Indonesia confirms ban on bauxite export

Indonesian President Joko Widodo has confirmed an export ban for bauxite starting in June 2023 to encourage domestic processing of a material used as the main ore source of aluminium.

The resource-rich nation has surprised markets with its commodity exports policies, including brief but controversial bans earlier this year on shipments of palm oil and coal, of which Indonesia is the world's biggest exporter.

It is also among the world's top suppliers of bauxite, with China its key buyer. The timing of Indonesia's ban, however, is in line with its current mining law.

The president said the bauxite ban aimed to replicate Indonesia's success in developing its nickel processing capacity after halting exports of its raw form in January 2020, which enticed foreign investors, mostly from China, to build local smelters.

The measure, which led to a dispute at the World Trade Organization (WTO), also helped boost the value of Indonesia's exports.

"The government will remain consistent in implementing down streaming so the value add can be enjoyed domestically for the country's development and people's welfare," said Widodo, who is popularly known as Jokowi, emphasizing the importance of jobs creation.

China was the biggest importer of Indonesia's bauxite until Jakarta introduced a mineral export ban in 2014, which it lifted in 2017.

According to Wen Xianjun, a former head of the aluminium department at the China Nonferrous Metals Industry Association, Indonesia's 2014 ban prompted China to boost its efforts to develop aluminium resources in Africa instead.

"Compared with then, China's imports of bauxite are more diversified now," Wen said.

China imported 17.8 million tons of Indonesian bauxite in 2021, and 17.98 million tons in the first 11 months of year 2022, about 15.6% of its total imports, according to customs data.

Lately, three-month aluminium futures contract on the London Metal Exchange rose 0.6% at US$2,386.50 a ton, while the most-traded aluminium contract on the Shanghai Futures Exchange was up 0.2% to 18,595 yuan a ton.

The announcement by Indonesia is not expected to have significant impact on prices.

"It won't cause any major supply headwind as Indonesia now only accounts for a relatively small share of China's supply, Guinea and Australia will immediately make up the lost volume (after the ban)," an aluminium trader at a large trading house in China said.

Indonesia has four bauxite processing facilities with 4.3 million tons of alumina output capacity, while more are under construction with collective capacity of nearly 5 million tons, said chief economic minister Airlangga Hartarto.

Indonesia's bauxite reserves are enough for up to 100 years production, he said.

The country's mining law also states exports of other unprocessed minerals such as copper will also be stopped. Jokowi did not specify the timing of shipment bans on the other materials.

He said there was a possibility that legal action could be pursued against Indonesia for banning bauxite exports, but it would not deter him.

The WTO last month ruled in favour of the European Union in a dispute on nickel ore exports, which Indonesia is appealing.

 

 

 

WTO appoints first woman and African head

Nigerian economist, Ngozi Okonjo-Iweala has been appointed to head World Trade Organization (WTO), becoming the first woman and first African to take on the role amid rising protectionism and disagreement over how the body decides cases involving billions in sales and thousands of jobs.

Ms Okonjo-Iweala, 66, was named Director General by representatives of the 164 countries that make up the WTO, which deals with the rules of trade between nations based on negotiated agreements.

She said during an online news conference that she was taking over at a time when the WTO was "facing so many challenges".

"It's clear to me that deep and wide-ranging reforms are needed … it cannot be business as usual," she said.

Her first priority will be quickly addressing the economic and health consequences of the COVID-19 pandemic.

Strategies may include lifting export restrictions on supplies and vaccines, and encouraging the manufacturing of vaccines in more countries.

Other big tasks include reforming the organization’s dispute resolution process and finding ways for trade rules to deal with change like digitalization and e-commerce.

She takes over after four turbulent years in which former United States president Donald Trump used new tariffs, or import taxes, against China and the European Union to push his America-first trade agenda.

"It will not be easy because we also have the issue of lack of trust among members which has built up over time, not just among the US and China and the US and the EU … but also between developing and developed country members and we need to work through that," she said.

I absolutely do feel an additional burden, I can't lie about that ‑ being the first woman and the first African means that one really has to perform.

"All credit to members for electing me and making that history, but the bottom line is that if I want to really make Africa and women proud I have to produce results, and that's where my mind is at now."

The appointment, which takes effect on 1st March 2021, came after United States President Joe Biden endorsed her candidacy, which had been blocked by Trump.

Biden's move was a step toward his aim of supporting cooperative approaches to international problems after Trump's go-it-alone approach that launched multiple trade disputes.

But unblocking the appointment is only the start in dealing with US concerns about the WTO that date back to the Obama administration.

The US had blocked the appointment of new judges to the WTO's appellate body, essentially freezing its ability to resolve extended and complex trade disputes.

The US Government has argued the trade organization is slow-moving and bureaucratic, ill-equipped to handle problems posed by China's state-dominated economy, and unduly restrictive on US attempts to impose sanctions on countries that unfairly subsidies their companies or export at unusually low prices.

Chad P. Bown, senior fellow at the Peterson Institute for International Economics, said unblocking Ms Okonjo-Iweala's appointment was "a very good first step" in re-engaging with the WTO.

In particular, the WTO faces "a ticking time-bomb" in the form of other countries' challenges to Trump's use of national security as a justification for imposing tariffs, a little-used provision in US law rejected by key US trading partners in Europe.

Ms Okonjo-Iweala has been Nigeria's finance minister and, briefly, foreign minister, and had a 25-year career at the World Bank as an advocate for economic growth and development in poorer countries.

She rose to the number two position of Managing Director, where she oversaw US$104.1 billion in development finance in Africa, South and Central Asia, and Europe.

In 2012 she made an unsuccessful bid for the top post with the backing of African and other developing countries, challenging the traditional practice that the World Bank is always headed by an American.

She has a bachelor's degree in economics from Harvard University and a PhD in regional economics and development from the Massachusetts Institute of Technology.

South Korean Trade Minister Yoo Myung-hee withdrew her candidacy, leaving Ms Okonjo-Iweala as the only choice.

Her predecessor, Roberto Azevedo, stepped down on 31st August 2020, a year before his term expired.