Indonesia is a major player in the global mining industry. With its immense mineral reserves and production industry, Indonesia aims to develop an attractive investment climate that is favourable to the interests of both investors and the Indonesian government.
There are still challenges that demand the attention of the government, including falling commodity prices and the negative trend in the profitability of mining companies. However, there is good news. In the mineral mining sector, the processing and refinery industry has experienced rapid growth since the implementation of the domestic processing obligation that prohibits the export of unprocessed minerals.
However, improvements to the regulatory regime for the mining sector and to the Indonesian legal system in general are needed. There are several implementing regulations and policies that are not favourable to the interests of investors. The government faces the difficult task of balancing the interests of all stakeholders through legal instruments and has made a conscious effort to simplify bureaucracy in the mining sector to reinforce Indonesia’s position as a competitive destination for mining investments. Legal certainty is one of the most important elements to reduce investment risk and is key to spur new investments in the mining sector.
The target minerals in Indonesia are gold, copper, bauxite, tin, silver and, in particular, nickel, which the significant increase in the use of battery technology has stimulated the need for. As one of the largest producers of nickel in the world, Indonesia has benefited from an increase in investment in nickel mining. This includes a $4 billion lithium battery project in Morowali, on the island of Sulawesi.
Reproduced with permission of Law Business Research Ltd. This article was first published in Lexology Getting the Deal Through – Mining 2019 (Published: July 2019). For further information, please visit www.gettingthedealthrough.com.
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