Independence First: Indonesia Rejects IMF's Call to Lift Ore Export Ban

Jayanty Nada Shofa
June 30, 2023 | 7:29 pm
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Investment Minister Bahlil Lahadalia attends BTV's night talk show Obrolan Malam on Nov. 25, 2022. (B Universe Photo/Mohammad Defrizal)
Investment Minister Bahlil Lahadalia attends BTV's night talk show Obrolan Malam on Nov. 25, 2022. (B Universe Photo/Mohammad Defrizal)

Jakarta. Indonesia boldly rejects the advice of the International Monetary Fund (IMF) to abandon its industrial downstream policy and demands that the global financial institution cease interfering in the country's affairs.

In a recent Article IV Consultation document, the IMF urged Indonesia to consider phasing out export restrictions and refrain from extending the ban to other commodities in order to mitigate cross-border spillovers.

The IMF recommended that Indonesia conduct regular cost-benefit analyses, taking into account fiscal costs and annual forgone revenue, regarding its industrial downstream policies. The release of the document immediately prompted a response from the Indonesian government, asserting that the downstream policy has significantly contributed to the country's economy.

In 2020, Indonesia ceased exporting unprocessed nickel ores and instead prioritized domestic processing of the valuable metal. Investment Minister Bahlil Lahadalia reported that Indonesia's nickel exports surged from $3.3 billion in 2017-2018 to nearly $30 billion in 2022, thanks to the ban.

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Furthermore, the downstream policy has enabled Indonesia to reduce its trade deficit with China by exporting finished or semi-finished goods. Government data indicates that Indonesia-China's bilateral trade deficit decreased from $18.4 billion in 2018 to $1.8 billion in 2022. In the first quarter of 2023, Indonesia even enjoyed a $1.2 billion surplus with China.

Speaking to reporters in Jakarta on Friday, Minister Bahlil insisted that the IMF should refrain from making baseless claims. He criticized the IMF for previous "misdiagnoses" of Indonesia, stating that such experiences have made the ASEAN nation wary of heeding its advice.

Recalling the 1998 crisis, Bahlil highlighted how the IMF's recommendation to shut down industries and cut social assistance weakened purchasing power, potentially initiating deindustrialization.

"The increased interest rates at the time led to the collapse of numerous businesses," Bahlil explained. "Consequently, our economy experienced sluggish growth. Therefore, the IMF should limit its 'diagnosis' to countries currently facing difficulties and refrain from meddling in our affairs," the minister asserted.

He further emphasized the downstream industry's enduring priority under President Joko "Jokowi" Widodo's leadership, regardless of external pressures. Bahlil vowed to continue the ban on mineral ore exports, even in the face of potential lawsuits at the World Trade Organization (WTO).

Asserting Indonesia's independence, he challenged the IMF and other entities, stating, "If the sky were to fall, the downstream industry would remain our top priority. Should you wish to file a lawsuit against us at the WTO, go ahead. We are now a sovereign nation."

It is worth noting that Indonesia is currently confronting a WTO lawsuit filed by the European Union (EU) regarding its decision to ban nickel exports. The WTO panel ruled in favor of the EU, prompting Indonesia to file an appeal against the report.

Read More: Indonesia’s Downstream Industry Plan Needs $545.3b Till 2040

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