Bank Indonesia: Export Ban Causes Slowing Economy Eastern Regions
The central bank of Indonesia (Bank Indonesia) believes that Indonesia's recently introduced ban on the export of unprocessed minerals, in effect since 12 January 2014, will result in slowing economic growth in several regions in the eastern part of Indonesia as these regions are main sources of mineral production. Doddy Zulverdi, Head of the Economic Assessment Group in Bank Indonesia's Department of Economic and Monetary Policy, said that Sulawesi and Kalimantan will post slowing economic growth this year.
Based on data from Bank Indonesia, the eastern region of Indonesia and the island of Sumatra (located in the country's western part) were the main supporters of national economic expansion in the fourth quarter of 2013 (5.72 percent from 5.63 percent in the previous quarter) due to improved exports, particularly natural resources and plantation products. Java, Indonesia's most populous island and which accounts for almost 60 percent of the country's total economic growth, recorded slowing economic expansion amid reduced local demand.
However, Bank Indonesia expects that the eastern regions' GDP growth will slow to between 4.5 percent and 5.0 percent in 2014, significantly lower than the national average forecast of 5.8 to 6.2 percent.
Since 12 January 2014, the Indonesian government implemented a ban on exports of unprocessed minerals, implying that raw minerals need to be processed domestically first before export is allowed. The new law was announced in 2009 but few miners were willing to build processing smelters as they expected that the government would pull back this export ban on concerns that it disrupts the country's mining sector and trade balance (as the majority of Indonesia's exports constitutes raw commodities). On 11 January 2014, the government did sign a last-minute revision to the export ban which meant that continued exports of certain minerals would be allowed until 2017. However, continued exports are only possibly under specific and strict conditions implying that the trade balance will still be affected. As Kalimantan and Sulawesi are important sources of mineral production, these regions will feel the impact of reduced mineral exports until value-added processing industries are developed.
Further Reading:
• Softer Rules but Unclarity Remains about Indonesia's Ore Export Ban
• Go-Ahead for Indonesia's Controversial Ban on Unprocessed Mineral Exports
• Analysis of Indonesia's 5.78% Economic Expansion in 2013
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