Abacus | Why Jakarta needs to read up on 15th-century England

Earlier this month the Indonesian government announced it would relax its ban on the export of raw mineral ores. Despite appearances to the contrary, officials claim they are not retreating from their hardline policy of resource nationalism. Restricting the export of unprocessed commodities, they continue to insist, will create high-value jobs and spur Indonesia’s economic growth. Critics of the policy are less sure.

The reasoning behind the export ban, which was proposed in 2009 and came into partial effect three years ago, is simple enough. Indonesia is rich in deposits of minerals including copper, nickel and bauxite, the ore of aluminium. But although these are extensively mined, the ores are exported unprocessed, largely to China, where they are then smelted and refined.

This, say development economists, traps Indonesia in the position of an economic colony. It simply extracts the raw resources. China captures all the high-value processing. By prohibiting the export of unrefined ores, argue proponents of the ban, Jakarta will force metals companies to build smelters in Indonesia, furthering development by pushing the domestic economy up the value curve.

It’s an argument that has resonated with successive Indonesian governments. In 2009 Jakarta passed a law that gave metals companies five years to build processing plants before a complete ban on exports of nickel, copper and other ores was to come into force in 2014.

Unfortunately not one of the planned smelters was completed on time. As a result, the ban was only partially implemented. Nickel ore and bauxite exports were largely halted, with copper ore shipments allowed to continue for another three years.

Yet progress on smelter construction has been glacial. Companies complained that mining regions lack the infrastructure and power to build processing plants. Meanwhile industry critics accused mining companies of deliberately dragging their feet and of stockpiling ores in expectation that the export ban would be reversed.