No More Raw Materials

One by one, raw materials are no longer sold by Indonesia, unless it is in the form of processed or industrial products. Value added is obtained.

KOMPAS/ELSA EMIRIA LEBA

Nickel-based processing and refining factory or smelter owned by PT Virtue Dragon Nickel Industry in Konawe, Southeast Sulawesi, Monday (25/2/2019)

Raw bauxite export will be stopped in June 2023. The government's decision to prohibit exports of all raw bauxite ore, including washed ore, is followed by efforts to encourage the bauxite purification and processing industry in the country. All bauxite ore must be processed in Indonesia, which will produce higher selling value products, including alumina and aluminum.

This bauxite downstreaming follows a similar step that was applied to nickel. Indonesia is appealing the World Trade Organization (WTO) ruling on the nickel export ban dispute against the European Union. Indonesia has banned nickel ore exports since 2020. Nickel ore is processed to meet domestic industrial needs.

Also read: Bauxite Exports to Stop from June 2023

To support the purification of bauxite ore in the country, the government said, currently there were at least four purification facilities or bauxite smelters with a capacity of 4.3 million tonnes. The bauxite reserves owned by Indonesia are estimated to be 3.2 billion tonnes.

In the downstreaming program, Indonesia will no longer be an exporter of raw materials. Conversely, Indonesia can produce semi-finished goods needed by domestic and foreign industries and finished goods needed by consumers at home and abroad. Products that have been processed have a higher value than the original or raw products. The added value can be in multiplied amounts.

KOMPAS/LAKSANA AGUNG SAPUTRA (LAS)

One of the bauxite mining locations on Bintan Island, Riau Archipelago, when photographed from the air, Sunday (1/5/2020).

For example, alumina, processed products and purification of bauxite ore, is worth eight times the value of bauxite ore. When they are further processed to aluminum, the value will increase 30 times compared with the ore value.

Downstreaming is not only in minerals and mining. In the marine and fisheries sector, for example, downstreaming plans for seaweed are now being discussed. If realized, the export value of seaweed derivative products will be greater than the export value of Indonesian seaweed in 2021, which amounted to US$345 million or around Rp 5 trillion.

Also read:

> Indonesia Fights against “Forced Exports”

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

It is not easy to change the habit of selling raw materials into processed products. There is an additional process that must be passed before changing goods into money, including the purification and processing stages. Additional investment is needed to produce semi-finished products and finished products. This investment can be a new attraction for investors to be involved in the production process. Additional investments can absorb labor or capital to be invested in Indonesia. In the end, the intermediate products or finished products give extra value.

For those who want to immediately enjoy the proceeds from the sale of raw materials, be patient. Let us build an industry for better proceeds and added value.

This article was translated by Hyginus Hardoyo.