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Cablegate: Resource Nationalism-Indonesia Tightens Minerals Exports

VZCZCXYZ0016
RR RUEHWEB

DE RUEHJA #0918 1300802
ZNR UUUUU ZZH
R 090802Z MAY 08
FM AMEMBASSY JAKARTA
TO RUEHC/SECSTATE WASHDC 8953
RHMFIUU/DEPT OF ENERGY WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS JAKARTA 000918

DEPT FOR EAP/MTS and EB/ESC/IEC
DOE FOR CUTLER/PI-32
STATE PASS TDA FOR STEINGASS

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: EMIN EINV ECON ID
SUBJECT: Resource Nationalism-Indonesia Tightens Minerals Exports

1. (SBU) The Government of Indonesia said May 8 that it will
institute greater scrutiny on mining export shipments beginning in
July, according to a senior trade ministry official. GOI officials
say they want to curb illegal exports of coal, as well as copper,
nickel, bauxite, lead, zinc and gold ores and concentrates. A
similar clampdown on tin in February 2007 resulted in tighter
supplies and global prices hitting 20-year highs. In 2006,
Indonesian tin exports were 118,555 tons worth $913 million. After
the regulation, tin exports dropped to 86,304 tons but rose in value
to $1.2 billion, according to government data.

2. (SBU) GOI officials said they will pay greater attention to
verifying the export volumes reported by miners as well as the
quality of ore and condensate exports. Under the current system,
exporters provide reports to customs, which makes little effort to
reconcile actual shipments with the declarations. Our contacts say
the GOI is particularly concerned about losing revenue from coal
exports, given the doubling of global coal prices in the last year
and the surging volumes of Indonesian thermal coal exports.
Indonesia produced almost 200 million metric tons of coal in 2007
and exported almost 80 percent of that production.

3. (SBU) Several of our expatriate mining contacts expressed mixed
reviews of the new policy, but tempered their remarks given the
limited amount of information the GOI released on their plans. They
noted Indonesia has a long history of announcing export taxes and
other types of controls only to let them lapse or withdraw them in
the face of public criticism. In general, our mining company
contacts welcome higher prices but worry that continued strong
increases on global markets may lower world growth, which will
eventually cause the minerals boom to bust. They also expressed
concerns about GOI backsliding on investment climate issues. They
see a danger of complacency stemming from the higher revenues and
fear it will prompt GOI officials to continue pursuing policies that
suppress even further the already anemic levels of minerals
exploration investment.
HUME

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