Indonesia's widening deficit takes toll on resource nationalism drive

Tue Sep 17, 2013 12:47am EDT
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

By Fergus Jensen and Randy Fabi

JAKARTA (Reuters) - Indonesian policymakers are scrambling to ease nationalistic resource rules that threaten to slash mining exports from January and potentially widen a current account deficit already at a near-record high.

The deficit, which reached $9.8 billion in the second quarter, or more than 4 percent of GDP, has become enemy No. 1 for President Susilo Bambang Yudhoyono's administration, and any policies that worsen the situation have come under fire.

Regulations initially passed more than a year ago to allow Indonesia to seize more control over its natural resources are being reviewed as the government looks to bolster exports to offset a bulging import bill.

"For exports, this is an emergency," Energy and Mineral Resources Minister Jero Wacik told reporters recently. "What is important is that the balance of imports and exports improves for our country."

The trade deficit in July widened to a record $2.31 billion from $880 million the previous month due to a spike in oil imports. The trade balance along with investment income make up Indonesia's current account deficit.

Among the policies the government is reconsidering are a pending ban on mineral ore exports, and a royalty hike and export tax on coal. Shipments from the two industries represent more than 15 percent of Indonesia's total exports by value, or around $2.5 billion a month.

Indonesia is the world's top exporter of nickel ore, thermal coal and refined tin.

"A ban applied (on mineral ore exports) in January 2014 would lead to a significant disruption of exports," Barclays analysts said in a research report.   Continued...