PUBLICATION

Engineering & Mining Journal

AUTHORS

Josie Perez, JP Stevenson, Vanessa Acuna

Indonesia Mining 2014 E&MJ Report

September 05, 2014

An archipelago of 17,000 islands that severed from the Australian continental shelf thousands of years ago, Indonesia has long been known for its mineral wealth. Today, despite lacking basic infrastructure, the country is the world’s largest exporter of nickel, thermal coal and refined tin, and the prospects for future investment are alluring.

However, regulatory uncertainty makes the Indonesian mining industry a leap of faith for investors. In 2009, the Indonesian government undertook an ambitious nationalization program, which sought to substitute the industry’s foreign base with national companies and even expel foreign companies entirely, all under the guise of facilitating foreign investment. The 2009 Mining Law remains difficult to understand and new requirements are constantly evolving. Investor sentiment has declined, and the country has lost its ability to attract megaprojects. The Fraser Institute’s “Survey of Mining Companies 2012/2013,” which ranks the attractiveness of a country’s resource policies based on industry perceptions, ranked Indonesia last of the 76 jurisdictions surveyed. However, if political barriers were removed and best practices employed, Indonesia would have been ranked fourth.

The Indonesian mining industry therefore remains enigmatic, tantalizing investors with its natural abundance and at the same time scaring them away with opaque and onerous regulations. If handled with care, the industry could become one of the world’s last great frontiers and help the government accomplish many of the admirable goals that it hopes to achieve for its people.

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