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Indonesia seeks legal route for bauxite miners to resume exports

[JAKARTA] Indonesia's government is discussing legal avenues to allow a resumption of bauxite exports to help kickstart stalled smelter projects, top officials said, as Southeast Asia's largest economy tries to promote infrastructure development.

Indonesia imposed restrictions on exports of unprocessed metal ores in early 2014 in an effort force firms to develop smelters that would add value to the country's resources and create jobs.

However, many firms including bauxite miners said building smelters was unfeasible in the absence of supporting infrastructure and export revenue, and the country's revenue from mining has plummeted.

Indonesia's bauxite exports fell to 2.1 million tonnes in calendar 2014 from 55.6 million in 2013, when they were worth US$1.3 billion to the country's economy.

The need for a breakthrough for bauxite smelters was flagged by the mining ministry in March.

"We are discussing this to see if there's a possibility of us providing a slight relaxation," Sofyan Djalil told reporters on Tuesday, adding that the government was looking into allowing exports by firms that have set aside a smelter development guarantee fund in an escrow account.

"It will be very restricted, very tight. Free riders won't be allowed," Mr Djalil said, adding that no relaxation would be given to nickel miners building smelters. "Nickel doesn't need it because the investment costs aren't too high." Last month the finance ministry said it needed to hasten the pace of infrastructure spending to counter the worst domestic economic slowdown since the depths of the 2009 financial crisis.

According to Mining Minister Sudirman Said, any relaxation of the existing bauxite export rules needs first to ensure it doesn't contradict the country's law on mining, and would likely be covered in a new ministerial decree.

"This is what we need to study - from a legal point of view," Mr Said said on Monday. "The dilemma is this: if we continue to withhold (exports) they won't complete the smelter projects and everyone loses," he said. Once firms had completed more than 30 percent of smelter projects they were seen as unlikely to leave projects unfinished, he said.

Any easing of the mineral export ban for bauxite miners would be the second such policy reversal, after President Joko Widodo's government said it may push back a total ban on exports of copper and other mineral concentrates due to come into effect in 2017.