Investment Climate in the Indonesian Mining Business

Surizki Febrianto and Raja Febriana Andarina Zaharnika

Department of Law, Universitas Islam Riau, Pekanbaru, Indonesia

Keywords:

Investment, Mining, Mineral, Coal, Regulation

Abstract:

Minerals and coal contained in the Indonesian mining jurisdiction are non- renewable natural wealth as the

gift of God Almighty which has an important role in fulﬁlling the livelihoods of many people, therefore man-

agement must be controlled by the State to provide real added value to the national economy in an effort

achieve prosperity and prosperity in a just manner. Mining is part or all of the stages of activities in the con-

text of research, management and commercialization of minerals or coal which includes general investigation,

exploration, feasibility studies, construction, mining, processing and reﬁning, transportation and sales, and

post-mining activities. Mining Business is an activity in the framework of the exploitation of minerals or

coal which includes the stages of general investigation, exploration, feasibility studies, construction, mining,

processing and reﬁning, transportation and sales, and post-mining activities. The main issue: How is the In-

vestment Climate Mining Investment in Indonesia Since the issuance of Government Regulation (PP) No. 24

of 2012 concerning the implementation of Mineral and Coal mining business activities, as well as Minister of

Energy and Mineral Resources Regulation No. 7 of 2012 which was subsequently reﬁned by 2 ESDM Minis-

terial Decree No. 11 of 2012 concerning Increasing Mineral Value Added through Smelter Management and

Puriﬁcation activities. The paper describes In order to control ore exports and encourage downstream indus-

tries, the government has issued Government Regulation (PP) No. 24 of 2012 concerning the implementation

of Mineral and Coal mining business activities. Furthermore, several related regulations were issued such as

Minister of Energy and Mineral Resources Regulation No. 7 of 2012 which was subsequently reﬁned by 2

ESDM Minister Regulation No. 11 of 2012 concerning Increasing Mineral Value Added through Mineral Pu-

riﬁcation and Management (smelter) activities, where the main material contained in said mining companies

can export mineral ores abroad before January 2014 if it has obtained a recommendation from the Minister of

Energy and Mineral Resources. Other related regulations that have been issued in order to support the imple-

mentation of the Minerba Law, are the Minister of Trade Regulation No. 29 of 2012 concerning the provisions

on mining product exports and Minister of Finance Regulation No. 75 of 2012 concerning Determination

of Goods subject to Export Levy and Export Duty Tariff, the Center for Foreign Trade Policy will conduct

evaluations relating to the prohibition of exports in the form of ore (raw material or ores).

1 INTRODUCTION

1.1 Background

Minerals and coal contained in the Indonesian mining

jurisdiction constitute non-renewable natural wealth

as a gift from God Almighty which has an important

role in fulﬁlling the livelihoods of many people, there-

fore management must be controlled by the State to

provide real added value. Therefore, the management

of mines and minerals must add value to the national

economy. To achieve this, the management of mineral

mining must be based on beneﬁts, justice and balance

and alignments with the interests of the nation and

state (Saleng, 2004; Sutedi, 2011; Himawan, 2003).

Mineral and coal mining activities which are min-

ing business activities outside geothermal, oil and gas

and ground water have an important role in provid-

ing tangible added value to national economic growth

and sustainable regional development. In line with

this, the government continues to make efforts to en-

courage business people to continue to improve them-

selves and make breakthroughs so that they can boost

the added value of Indonesian mines and minerals to a

position that can prosper the people and determine the

trade in world mines and minerals. The government’s

good intention in encouraging business people to in-

crease the added value of the said mines and minerals,

as stated in Law No. 4 of 2009 concerning Mineral

and Coal Mining (Minerba), in which the Act has reg-

352

Febrianto, S. and Zaharnika, R.

Investment Climate in the Indonesian Mining Business.

DOI: 10.5220/0009149003520358

In Proceedings of the Second International Conference on Social, Economy, Education and Humanity (ICoSEEH 2019) - Sustainable Development in Developing Country for Facing Industrial

Revolution 4.0, pages 352-358

ISBN: 978-989-758-464-0

ulated the obligation to process and reﬁne mines and

minerals which are implemented no later than 5 (ﬁve)

years after the said Act was promulgated on January

12, 2009 so that the processing and reﬁning applies

mining and minerals fell in January 2014. As a result

of the promulgation of Law No. 4 of 2009, nation-

ally there has been a massive increase in mineral ore

exports in the last 3 year (Manuputy et al., ; Sefri-

ani, 2011; Salim, 2006). In order to control ore ex-

ports and encourage downstream industries, the gov-

ernment has issued Government Regulation (PP) No.

23 of 2010 which has been amended by PP No. 24 of

2012 concerning the implementation of Mineral and

Coal mining business activities. Furthermore, sev-

eral related regulations were issued such as Minister

of Energy and Mineral Resources Regulation No. 7

of 2012 which was subsequently reﬁned by 2 ESDM

Minister Regulation No. 11 of 2012 concerning In-

creasing Mineral Value Added through Mineral Pu-

riﬁcation and Management (smelter) activities, where

the main material contained in said mining compa-

nies can export mineral ores abroad before 2004 if it

has obtained a 2 recommendation from the Minister

of Energy and Mineral Resources. Other related reg-

ulations that have been issued in order to support the

implementation of the Minerba Law, are the Minis-

ter of Trade Regulation No. 29 of 2012 concerning

the provisions on mining product exports and Minis-

ter of Finance Regulation No. 75 of 2012 concerning

Determination of Goods subject to Export Levy and

Customs Tariff(Starke, 2014; Istanto, 2010; Utomo,

2005). In connection with these various problems,

and based on the Request Letter for Cooperation in

mining and mineral studies from the Directorate of

Industrial and Mining Exports (DG Daglu) Number:

1022 / DAGLU.3.4 / ND / 8/2013 dated August 13,

2013, the Center for Foreign Trade Policy will evalu-

ating the impact of the policy in question, especially

relating to the prohibition of exports in the form of ore

(raw material or ores) on mining and mineral com-

modities that will take effect in January 2014. This

is in accordance with the explanation of Charles Hi-

mawan who said ”These regulations are sometimes

so numerous that they cause obscurity of applicable

laws. To utilize multinational capital to the maxi-

mum, it requires legal clarity. Furthermore, it was

stated, if the authoritative law means the law that is

obeyed by people, both the person who made the law

and the person against whom the law was intended, it

will be seen here the connection between humans and

law ”(Lanini et al., ; OCallaghan, 2010; PERMANA

and DREBENSTEDT, 2013).

1.2 Identiﬁcation of Problems

Identiﬁcation of problems in a study is very important

because it is a guideline and makes it easier for the

author to discuss the problems to be studied, so that

the goals to be achieved are clearly in accordance with

what is expected.

Based on the background description of the prob-

lem above, the authors formulate the problem as fol-

lows:

• How is Investment Climate Mining Investment in

Indonesia Since the issuance of Government Reg-

ulation (PP) No 24 of 2012 concerning the imple-

mentation of Mineral and Coal mining business

activities?

• How is the Minister of Energy and Mineral Re-

sources Regulation No. 7 of 2012 which was sub-

sequently reﬁned by 2 ESDM Ministerial Decree

No. 11 of 2012 concerning Increasing Mineral

Value Added through Smelter?

1.3 Research Purpose

In this paper, the writer has speciﬁc objectives to be

achieved, including knowing in depth about the busi-

ness world, especially about investment in the mining

sector. In this case the writer’s critical thinking lies

in the regulations and government policies that have

an impact on investment efforts. Therefore, the writer

needs to study the government regulations, especially

regarding the prohibition of the export of mineral ores

(raw materials ores) abroad, so that it has an impact

on the upstream mining industry in Indonesia.

2 RESEARCH METHODS

In conducting this research, the author uses the legal

normative legal research method, namely the author

tries to provide a description of the research methods

as follows:

2.1 Research Approach

Approach to the problem is the process of solving

or solving problems through predetermined stages so

as to achieve the research objectives. To discuss the

problems contained in this study the author uses a nor-

mative juridical approach.

2.2 Research Speciﬁcations

The speciﬁcation of this research is descriptive re-

search. Descriptive research is intended to provide

Investment Climate in the Indonesian Mining Business

353

as much preliminary data as possible about humans,

circumstances or other symptoms. The point is pri-

marily to reinforce the hypotheses, in order to be able

to help strengthen old theories or within the frame-

work of composing new theories.

3 RESULTS AND DISCUSSION

3.1 Results and Discussion “Investment

Climate Mining Investment in

Indonesia Since the issuance of

Government Regulation (PP) No. 24

of 2012 concerning the

implementation of Mineral and

Coal mining business activities”

3.1.1 Regulations and Policies on the Existence

of Mines and Minerals in Indonesia

Article 33 of the 1945 Constitution mandates that the

earth, water and natural resources contained therein

be controlled by the state and utilized as much as pos-

sible for the prosperity of the people. The mandate

of the 1945 Constitution is the foundation of min-

ing and energy development to utilize the potential

wealth of mineral and energy resources that are op-

timally owned in supporting sustainable national de-

velopment. The mines, minerals and coal contained

in the Indonesian legal jurisdiction are non-renewable

natural wealth as the gift of God Almighty which has

an important role in fulﬁlling the lives of many peo-

ple. Therefore, the management must be controlled

by the State to provide real added value to the na-

tional economy in an effort to achieve prosperity and

equitable welfare of the people. Mining is an activity

of extracting precious and economically valuable de-

posits of deposits from the skin of the earth, both me-

chanically and manually on the surface of the earth,

beneath the surface of the earth’s water. The Govern-

ment of the Republic of Indonesia through Govern-

ment Regulation No. 27 of 1980 divides the excavated

material into 3 groups, namely:

1. Strategic excavation material called group A ex-

cavation consists of: petroleum, liquid bitumen,

frozen wax, natural gas, solid bitumen, asphalt,

anthracite, young coal, uranium radium, thorium

other radioactive minerals, nickel, cobalt, tin.

2. Vital excavation is also referred to as class B ex-

cavation consisting of iron, molybden, chromium,

tungsten, vanidium, titan, bauxite, copper, lead,

zinc, gold, platinum, silver, mercury, arsenic, an-

timony, bismuth, ytrium , rhutenium, cerium, and

other rare metals, beryllium, corundum, zircon,

power crystals, cryolite, ﬂuorspar, barite, iodine,

bromine, clhor, sulfur.

3. Non-strategic and non-vital excavation materi-

als, also referred to as group C excavations.

These consist of: nitral, nitrite, phosphate, rock

salt (halite), asbestos, talc, mica, graphite, mag-

nesite, yarocyte, leucite, alum (alum ), ocher,

gemstones, semi-gemstone, quartz sand, kaolin,

feldspar, gypsum, bentonite, diatomaceous earth,

absorbent soil (fuller earth), pumice, trass, obsid-

ian, marble, slate, limestone, dolomite, calcite ,

granite, andesite, basalt, trachite, clay, sand, as

long as they do not contain group A or group B

mineral elements on a scale that is signiﬁcant in

terms of mining economics.

The classiﬁcation of the above excavation is insepa-

rable from the 1967 Basic Mining Law which con-

ﬁrms that the classiﬁcation of minerals is based on

different roles for the nation and state. Group A is a

mineral that is very important for the country’s econ-

omy because it brings in relatively large foreign ex-

change. Group B is a mineral that concerns the liveli-

hood of many people, while group C is a mineral that

is needed for industrial or building materials.

Meanwhile, based on the criteria of mineral min-

ing commodities that can be increased, the added

value can be classiﬁed into 3 (three) groups, namely

metal minerals, nonmetallic minerals and rocks. The

description of each type of mineral mining commod-

ity is as follows:

1. The group of metal minerals is a type of metal

mineral mining commodity which includes ore:

copper, gold, silver, tin, lead and zinc, chromium,

molybdenum, platinum group metals, bauxite,

ore, iron sand, nickel, cobalt, manganese and an-

timony.

2. Nonmetallic mineral groups consist of various

types of non-metallic mineral mining commodi-

ties which include: calcite (limestone / lime-

stone), feldspar, kaolin, bentonite, zeolite, silica,

zircon and diamond.

3. The rock group is a type of rock mining com-

modity, among others: Toseki, Marble, Onik, Per-

lite, Slate (slate), Granite, Granodiorite, Gabro,

Peridotite, Basalt, Opal, Chalcedony, Chert (ri-

jang), Jasper, Chrysoprase , Garnet, Jade, Agat

and Topas.

In welcoming the ban on the export of raw mate-

rials for mining and minerals in January 2014, there

were 15 (ﬁfteen) companies that stated readiness for

ICoSEEH 2019 - The Second International Conference on Social, Economy, Education, and Humanity

354

processing and reﬁning facilities that would be op-

erational in 2014. Of the 15 companies, there were

6 companies that have prepared themselves with the

progress of mining and mineral processing and reﬁn-

ing facilities have reached 100% to operate in 2014.

Of the 6 (six) mining companies, including PT. Delta

Prima Steel and PT. Meratur Jaya Iron Steel with its

production in the form of Sponge Iron, PT. Indo Ferro

with the production of Pig Iron, PT. Batutua Tem-

baga Raya with the results of processing in the form

of Cupper Chatode, PT. Indotama Ferro Allays and

PT. Century Metalindo with the processing of Silica

Manganese. Meanwhile, for the other 9 companies

the progress of processing and reﬁning readiness fa-

cilities to operate in 2014 is still below 75%

In the last three years after Law No. 4 In 2009,

nationally there were several types of ore and min-

eral ore whose realization has increased massively,

including nickel ore exports increasing by 800%, iron

ore increasing by 700%, and bauxite ore increasing

by 500%. In order to control mineral ore exports

and encourage downstream industries, the govern-

ment issued a number of related regulations, includ-

ing ESDM Ministerial Regulation No. 7 of 2012 as

amended by PerMen No. 11 of 2012, Regulation of

the Minister of Trade No. 29 of 2012 concerning Pro-

visions on the Export of Mining Products and Regu-

lation of the Minister of Finance No. 75 of 2012 con-

cerning Determination of Export Prices for Calcula-

tion of Export Levy. The government requires export

duties for 14 mining minerals including copper, gold,

silver, tin, lead, chromium, molybdenum, platinum,

bauxite, iron ore, iron sand, nickel, manganese, and

antimony with an export duty range to be collected

ranging from 20% to 50% depending on the type of

mineral.

ESDM Ministerial Regulation No. 7 of 2012 was

issued in order to secure the implementation of the

mandate of Law No. 4 of 2009 concerning Mineral

and Coal Mining, speciﬁcally related to the obliga-

tion to process and reﬁne minerals in the country no

later than January 12, 2014. Then Candy 07 of 2012

this was amended based on RI Minister of Energy and

Mineral Resources Regulation No. 11 of 2012 dated

May 16, 2012 which states that mining companies can

export mineral ore or ore in this case nickel abroad

before 2014 if they have obtained a recommendation

from the Minister of Energy and Mineral Resources

c.q Director General. These recommendations will be

provided with the following conditions:

1. Status of Production Operation IUP and IPR clear

and clean in the sense that each mining company

is required to have an approved Production Oper-

ation IUP.

2. Mining companies must pay off ﬁnancial obliga-

tions to the state.

3. Mining companies must submit work plans and or

cooperation in the management and / or reﬁning

of minerals in the country.

4. Mining companies must sign an integrity pact.

3.1.2 Development of the Indonesian Mining

Industry

There are two things that enable Indonesia to develop

into an advanced industrial country. First; Indonesia

is a country that has the most complete mineral wealth

in the world, although it is not the world’s main actor

in all raw materials, but Indonesia has almost the most

important mineral sources. Second, Indonesia has

relatively large and diverse types of energy sources,

ranging from petroleum, gas, coal and other renew-

able energy sources. However, until now Indonesia

has not been able to develop its industry properly, be-

cause the mineral mining products exploited in the

bowels of Indonesia are still exported in the form of

raw materials with very low added value. On the one

hand, indeed in terms of raw material and commodity

trade, Indonesia holds a key position. But most min-

ing companies have tied mining product sales con-

tracts with developed countries, so that Indonesia can-

not control the price of its mining commodities.

3.1.3 Policies Regarding Mining and Minerals

Starting from the issuance of Law Number 4 Year

2009 on 12 January 2013 concerning Mineral and

Coal Mining, where the basic material contained in

this Law regulates the removal of mineral and coal

mining products and prohibits the export of raw ma-

terials until 2014. Therefore, This law mandates the

construction of smelters so that domestic mining pro-

duction can be processed before being exported. The

purpose of the Minerba Law is intended, so that In-

donesia can feel the added value of mining and min-

eral products so that it can boost gross domestic prod-

uct and absorb labor. Based on the mandate of Law

No. 4 of 2009 referred to, it will become effective

in January 2014 for metal mineral mining commodi-

ties, nonmetallic minerals and rocks in the form of

raw materials (raw material / ores).

In the context of implementing various articles in

the Minerba Act, the government then issued Govern-

ment Regulation (PP) No.23 of 2010 dated February

1, 2010 concerning the Implementation of Mineral

and Coal Mining Business Activities, which in this

regulation implies that holders of Mining Business

Permits (IUPs) are operating production and Special

Investment Climate in the Indonesian Mining Business

355

Mining Business Permit (IUPK) Production opera-

tions must prioritize the needs of minerals and / or

coal for domestic interests. Therefore, in supporting

the development of domestic industries, it is neces-

sary to restructure the issuance of mining business

licenses for non-metal minerals and rocks. Further-

more, in order to provide greater opportunities for In-

donesian participants to participate more in mineral

and coal mining activities as well as to provide le-

gal certainty for holders of Coal Mining Concession

Work Contracts and Work Agreements intending to

extend in the form of Mining Business Permits, PP

is then issued No. 24 of 2012 dated 21 February

2012 concerning Amendment to Government Regula-

tion Number 23 of 2010 concerning Implementation

of Mineral and Coal Mining Business Activities.

Besides that, in order to increase the effective-

ness of controlling mineral ore exports and encour-

age downstream industries, the government has is-

sued various regulations such as Minister of Per-

manent Regulation ESDM No. 7 of 2012 which

was later amended by ESDM Regulation No. 11

of 2012 concerning Increasing Mineral Value Added

through Mineral Processing and Puriﬁcation Activi-

ties. Increasing Added Value and processing obliga-

tions with minimum processing limits, this is done

with Mineral Processing and Puriﬁcation Activities

which include processing and reﬁning metal minerals,

processing non-metal minerals and rock processing,

as well as processing and reﬁning certain metal min-

erals, processing non-metallic minerals certain, and

certain rock processing must meet the minimum pro-

cessing limits.

Meanwhile, in order to increase the effectiveness

of the export regulation of several types of mining

products, the government through the Ministry of

Trade has also issued Permendag No. 29 / M-AG

/ PER / 5/2012 as amended by Permendag No. 52

/ M-AG / PER / 8/2012 concerning Provisions on

the Export of Mining Products, where this regulation

regulates matters relating to procedures and permits

for the implementation of export activities of various

types of mining products by considering the neces-

sity to meet minimum processing limits. In addition

to this, based on the consideration / proposal of the

Minister of Energy and Mineral Resources as sub-

mitted through Letter Number 3038/30 / MEM.B /

2012 concerning the Policy for Control of Mineral

Ore Sales (Raw Material or Ore) abroad and in or-

der to increase added value and availability of mineral

resources in the country, it is necessary to regulate

the imposition of Export Levy on exported goods in

the form of mineral raw materials. In this regard, on

May 16, 2012 the government through the Ministry

of Finance has issued Permenkeu No. 75 / PMK.011

/ 2012 which was subsequently reﬁned by Minister of

Finance Regulation No. 128 / PMK.011 / 2013 con-

cerning changes to the regulation of the ﬁnance min-

ister number 75 / pmk.011 / 2012 concerning the stip-

ulation of export goods subject to export duties and

export duty tariffs, wherein the main material In these

changes related to the sale of various types of mineral

raw materials to foreign countries subject to export

export tariffs of 20%, except for Marble and Traver-

tine products in the form of beams¿ 4 cm thick and

Granite beam products with thickness¿ 4 cm is sub-

ject to an export duty of 10%. The objectives of the

policy to impose export duty on mining commodities

are to ensure the fulﬁllment of domestic needs, pro-

tect the preservation of natural resources, anticipate

a drastic increase in prices from certain export com-

modities on the international market and or maintain

the stability of certain commodity prices within coun-

try. From the description above, it can be concluded

that increasing industrial excavation products requires

a high precision processing process which can ul-

timately increase the multipurpose of the excavated

material so that the marketing becomes wider. Accu-

racy of work is needed in all stages of activities so that

a lot of useful minerals are obtained and a little bit of

impurities is obtained so that the results obtained are

more maximal in accordance with the results of con-

sumer orders. With the existence of the Minerba Act,

all types of ore / mineral goods and minerals must

be processed and puriﬁed in advance to obtain added

value and then be exported. In Article 102 of the Min-

ing Law, Holders of IUP and IUPK are required to

increase the added value of mineral and / or coal re-

sources in the implementation of mining, processing

and reﬁning, as well as the utilization of minerals and

coal. This new obligation is planned to take effect

in 2014. Seeing the prohibition policy, it will only

be enacted in 2014, some businesses have increased

production and exports on a large scale. This is done,

because in general the business actors argue that to es-

tablish a processing and reﬁning plant in the ﬁeld of

mining and minerals, a high cost is needed, so that the

opportunity during this transition period seems to be

used by businesses to produce and export on a large

scale because it feels the cost production is still rela-

tively cheap. As is well known, the majority of raw

mineral and mineral materials markets are mostly for

exports, but there are also those that are marketed do-

mestically and even to fulﬁll the need for further raw

materials as domestic industries also carry out imports

even though the original raw material comes from do-

mestic as well.

ICoSEEH 2019 - The Second International Conference on Social, Economy, Education, and Humanity

356

3.2 Results and Discussion “Impact of

the Issuance of Minister of Energy

and Mineral Resources Regulation

No. 7 of 2012 which was

subsequently reﬁned by 2 ESDM

Ministerial Decree No. 11 of 2012

concerning Increasing Mineral

Value Added through Smelter

Management and Puriﬁcation

activities”

3.2.1 Impact of Mining and Mineral Export

Prohibition Policy

In Indonesia, the metal mineral mining industry is

controlled by foreign investors and state-owned com-

panies, as well as private companies. These compa-

nies are established based on Indonesian laws and

regulations in the form of an Indonesian legal en-

tity. In mining contract work documents, foreign min-

ing companies are also required to release ownership

shares. State ownership rights as a concept to date

have not yet had a clear and explicit understanding

and meaning that can be accepted by all parties in re-

lation to the management and utilization of national

natural resources so as to invite many interpretations

that have implications for their implementation.5 Law

No. 4 of 2009 concerning Mineral and Coal Mining

is a time bomb for Indonesia. This law regulates the

removal of mineral and coal mining products and pro-

hibits the export of raw materials in 2014. This law

mandates the construction of smelters so that domes-

tic mining production can be processed before being

exported. The objective of the Mining Law is very

noble: so that Indonesia can feel the added value of

mining products, boost gross domestic product, and

absorb labor.

In contrast to the initial expectations, post-

determination of this law mining exploitation actu-

ally jumped sharply. Mine owners compete to mine

as much as possible before being banned. As a re-

sult, production of a number of mining commodities

surged. For example, bauxite production in 2009 was

783,000 mt, in 2011 it was 17,634,000 mt, or jumped

2,150 percent. The same thing happened to nickel

ore commodities, where production in 2009 was only

5,802,000 wmt, but in 2011 it was 15,973,000, or a

175 percent increase.

The implementation of the ban on the export of

raw materials was in sight, but Indonesia still did not

have an adequate smelter to offset mine production.

It is recorded that there are at least three commodi-

ties that will deﬁcit the smelter in 2014, namely cop-

per, bauxite and nickel. National bauxite production

in 2011 reached 17.6 million tons.7 At present, In-

donesia does not yet have a bauxite smelter. The plan

to build a number of bauxite smelters, up to 2014, can

only accommodate 7.1 million tons. The gap between

mine production and smelter capacity is 10.5 million

tons, assuming all smelter developments are smooth.

Nickel commodities experience the same thing.

Indonesia’s nickel mining produced 15.9 million tons

of nickel in 2011. Existing nickel smelters in Indone-

sia have a capacity of 9.03 million tons. Until 2014,

it is estimated that there will be an additional number

of new smelters, with a total capacity of 4.15 million

tons. The gap between mine production and smelter

in 2014 reached 2.72 million tons.

For copper commodities, national copper produc-

tion in 2011 reached 20.2 million tons, while existing

copper smelters could only accommodate 1 million

tons.8 The planned construction of a number of cop-

per smelters until 2014 only adds smelter capacity to

1.2 million tons. At least there will be 18 million tons

of copper that cannot be processed.

4 CONCLUSION

Implications of the lack of a ﬁrst smelter, govern-

ment revenues from the mining sector can be in the

form of tax revenues (PPh), non-tax revenues (min-

ing royalties), and deadrent (land rent). This revenue

has the potential to drop if Minerba mine production

decreases. Second, the reduction in mine production

will have implications for reducing labor. With the

ban on the export of raw materials, workers must be

prepared to lose their jobs. Reduction of labor will

also occur in companies supporting mining activities,

such as shipping and heavy equipment. Third, if raw

material exports decline due to export restrictions, the

trade balance will be more deﬁcit. This will have an

impact on the weakening of the rupiah exchange rate

which boosts import costs. The high cost of imports

will affect a number of products that still rely on im-

ported components. The Minerba Act has been stipu-

lated since 2009, but until now the removal program

has been in place. The government has not succeeded

in creating a business climate that has made investors

interested in building a smelter industry in Indonesia.

Investment Climate in the Indonesian Mining Business

357

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