IN THE more rugged, poor and far-flung areas of the vast archipelagoes of Indonesia and the Philippines, mining is one of the few industries that shows much promise. Last year the Philippines exported nearly $1.7bn of minerals and ore—4% of the country’s exports. Mining employs over 200,000 people. By the same token, the Indonesian unit of Freeport McMoRan, an American firm that operates Grasberg, a vast copper and gold mine high in the mountains of Papua, has paid more than $16.5bn in taxes over the past 16 years. Freeport plans to expand Grasberg; over the next 25 years it expects to cough up a further $40bn. Yet the governments of both countries are imperilling this bonanza.
Three years ago, in an effort to boost the economy by spurring domestic processing, Indonesia banned the export of unrefined metal ores. (Smelting copper ore adds little value, so it was exempted.) Mining collapsed: the output of bauxite, from which aluminium is refined, fell from 56m tonnes in 2013 to 1m tonnes in 2015 (see chart). Some firms did begin building expensive smelters—but not nearly enough to process all the ore that had previously been mined. Indonesia now has...Continue reading
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