(in association with Stephenson Harwood LLP)

BRINGING FORWARD NICKEL ORE EXPORT BAN –

COMPOUNDING INVESTOR UNCERTAINTY PROBLEM12345

INTRODUCTION

The recent decision of the Government to bring forward the Nickel Ore Export Ban from
2022 to 2019 has unsettled international commodities markets as well as generated much
discussion of the likely reasons for this decision.

Statements by senior Government officials, aimed at justifying the 2019 Nickel Ore Export
Ban, have been confused and confusing with many different considerations jumbled together
and a startling lack of any comprehensive analysis of the macro-economic implications of
such a move.

There is a serious risk that, in bringing forward the Nickel Ore Export Ban to 2019, the
Government has compounded Indonesia’s already endemic problem of investor uncertainty,
especially in the energy, infrastructure and mining sectors.

In this article, the writer will consider the decision to bring forward the Nickel Ore Export
Ban to 2019, the likely reasons for this decision and how it may affect investor attitudes to
Indonesia generally.

BACKGROUND

In January 2017, the Government announced that it would allow (i) the continuation of
exports of certain metal mineral concentrates (concentrates being intermediate and only
partially refined metal mineral products) beyond the then 11 January 2017 deadline for full
domestic processing and refining of all metal minerals (“2017 Concentrate Export
Continuation”) and (ii) the resumption of exports of substantially unprocessed/unrefined
Nickel Ore and Bauxite Ore which had been banned since 11 January 2014 (“2014 Export
Ban”) (“2017 Nickel Ore & Bauxite Ore Export Resumption”) (together, “2017 Export
Ban Relaxation”).

The 2017 Export Ban Relaxation allowed parties, producing concentrate forms of Copper and
certain other metals, to continue to export their concentrate products, in quantities approved
by the Ministry of Energy & Mineral Resources (“ESDM”), for a maximum of five years
until 11 January 2022, so long as they:

1
Bill Sullivan, Senior Foreign Counsel with Christian Teo & Partners and Senior Adviser to Stephenson Harwood LLP.
2
Bill Sullivan is the author of “Mining Law & Regulatory Practice in Indonesia – A Primary Reference Source” (Wiley,
New York & Singapore 2013), the first internationally published, comprehensive book on Indonesia’s 2009 Mining Law
and its implementing regulations.
3
Copyright in this article belongs to Bill Sullivan and Petromindo.
4
This article may not be reproduced for commercial purposes without the prior written consent of both Bill Sullivan and
Petromindo.
5
An earlier version of this article appeared in the September – October 2019 edition of Coal Asia Magazine.
(a) in the case of foreign-owned producers, committed to divesting 51% of their issued
shares to local parties within ten years of commencing production;

(b) had their smelter construction plans independently verified and approved by ESDM;

(c) made 90% ongoing progress in fulfilling their existing commitments to domestic
smelter construction;

(d) renewed their export permits every twelve months; and

(e) paid the applicable export tax of up to 10%.

The 2017 Export Ban Relaxation also allowed parties, producing Nickel Ore, to resume
export of unprocessed Nickel Ore, with a Nickel content of less than 1.7% and in ESDM
approved quantities, for a maximum of five years until 11 January 2022, so long as they:

(a) in the case of foreign-owned producers, committed to divesting 51% of their issued
shares to local parties within ten years of commencing production;

(b) committed to constructing domestic smelters within five years;

(c) had their smelter construction plans independently verified and approved by ESDM;

(d) made 90% ongoing progress in fulfilling their commitment to domestic smelter
construction;

(e) renewed their Export Permits every twelve months;

(f) collectively supplied 30% of the low metal content Nickel Ore required by domestic
smelters; and

(g) paid the applicable export tax of up to 10% (together, “2017 Nickel Ore Export
Conditions”).

Finally, the 2017 Export Ban Relaxation allowed parties, producing Bauxite Ore, to resume
export of washed Bauxite Ore, with an aluminum oxide content of at least 42% and in ESDM
approved quantities, for a maximum of five years until 11 January 2022, so long as they:

(a) in the case of foreign-owned producers, committed to divesting 51% of their issued
shares to local parties within ten years of commencing production;

(b) committed to constructing domestic smelters within five years;

(c) had their smelter construction plans independently verified and approved by ESDM;

(d) made 90% ongoing progress in fulfilling their commitment to domestic smelter
construction;

(e) renewed their export permits every twelve months; and

19WAS045 03 2
(f) paid the applicable export tax of up to 10%.

While the 2017 Concentrate Continuation was widely expected, the 2017 Nickel Ore &
Bauxite Ore Export Resumption took many people by surprise.

The Government has now brought forward the ban on the export of Nickel Ore, with a Nickel
content of less than 1.7%, from 11 January 2022 to 31 December 2019 and thereby
effectively banned the export of all Nickel Ore as of 31 December 2019 (“2019 Nickel Ore
Export Ban”). The Government has, however, left in place the 2017 Concentrate
Continuation and the 2017 Nickel Ore & Bauxite Ore Export Resumption in respect of
Bauxite Ore only.

The Minister of Energy & Mineral Resources (“MoEMR”) recently issued MoEMR
Regulation No. 11 of 2019 re Second Amendment to MoEMR Regulation No. 25 of 2018 re
Mineral & Coal Mining Business (“MoEMRR 11/2019”). MoEMRR 11/2019 provides the
legal basis for the 2019 Nickel Ore Export Ban.

Even before the issuance of MoEMRR 11/2019, rumors about the impending 2019 Nickel
Ore Export Ban had resulted in a dramatic increase, of more than 40% during 2019, in the
price of Nickel Products on international markets.

Readers interested in knowing more about the long and often changing lead-up to the 2019
Nickel Ore Export Ban are referred to the writer’s earlier articles being (i) “Is the Export Ban
Really Going to be Enforced in January 2014 After All?”, Petromindo, Coal Asia Magazine
December 2013 – January 2014; (ii) “The Export Ban as Finally Introduced – A Grand
Compromise with Much Residual Uncertainty”, Petromindo, Coal Asia Magazine, January –
February 2014, (iii) “The Unfinished Business of the Export Ban – Old and New Issues
Frustrate the Grand Compromise”, Petromindo, Coal Asia Magazine February - March
2014; (iv) “Export Ban Upheld by Constitutional Court”, Petromindo, Coal Asia Magazine,
January – February 2015, (v) “Metal Mineral Export Ban – Showdown at the O.K. Corral?”,
Petromindo, Coal Asia Magazine, October – November 2016 and (vi) “New Metal Mineral
Export Conditions – Smoke & Mirrors”, Petromindo, Coal Asia Magazine, February – March
2017.

ANALYSIS AND DISCUSSION

1. Various Reasons Given for 2019 Nickel Ore Export Ban

The reasons given for the 2019 Nickel Ore Export Ban are varied in the extreme while, at the
same time, being “bundled together” in a confused and confusing manner.

Is the 2019 Nickel Ore Export Ban predicated on (i) the importance of fully implementing the
domestic processing and refining of metal minerals obligation imposed by the 2009 Mining
Law, (ii) the inherent desirability of doing more to encourage smelter investment and
downstream processing and refining of metal minerals, (iii) taking advantage of the
opportunities presented by the on-going trade dispute between the United States of America
and China, (iv) the urgency of increasing exports to overcome a trade imbalance, (v)
addressing abuses by existing Nickel Ore exporters, (vi) concern that Indonesia may exhaust
its reserves of Nickel Ore, (vii) Indonesia already having enough existing smelter capacity to

19WAS045 03 3
carry out domestic processing and refining of all its Nickel Ore production, (viii) recognition
of emerging domestic opportunities for Nickel Ore usage in the form of production of
batteries for electric cars or (ix) something else? All these reasons and more have been
advanced by different supporters of the 2019 Nickel Ore Export Ban.

The Coordinating Minister for Maritime Affairs (“Coordinating Minister”) has been
particularly vocal in his support for the 2019 Nickel Ore Export Ban. Parsing his various and
somewhat confusing statements about the 2019 Nickel Ore Export Ban, the position of the
Coordinating Minister may be summarized as follows:

(a) domestic processing and refining of all Nickel Ore is the inescapable future of
Indonesia and it is inevitable that there will eventually be a complete Nickel Ore
Export Ban;

(b) domestic processing and refining of Nickel Ore will greatly increase the value of
Indonesia’s metal mineral exports and make a major contribution to improving
Indonesia’s current account position (i.e., the sum of the balance of trade or exports
minus imports of both goods and services plus net factor income plus next transfer
payments) (“Current Account”) which has shown a very substantial deficit
(“Current Account Deficit”) for several years now;

(c) Indonesia can significantly increase investment in construction of smelters for

domestic processing and refining of Nickel Ore by showing suitable commitment to
an immediate Nickel Ore Export Ban;

(d) there is already or will shortly be sufficient smelter capacity in Indonesia to

domestically process and refine all of the country’s Nickel Ore production;

(e) having regard to (a) to (d) above, it is very much in Indonesia’s economic interests to
move forward the Nickel Ore Export Ban from 2022 to 2019; and

(f) there is no good reason why Indonesia should wait until 2022 to implement the Nickel
Ore Export Ban notwithstanding that, as part of the 2017 Nickel Ore & Bauxite Ore
Export Resumption, the Government previously assured Nickel Ore producers they
could keep exporting low grade Nickel Ore until 2022 so long as they complied with
the 2017 Nickel Ore Export Conditions (“CMMA’s Position”).

At the same time as he has been vocally supporting the 2019 Nickel Ore Export Ban, the
Coordinating Minister has sought to deny rumors the Government was lobbied (i.e.,
“pressured”) by prospective foreign investors in smelters to bring forward the Nickel Ore
Export Ban to 2019. The Coordinating Minister’s assurances on this matter, as reported in a
22 August news item by CNBC Indonesia, were somewhat undercut though when, having
just denied the existence of any lobbying by Chinese investors, he referred to an Indian
investor having expressed an interest in building a large smelter in Indonesia and in
conjunction with its existing Nickel Ore concession but only if Indonesia would immediately
implement the Nickel Ore Export Ban. As quoted by CNBC Indonesia, the Coordinating
Minister said:

“But one condition, you [Nickel Ore exports] must be banned. Because if you [ Nickel
Ore exports] are not banned, why do you build a factory here? Make it in India. Make

19WAS045 03 4
 it in China.”

2. Current Account Deficit

The important contribution the 2019 Nickel Ore Export Ban will supposedly make to
reduction of the Current Account Deficit is a critical aspect of CMMA’s Position. This is
because it is directed at the President’s growing concern about the size of the Current
Account Deficit and its potential to cause an outflow of capital from Indonesia and rapid
depreciation of the Rupiah if investors come to view the Government’s apparent difficulty in
managing the Current Account Deficit as evidence of overall poor economic policy making.

According to a front-page news item in the 15 August edition of The Jakarta Post, the
President recently said that:

“the current account deficit….. is the country’s biggest economic problem at present.”

The same news item, in the 15 August edition of The Jakarta Post, made clear that a major
focus of the President’s soon to be announced Second Term Cabinet would be to improve
exports and reduce the Current Account Deficit. To this end, the Trade Ministry is to be
merged with the Industry Ministry to concentrate on domestic trade matters while the Foreign
Ministry will be given new responsibility for improving exports through “economic
diplomacy”.

The Coordinating Minister has been quoted on several occasions (most recently by the Detik
Finance media service on 22 August) as saying that the 2019 Nickel Ore Export Ban will
result in Indonesia’s

“existing Nickel Ore exports worth US$600 million to US$700 million becoming
refined Nickel Product exports worth US$5.8 billion initially, increasing to US$7.5
billion and then to US$12 billion”.

As to the resulting impact on the Current Account Deficit, the Coordinating Minister was
quoted in a 20 August report by news portal tirto.id as having said the result of the 2019
Nickel Ore Export Ban will be that:

“Indonesia will become the largest nickel [refined Nickel Product] producer in the
world. The effect of CAD [repair] will be extraordinary. The multiples can be large.”

Given his pre-occupation with the Current Account Deficit, it is understandable the President
apparently sees a lot of merit in the 2019 Nickel Ore Export Ban when presented with the
Coordinating Minister’s “impressive” figures. It is unclear, however, whether or not the
President ensured that a very careful study was undertaken of the basis for the Coordinating
Minister’s “impressive” figures before finally approving the 2019 Nickel Ore Export Ban.

The Coordinating Minister is, of course, entirely correct to say that exporting high value,
refined Nickel Products will make a much greater contribution to reducing the Current
Account Deficit than exporting low value Nickel Ore. What is much less clear, however, is
whether the mere act of moving forward the Nickel Ore Export Ban to 2019 from 2022 will
result in the huge increases in export values, claimed by the Coordinating Minister, being

19WAS045 03 5
realized before 2022. Also, presumably, the very same huge increases in export values would
have been realized by Indonesia starting in 2022 if the Government had not moved forward
the Nickel Ore Export Ban to 2019. Finally, it is far from clear that the Coordinating Minister
has taken into account any negative consequences for exports and investment in other sectors
of the Indonesian economy that may result from the 2019 Nickel Ore Export Ban. This final
point was identified by the Minister of Trade as a potential weakness in the 2019 Nickel Ore
Export Ban. According to a 20 August report by news portal tirto.id, the Minister of Trade
has expressed the concern that implementation of the 2019 Nickel Ore Export Ban may, at
least initially, result in a decline in exports in other areas. The Minister of Trade was quoted
as saying that:

“With the ban on the export of low-grade nickel ore, the export performance will be
disrupted. In terms of trade, we will be disrupted by US$4 billion. Also from other
industries that are in the process.”

It may be that the huge increases in export values, claimed by the Coordinating Minister, are
really just a matter of timing. In other words, the same increases in export values would have
been realized, starting in 2022 rather than in 2020, if the Nickel Ore Export Ban had not been
moved forward to 2019. That said, the Government would clearly prefer to start reducing the
Current Account Deficit in 2020 rather than only in 2022. Accordingly, it must be
acknowledged that the 2019 Nickel Ore Export Ban is, probably, consistent with one of the
President’s most important economic objectives during his Second Term; namely, reducing
the Current Account Deficit as soon as possible although perhaps not by as much as the
Coordinating Minister has claimed if the reservations of the Minister of Trade are correct.
Assuming this is correct, the issue then becomes whether or not the undeniable timing
benefit, in terms of reducing the Current Account Deficit, of having the increases in
export values start in 2020, rather than only in 2022, is offset by other considerations of
equal or even greater importance to Indonesia in the long run. This is the subject of the
next three sections.

3. Investor Fairness/Unfairness

The 2019 Nickel Ore Export Ban is, of course, very unfair to those Nickel Ore producers who
(i) currently have Export Quotas/Permits for Nickel Ore, (ii) genuinely intend to build
smelters, by 2022, using their Nickel Ore export proceeds as partial financing for the same,
(iii) really have no alternative to Nickel Ore export proceeds as a means of partially
financing construction of their smelters, (iv) are making the required progress with smelter
construction and (v) are otherwise fully complying with all the 2017 Nickel Ore Export
Conditions. The question, though, is how many Nickel Ore producers actually fall into this
category?

The Indonesian Nickel Mining Association (“APNI”) has been almost as vocal as the
Coordinating Minister, albeit in opposing rather than in supporting the 2019 Nickel Ore
Export Ban.

APNI’s objections to the 2019 Nickel Ore Export Ban seem to be based primarily on
“fairness” considerations rather than economic considerations although, somewhat belatedly,
APNI has sought to broaden its objections to include some other considerations. According to
the Secretary General of APNI, as quoted in a Bisnis.com news portal item on 26 August:

19WAS045 03 6
 “If it [the right to export Nickel Ore] stops halfway in 2019, local entrepreneurs will
all die.”

APNI’s opposition to the 2019 Nickel Ore Export Ban may be summarized as being that it:

(a) is unfair to local entrepreneurs who invested in Nickel Ore production in 2017
following the announcement of the 2017 Nickel Ore & Bauxite Ore Export
Resumption and in reliance upon being able to use the proceeds from five years of
Nickel Ore exports to finance smelter construction;

(b) will interfere with and delay indefinitely the construction of smelters by entrepreneurs
who have no means of financing smelter construction other than from Nickel Ore
export proceeds;

(c) will force producers to sell their Nickel Ore production to existing smelter
owners/operators at whatever price the existing smelter owners/operators are willing
to pay given exporting Nickel Ore production will no longer be an available option;

(d) may cause some Nickel Ore producers to cease operation altogether; and

(e) in the event of (d) occurring, adversely affect the economic well-being of local
communities as well as increase the risk of foreign investors acquiring control of
Nickel Ore mining concessions and half-built smelters.

The weakness in APNI’s position and its preoccupation with “fairness” is the concern that at
least some of the local entrepreneurs currently exporting Nickel Ore in reliance upon the
2017 Nickel Ore & Bauxite Ore Export Resumption are, in fact, not intending to build
smelters at all but, rather, are just taking advantage of lax enforcement (or worse) of the 2017
Nickel Ore Export Conditions. It is, needless to say, impossible to tell how justified or
otherwise is this concern. However, it inevitably casts doubt on whether there is really any
serious unfairness in implementing the 2019 Nickel Ore Export Ban if it will effectively stop
“rogue” Nickel Ore producers from exploiting inherent weaknesses in the 2017 Nickel Ore
Export Conditions (and in the enforcement of the same).

4. Investor Certainty/Uncertainty

The 2019 Nickel Ore Export Ban is obviously inconsistent with the 2017 Export Ban
Relaxation and, more particularly, with the 2017 Nickel Ore & Bauxite Ore Export
Resumption which allowed the resumption of exports of unprocessed Nickel Ore, with a
Nickel content of less than 1.7% and in ESDM approved quantities, for a maximum of five
years or until 11 January 2022 and provided the 2017 Nickel Ore Export Conditions are
satisfied.

Notwithstanding supposedly good economic and political reasons for the 2017 Export Ban
Relaxation, the 2017 Export Ban Relaxation only served to highlight the complete lack of
consistency in how successive Governments have approached the implementation of the
obligation, imposed by the 2009 Mining Law on metal mineral and coal producers, to carry
out local value-added activity “within five years” or by January 2014. Initially proposed for

19WAS045 03 7
as early as May 2012, the deadline for the cessation of all metal mineral ore exports, in less
than fully refined form, was subsequently changed from January 2014 to January 2017 and
then to January 2022.

The Government has now effectively “doubled down” on its earlier lack of consistency, in
allowing the 2017 Nickel Ore & Bauxite Ore Export Resumption, by bringing forward the
Nickel Ore Export Ban to 2019 from 2022.

It must be expected that the 2019 Nickel Ore Export Ban will to a greater or lesser degree:

(a) be interpreted as showing Indonesia has made little progress in overcoming the so-
called “flip flop phenomenon”, of ever-changing policy and regulation in the mining
industry, that even the President has complained about;

(b) confirm investors’ worst fears about the inherent lack of consistency and continuity in
Government policy on mining industry related issues; and

(c) discourage new investment in the mining industry, except possibly in smelter
construction.

Even the promised new investment in smelter construction may fail to be realized, at least in
the amount envisaged by the Coordinating Minister, once the 2019 Nickel Ore Export Ban is
implemented. After all, what confidence could prospective investors in smelters possibly
have that bringing forward the Nickel Ore Export Ban to 2019 from 2022 will be the last
major change in Government policy on domestic processing and refining of Nickel Ore?
Having already substantially changed Government policy on domestic processing and
refining of Nickel Ore in 2012, 2014 and 2017, a further substantial change in 2019 only
serves to make embarrassingly clear that Indonesia simply does not offer any legal, policy or
regulatory certainty whatsoever for prospective investors in the local mining industry
including prospective investors in domestic processing and refining of Nickel Ore.

5. The Bigger Picture

The President has:

(a) repeatedly expressed his dissatisfaction with the fact that Indonesia’s rate of economic
growth is hovering at around 5% per annum and otherwise still falls far short of the
7% per annum economic growth rate promised by the President when he first took
office in 2014;

(b) indicated strong interest in seeing Indonesia benefit from the ongoing relocation of
manufacturing activity from China to South East Asia in response to the United States
– China trade dispute; and

(c) identified Vietnam as Indonesia’s major competitor for relocating manufacturing

capacity as well as being a country that is currently doing a better job than Indonesia
in attracting foreign investment generally.

19WAS045 03 8
Given the President’s focus on improving the rate of economic growth and ensuring that
Indonesia as a whole benefits from increased foreign investment, there was clearly a need
for the Government to carefully balance the (i) benefit of any positive impact on smelter
construction investment and on reducing the Current Account Deficit that might follow from
implementing the 2019 Nickel Ore Export Ban against (ii) its possibly negative impact on
investment in the Indonesian economy as a whole. If one of the consequences of the 2019
Nickel Ore Export Ban is a heightened perception, among foreign investors generally, of
Indonesia as being an unreliable investment destination, then the claimed economic benefits
of increased investment in smelters and a reduction in the Current Account Deficit may well
be offset by an increased reluctance, on the part of at least some foreign investors, to make
large capital investments in other sectors of the Indonesian economy.

Put another way, the decision to bring forward the Nickel Ore Export Ban to 2019 should not
have been made on the basis of just what was the best course of action for promoting
domestic processing and refining of metal minerals through greater investment in smelter
construction or even what was the best course of action for reducing the Current Account
Deficit. Instead, the focus should have been on what was the best course of action for
promoting greater investment in the Indonesian economy as a whole. It was almost
certainly the need for this “bigger picture perspective” that the Trade Minister was alluding to
when he highlighted the potential for implementation of the 2019 Nickel Ore Export Ban to
adversely affect other areas of the Indonesian economy.

Insights into the likely negative impact of the 2019 Nickel Ore Export Ban, on investor
perceptions of Indonesia as a reliable/unreliable investment destination, can be usefully
gained from a recent presentation by the World Bank to the President. As reported on the
front page of the 10 September 2019 edition of The Jakarta Post, the World Bank identified
thirty-three Chinese companies which, between June and August 2019, announced plans to
set up or expand production abroad. Not even one of these Chinese companies has chosen
Indonesia as the place for its new or expanded production activities. According to the World
Bank, perceived regulatory uncertainty in Indonesia was a contributing reason for the
relevant Chinese companies preferring Vietnam, Cambodia, Malaysia, Mexico, Serbia and
Thailand to Indonesia. Self-evidently, unexpectedly bringing forward the Nickel Ore Export
Ban, from 2022 to 2019, will have done nothing to (i) reduce Chinese company concerns
about the lack of regulatory certainty in Indonesia or (ii) make Indonesia a more attractive
investment destination than Vietnam for companies moving manufacturing capacity away
from China.

6. An Alternative Approach

The residual concerns regarding the 2019 Nickel Ore Export Ban, as discussed in Sections 3,
4 and 5 above, could have easily been avoided by (i) leaving in place the 2022 deadline for
cessation of all Nickel Ore exports, (ii) strictly enforcing each of the 2017 Nickel Ore Export
Conditions and (iii) immediately and permanently cancelling the Export Quotas/Permits of
any Nickel Ore producers which are not fulfilling the 2017 Nickel Ore Export Conditions
(“Alternative Approach”).

Under the Alternative Approach, compliant Nickel Ore producers would not be treated
unfairly as a result of strict enforcement of the 2017 Nickel Ore Export Conditions. Non-
compliant Nickel Ore producers would have their Export Quotas/Permits cancelled

19WAS045 03 9
immediately but would not reasonably be entitled to complain about unfairness as the 2017
Nickel Ore Export Conditions are very clearly specified and easily understood by all
interested parties. Most importantly, however, the Government would not be doing something
that risks increasing the negative perception of Indonesia as an unreliable investment
destination. Indeed, by strictly enforcing the 2017 Nickel Ore Export Conditions, the
Government would be doing something to help improve the perception of Indonesia as being,
at least, a “somewhat reliable” investment destination.

To the extent the Government’s decision, not to allow the continuation of Nickel Ore exports
until 2022 and in accordance with the 2017 Nickel Ore & Bauxite Ore Export Resumption,
was motivated in part by the perceived difficulties associated with strictly enforcing the 2017
Nickel Ore Export Conditions, the question must be asked how then does the Government
expect to be able to strictly enforce 2019 Nickel Ore Export Ban? It seems inevitable that the
2019 Nickel Ore Export Ban will only encourage “rogue” Nickel Ore producers to consider
illegally exporting Nickel Ore in complete disregard of the 2019 Nickel Ore Export Ban.
After all, those Nickel Ore producers, which are currently exporting without strictly
complying with the 2019 Nickel Ore Export Conditions, are already knowingly operating in
breach of the law. Is it realistic then to expect that these “rogue” Nickel Ore producers will
suddenly “have a change of heart” and decide to henceforth comply with the law, in the form
of the 2019 Nickel Ore Export Ban, when they have not been doing so previously? It is not
apparent to the writer why it should now be materially easier for the Government to strictly
enforce the 2019 Nickel Ore Export Ban than it would have been for the Government to
strictly enforce compliance with the 2017 Nickel Ore Export Conditions.

SUMMARY & CONCLUSIONS

It may well be the case that the 2019 Nickel Ore Export Ban will result in more investment in
smelter construction. It may also well be the case that the 2019 Nickel Ore Export Ban will
help reduce the Current Account Deficit. Finally, it may well be the case that the 2017 Nickel
Ore & Bauxite Ore Export Resumption was actually a mistake at least in the case of Nickel
Ore. For better or worse, however, “that ship has already sailed”.

There must now be a real risk that changing, yet again, Indonesia’s policy on domestic
processing and refining of Nickel Ore will only serve to increase negative perceptions of
Indonesia as an unreliable investment destination. Indonesia already has a chronic problem of
lack of investor certainty and the 2019 Nickel Ore Export Ban may well compound this
problem.

The concern is that the Government has “lost sight of the bigger picture”; namely, how to
increase investment in the Indonesian economy as a whole and thereby move the country’s
economic growth rate significantly above 5% as the President promised he would deliver
when he took office in 2014. It is the economy wide impact of the 2019 Nickel Ore Export
Ban that matters most, not the impact on the domestic Nickel Ore processing and refining
industry or even on the Current Account Deficit in isolation.

*********

19WAS045 03 10
This article was written by Bill Sullivan, Senior Foreign Counsel with Christian Teo &
Partners and Senior Adviser to Stephenson Harwood LLP. Christian Teo & Partners is a
Jakarta based, Indonesian law firm and a leader in Indonesian energy, infrastructure and
mining law and regulatory practice. Christian Teo & Partners operates in close association
with international law firm Stephenson Harwood LLP which has ten offices across Asia,
Europe and the Middle East: Beijing, Dubai, Hong Kong, London, Paris, Piraeus, Seoul,
Shanghai, Singapore and Yangon.

Get in touch

Bill Sullivan Christian Teo Claudius Novabianto

T: +62 21 5150 280 T: +62 21 5150 280 T: +62 21 5150 280

M: +62 815 8506 0978 M: +62 818 124 747 M: +62 818 0858 9235
E: bsullivan@cteolaw.com E: cteo@cteolaw.com E: cnbianto@cteolaw.com

19WAS045 03 11