The mining industry in Indonesia is regulated by way of mining laws. The main regulation is Law 4/2009 on Coal and Mineral Mining, which is further implemented by various regulations and decrees issued by the central government, the Ministry of Energy and Mineral Resources (MEMR) and regional governments at the provincial and regency or municipal levels.
Mining Indonesia: The Industry in Perspective
Indonesia continues to be a significant player in the global mining sector specially production in coal, copper, gold, tin, bauxite, and nickel. Indonesia also one of the world’s largest exporters of thermal coal. There has been limited investment in mining in recent years, and particularly limited investment in greenfield projects.
After a decade, there is still a long way to go before Indonesia can fully realise its mining industry potential. It was hoped that the New Mining Law and its supporting framework of implementing regulations would provide investors with the necessary regulatory certainty to spur new investment and strengthen Indonesia’s position as a key player in the mining sector.
The most active regions for coal mining are: South Sumatra, Jambi, Riau, Central Kalimantan and East Kalimantan.
The most active regions for mineral mining are: Bangka Belitung Islands, West Kalimantan, Central Sulawesi, Southeast Sulawesi, Maluku and Papua.
Mining Regulatory Framework
The main regulation is Law 4/2009 on Coal and Mineral Mining, which revoked Law 11/1967 on the General Provisions of Mining, introduced a licensing system for mining business activities.
In the previous mining law, mining activities are conducted based on:
- Mining authority for domestic investment,
- Contract of Work (CoW) for foreign investment.
However, according to Law 4/2009, there are three types of mining permits:
- Mining permit (IUP),
- Small-scale mining permit (IPR),
- Special mining permit (IUPK).
To reflect the different stages of mining activity, IUPs and IUPKs are divided into:
- IUP exploration (IUPE) and IUP operation production (IUPOP)
- IUPK exploration and IUPK operation production (IUPKOP).
Unlike the licensing system, a CoW is a contract entered into by a foreign investor with the government as the basis for the investor to carry out mineral mining business activities. When Law 4/2009 came into force, all mining authorities had to be converted into IUPs, while CoWs are honoured until their expiration.
The MEMR, governors, regents and mayors, according to their respective authority, are authorised to issue IUPs, IUPKs and IPRs.
An IUP is granted for mining activities undertaken in a mining business permit area (WIUP), while an IUPK is granted for activities carried out in a special mining permit area (WIUPK).
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