Mining Industry in Indonesia – Legal and Regulatory Structure

By Fitriana Mahiddin and Karisa Pangaribuan

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.

Law 4/2009, which revoked Law 11/1967 on the General Provisions of Mining, introduced a licensing system for mining business activities. Under the previous mining law, mining business activities could be conducted based on:

• a mining authority for domestic investment; and
• a contract of work (CoW) for foreign investment.

Law 4/2009 was introduced with the aim of eliminating the different treatment of domestic and foreign investment in the industry.

There are three types of mining permit under Law 4/2009, namely:

• a mining permit (IUP);
• a small-scale mining permit (IPR); and
• a 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); and
• 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).

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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