Outright export bans on unprocessed products are uncommon. In a recent example, Indonesia banned the export of a number of mineral ores, such as nickel and bauxite, in 2014. Exports of mineral concentrates were permitted for a period of three years and during this time export taxes were levied at rising rates. In addition, a number of positive supports were provided to investments in processing, including no tariffs on imports of capital goods and inputs required for processing, and a variety of tax reductions. These measures resulted in a dramatic fall in Indonesia’s mineral exports. The value of unprocessed exports of bauxite, copper, and nickel fell from US$7 billion in 2013 to just under US$2.9 billion in 2014. Nickel exports, which declined by 97 percent, were particularly hard hit. The export bans were introduced at a time when global prices were falling and there was widespread oversupply of the minerals concerned, which exacerbated the negative impacts.

Indonesia quickly modified its rules. For example, bauxite producers were allowed to resume exports while they were in the process of building aluminum refineries, but they would have to pay export taxes. In January 2017, the government announced that it would end the prohibition on the export of nickel ore and bauxite and extend a temporary deal to allow the export of copper concentrate.

However, in the interim, government policies had a positive impact on investments downstream. Most of the capital came from China in partnership with local investors. The reversal in government policy caused confusion and considerable opposition from investors and potential investors in downstream processing.^[1],[2],^[3]

A similar scenario played out in Zimbabwe, which banned the export of chrome ore in 2011, only to lift it again in 2015 after admitting the ban had failed to stimulate the refining of chrome. In 2013, the government proposed a tax on raw platinum exports to compel mining companies to invest in smelting and refining capacity in Zimbabwe. The tax was supposed to come into effect in January 2015 but was pushed to 2018 to allow the miners time to set up the facilities. MacDonald Dzirutwe explained:

We have been trying to use taxation but until we have established a facility to process locally the companies will continue to argue that we are being unfair. Once we have processing capacity locally we will institute a la that the amount of concentrate produced first takes care of the capacity that would have been established locally before it can be exported…We have made it clear that as soon as a refinery is built locally, we would want processing done locally.^[4]

The OECD has a database of Export Restrictions on Industrial Raw Materials, which contains information on export regulations in minerals, metals, and woods. The database records and measures restrained exports from 2009 to 2014 at the 6-digit level of HS2007 classification.

View footnotes

[1] Columbia Center for Sustainable Investment (CCSI), Linkages to the Resource Sector. The Role of Companies, Governments and International Development Cooperation (Bonn: Deutsche Gesellschaft fur Internationale Zussamenarbeit, 2016), 39.

[2] Olle Östenson and Anton Löf, “Downstream Activities: The Possibilities and the Realities,” WIDER Working Paper 2017/113, World Institute for Development Economic Research (UNU-WIDER), Helsinki, 2017, 17-18.

[3] Nathan and Associates, Economic Effects of Indonesia’s Mineral-Processing Requirements for Export, U.S. Agency for International Development (Nathan and Associates, 2013).

[4] MacDonald Dzirutwe, “Zimbabwe Hopes to Transform Mining Sector with $4.2 Billion Platinum Deal,” Reuters, March 22, 2018.