JAKARTA: Indonesia, home to one of the world’s largest gold mines, plans to set up a bullion bank to spur trading of the precious metal domestically.
The government is consulting with parties including the central bank and the mining industry, with a plan to start operating the bank in 2024, according to Trade Minister Muhammad Lutfi.
“Our exports have gone to transit countries because they have better gold trading systems, either in the form of bullion banks or better bourses than ours, ” Lutfi said in an interview.
“As a gold producing country why would we sell it to transit countries?”
Indonesia is South-East Asia’s biggest gold producer, with the Grasberg mine in Papua holding one of the world’s largest reserves.
The push to create a bullion bank is part of resource-rich Indonesia’s broader effort to climb up the commodities value chain.
That drive has included forcing copper and nickel miners to invest in domestic refining, allowing the country to profit from higher-value products rather than just raw materials exports.
Bullion banks are involved in activities including clearing, hedging, trading and vaulting of gold and precious metals.
Global banks which engage in bullion banking include JPMorgan Chase & Co and HSBC Holdings Plc, with most being members of the London Bullion Market Association.
Having an onshore bullion bank would cut the need to import gold products after they’re certified overseas, help develop the local industry by providing financing opportunities, and let the central bank use gold instruments to manage stability, said Iskandar Simorangkir, deputy for macroeconomics and finance policy coordination at the Coordinating Ministry for Economic Affairs.
Indonesia exports much of its gold to Singapore and Australia, which are hubs for trading rather than consumption, Lutfi said.
The government is in talks with gold-buying countries, including members of Gulf Cooperation Council, to set up trade deals to compete with those “transit countries, ” he added. — Bloomberg