFI is currently in the process of building a copper smelter in Manyar, Java Integrated Industrial and Port Estate (JIIPE) Special Economic Zone (KEK) in Gresik, East Java worth US$ 3.4 billion.
Radhi criticized the Ministry of Energy and Mineral Resources (Kemen ESDM) for giving a shortcut to PTFI before the license expiration date arrived. Which might lead to discrimination toward other companies.
“The relaxation of concentrate export is discriminatory against nickel and bauxite businesses that were subjected to domestic mandatory smelter industrial downstreaming. This will only cause them to also demand relaxations for exports on similar commodities,” said Radhi, on June 26, 2023.
Currently, the downstream industry is experiencing obstacles that can hinder further progress. Moreover, there have been discoveries of illegal exports of nickel ore to China which have occurred since 2020, amounting to 5.3 million tons.
“The relaxation of concentrate exports and the discoveries of illegal export of nickel ore will trigger uncertainty, which will cause smelter investors to leave the country,” Radhi said.
Radhi added that it would be a shame if this downstreaming policy failed because it was clear that the policy had already bring a lot of benefits.
Radhi said that after the ban on nickel export, export value for nickel derivative products increased from IDR 17 trillion in 2017 to IDR 326 trillion in 2022
The same situation has occurred with bauxite and its derivatives, which have increased state revenues from IDR 21 trillion in 2017 to IDR 62 trillion by the end of 2022.
Energy and Mineral Resources Minister responds
Arifin Tasrif, Minister of Energy and Mineral Resources said that Indonesia agreed to continue PTFI’s copper concentrate exports in June 2023, based on three considerations.
First, Tasrif said that the government was considering granting a permit to continue exporting copper concentrate due to the Covid-19 pandemic which had an impact on PTFI’s smelter construction being delayed.
He considered that there was a force majeure consideration in relation to the Covid-19 pandemic. Therefore, the export permit extension is not considered to violate the Minerba Law, because the contractor was from Japan, which at that time was in lockdown for several years resulting in no progress.
Second, the majority of PTFI shares are owned by Indonesia through MIND ID of 51%. If there is a loss from PTFI, the government will also be affected.
“Indonesia already has 51% of the shares, the impact will be more for us,” he said.
Third, there is a potential for Termination of Employment (PHK) if there is a termination of PTFI’s export permit in June 2023. Tasrif asserted that there will be a social impact because there are thousands of mining and construction workers with daily wages. There is a risk of potential massive layoffs that was taken into consideration by the government in granting the extension of PTFI’s export permit.
