JAKARTA - The Indonesian authorities are probing allegedly illegal shipments of nickel ore to China worth 14.5 trillion rupiah (S$1.3 billion) over 2½ years from early 2020.

The Corruption Eradication Commission (KPK) recently revealed that about 5.3 million tonnes of nickel ore from Indonesia were sent illegally to China from January 2020 to June 2022.

This is estimated to have caused the state to lose 575 billion rupiah (S$51.8 million) in royalties and export taxes.

Mr Muhammad Wafid, the acting director-general for mineral and coal mining at the Energy and Mineral Resources Ministry, said his office is coordinating with related institutions, including Indonesia’s embassy in Beijing.

“We are verifying everything as (nickel ore) export is banned,” he was quoted as saying by Kontan.co.id.  

The anti-graft body initially found a significant gap in the export values of nickel from Statistics Indonesia and China’s General Administration of Customs.

No details of the origin of the nickel ore were shown, but it might have been from mines in Sulawesi or North Maluku, Indonesia’s largest nickel-producing areas, according to KPK supervision official Dian Patria.

The shipments violate an export ban on nickel ore, or unprocessed nickel, which had been in place since January 2020.

Only processed nickel, such as ferronickel and nickel pig iron, is allowed to be exported.

The ban was meant to spur investment in processing facilities and smelters in Indonesia, the world’s largest producer of nickel, a key ingredient in electric vehicle (EV) batteries, and strengthen its local industry.   

Mr Nirwala Dwi Heryanto, a spokesman for the Finance Ministry’s customs and excise office, said the office has confirmed the finding with its Chinese counterpart and obtained a list of the exporters and would share the result with the KPK.  

Special staffer to the energy and mineral resources minister, Professor Irwandy Arif, said the ministry had not issued export recommendations to the Trade Ministry – which holds the authority to hand out export permits – since the ban took effect.

“There has been no plan to export nickel ore in the proposed annual budget approved (since January 1, 2020),” he told The Straits Times.  

Business groups and experts have called for the government to step up efforts to solve the case and punish those making the illegal shipments to deter such unlawful activity.  

Indonesian Nickel Mining Association secretary general Meidy Katrin Lengkey said the nickel ore might have been shipped to different ports in China using false declarations, or faking it as processed nickel, such as nickel pig iron.

“Only those that process nickel have access to international ports and can directly export their products,” she told ST.  

Weak supervision by the authorities in charge of export, such as the customs and excise office, might have led to the breach, she added.  

“Exporters reported the manifest documents to the officials. But did they match with the actual goods shipped? It is possible that they didn’t,” said Ms Meidy. 

Sharing a similar view with Ms Meidy, the executive director of the think-tank Centre of Energy and Resources Indonesia, Mr Yusri Usman, said that as the amount of the illegal exports was significant, the perpetrators might be linked to nickel-processing facilities which could directly ship their products overseas. 

“The nickel ore exported illegally likely had less than (the) 1.8 per cent concentration that was needed by the smelter,” he told ST.

Ms Meidy said that a disparity between domestic and global prices might have caused the illegal shipments.

“The export price has been higher than the domestic price. That’s why some illegally sold nickel (ore) overseas.”

To address the price gap, her association is preparing to launch the Indonesia nickel price index in 2024, she added.

Mr Yusri suggested that the government set up an integrated digital nickel information platform, with data such as nickel output from miners and processing companies and these outfits’ domestic sales and exports.

The platform should be accessible by various government institutions to allow tighter supervision and discourage illegal export. 

Indonesia has 21 million tonnes of nickel reserves, nearly a quarter of the world’s reserves, according to the US Geological Survey. 

Recently, the International Monetary Fund (IMF) advised the country to end its nickel export ban, saying the increased foreign investment has yet to have significant impact, such as job creation for Indonesians.

At the same time, the ban has resulted in corruption and rent-seeking, the IMF said.

However, Indonesian officials have defended the policy.

In the past few years, Indonesia has received billions of dollars in foreign investment from companies keen to produce EVs and batteries in the country.