US mining giant Newmont said Tuesday it has filed for international arbitration against Jakarta over a controversial mineral ore export ban that has forced it to halt production at its Indonesian mine. The company's Indonesian unit said it was seeking a ruling at the Washington-based International Centre for Settlement of Investment Disputes that would allow it to resume exports. Southeast Asia's top economy introduced a ban on the export of some unprocessed minerals, and higher taxes on others that can still be shipped out of the country, in January.
It is one of a raft of economic policies that critics have dubbed "resource nationalism", and which are pushed by politicians who argue that Indonesia is losing out by allowing foreign firms easy access to lucrative industries. Copper concentrate, a partially processed product that is a major export for Newmont and its US peer Freeport-McMoRan, was exempt from the ban but the companies still faced paying the new, higher taxes on shipments.
But Newmont refused, saying that the levies conflict with its original agreements to operate in Indonesia and it has not exported since the ban came into force. Last month it ceased production at its huge Batu Hijau copper and gold mine in central Indonesia after its stores filled up, declared "force majeure" to avoid penalties on missed deliveries, and sent thousands of workers on temporary leave.
In its latest move in the escalating row with the government, the head of Newmont's Indonesian unit, Martiono Hadianto, announced the company was "left with no option but to seek relief through international arbitration". Newmont said the action was being taken by its Indonesian unit and its majority shareholder, a Dutch entity, as Jakarta's ban also breached existing investment agreements between Indonesia and the Netherlands. R. Sukhyar, a senior energy ministry official, said Newmont had informed the government about the move.
"We regretted it because Newmont has been operating in Indonesia for a long time," he said. Bill Sullivan, an expert on legal and regulatory issues in the Indonesian mining sector, warned that the strategy might backfire. "No Indonesian government... is going to want to be seen to be backing down on the export restrictions in the face of overt pressure from a foreign-owned mining company," he told AFP.
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