While Appealing, the Government Discusses Plans for Nickel-ore Export Taxes

The government will appeal to the WTO as well as plans for the imposition of export duties or export taxes on nickel.

KOMPAS/MOHAMAD FINAL DAENG

A worker inspects ferronickel products processed from nickel ore at the PT Aneka Tambang (Antam) factory in Pomalaa, Kolaka Regency, Southeast Sulawesi, Friday (11/5/2011).

BADUNG, KOMPAS — The government will deploy a "double strategy" through fiscal and trade channels following Indonesia's defeat in a lawsuit against the nickel-ore export ban at the World Trade Organization. Apart from submitting an appeal to the WTO, plans for the imposition of export duties or export taxes on nickel ore are also being finalized.

Pande Putu Oka Kusumawardhani, the acting head of the State Revenue Policy Center for the Fiscal Policy Agency of the Finance Ministry, said that the discourse on implementing the nickel-ore export taxes is currently under discussion, in parallel with the government's efforts to submit an appeal to the WTO.

This policy is expected to be able to maintain the momentum of domestic downstreaming in the midst of the ongoing dispute process at the WTO. “The discussion is ongoing; there is no need to wait for the results of the appeal to come out first. There are many scenarios; the impact on the State Budget and the economy will follow from the scenarios that will be decided later," said Oka, when met on the sidelines of the 2022 Annual International Forum on Economic Development and Public Policy (AIFED) in Nusa Dua, Badung, Bali, on Tuesday (6/12/2022). Even though the discussion goes hand-in-hand with the appeals made by the Trade Ministry, Oka said the discussion on the nickel-ore export taxes is not the result of Indonesia's defeat in facing a nickel export-ban lawsuit at the WTO.

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Basically, according to her, the application of export duties on nickel ore is needed to accelerate downstream production and meet domestic supply.

Previously, Indonesia lost against the European Union in a lawsuit related to the nickel export ban at the WTO Dispute Settlement Body (DSB). The nickel-ore export-ban policy has been implemented by Indonesia since 2020.

According to the final report on the decision of the WTO panel on the dispute numbered DS 592 on 17 October 2022, the nickel export-ban policy and the obligation to process and refine nickel in Indonesia are deemed to have violated WTO provisions Article XI.1 GATT 1994. This decision has not yet had permanent legal force, so Indonesia can still appeal (Kompas, 23/11/2022).

KOMPS/RENY SRI AYU

Governor of South Sulawesi Nurdin Abdullah released nickel exports to China. This is a series of inauguration of the operation of the nickel smelter in Bantaeng, South Sulawesi, Saturday (26/1/2019).

Economist of Macroeconomics and Financial Markets of LPEM FEB of the University of Indonesia, Teuku Riefky, assessed that apart from seeking an appeal to the WTO, the government really needs to prepare other instruments to provide disincentives to exports of raw minerals.

“Indeed, we need to continue to pursue an appeal to the WTO, but we should not rely on that outcome alone, because it is relatively beyond our control. It is in contrast to the fiscal strategy that we can still control. After all, the long-term goal remains the same; namely, we want to encourage downstream and value-added economy," he said on the sidelines of the AI FED 2022 event.

Bauxite export ban

At the State Palace, Central Jakarta, on Tuesday, in a plenary Cabinet meeting, President Joko “Jokowi” Widodo said that Indonesia would continue to consistently carry out downstream industries. The government will soon announce a ban on the export of bauxite raw materials.

"We will continue to do what is called downstream industry consistently. We've talked about, after nickel, bauxite. And we will immediately decide when to ban the export of raw materials from bauxite," said the President.

We will continue to do what is called downstream industry consistently.

While answering journalists' questions at the Jakarta Presidential Palace complex, Coordinating Minister for the Economy Airlangga Hartarto said President Jokowi directed the ecosystem of electric-vehicle batteries, nickel, bauxite, aluminum and the automotive industry to be integrated. This includes the incentives that will be given.

"Bapak [Mr.] President asked that the incentives carried out in Indonesia not be inferior compared to other countries, especially ASEAN countries," said Airlangga.

This article was translated by Hyginus Hardoyo.