Other BriefingsIndonesia’s Mining Law Amendments: Boosting the Domestic Mineral Market
On February 18, 2025, the Indonesian House of Representatives approved a new amendment to the country’s Law on Mineral and Coal Mining (the Mining Law). The amendment must next be approved in a plenary session before becoming law.
The 2025 amendment, the fourth since the law’s inception in 2009, seeks to improve access to mineral resources for small companies and religious groups and increase the domestic utilization of mineral resources, among other changes. Through this amendment, the government hopes to boost the domestic mining and mineral processing sectors, provide opportunities to smaller and local players, and attract more foreign investment in green industries.
The full text of the amended law has not yet been released to the public.
As a country with vast mineral deposits – including the world’s largest nickel reserves – mining is one of the country’s most important sectors. In 2024, Indonesia’s coal production hit a record 830 million tons. Meanwhile, Indonesia produced 54 percent of the world’s nickel and was the sixth-largest copper producer in 2023, according to S&P Global Commodity Insights.
Background: Previous amendments to the Mining Law
The Indonesian government has previously amended the Mining Law three times. The most recent amendment was in 2020, which aimed to boost investment in the downstream mining sector. A key aspect of the revisions involved mining permits, with new licenses such as rock mining certificates and assignment licenses, the latter specifically allowing for the exploration of radioactive materials.
Another major reform is the centralization of mining regulation. While the 2009 law allowed both central and regional governments to issue licenses, the 2020 amendment consolidated licensing authority under the central government, with limited exceptions for local community-based mining permits. This shift aims to improve regulatory consistency and streamline the investment process.
Regarding foreign ownership, the 2020 amendment maintained a previous requirement for foreign mining companies to divest 51 percent of their shares to Indonesian entities. However, it removed the previous timeline (which required full divestment by the 10th year of production) and instead stated that divestment should occur in “stages,” with further details to be provided in subsequent regulations. The government’s increasing role in resource control was exemplified in its 2018 acquisition of a 51 percent stake in PT Freeport Indonesia, a major operator of the Grasberg mine, one of the world’s largest gold and copper mines.
Latest amendments to the Mining Law
Priority access to small businesses and religious groups
One of the most important changes to the law is the granting of priority access to companies with plans to establish domestic processing facilities. According to Jakarta Globe, “This is contingent upon the size of their investment, the potential for value addition, and the creation of job opportunities”.
This change aligns with Indonesia’s long-standing goals of developing Indonesia’s domestic mineral processing industry and reducing the export of raw materials. In recent years, the Indonesian government has implemented several rounds of export restrictions on key raw minerals, including bauxite and nickel ore.
Further, the amendment extends these priority rights from state-owned enterprises to private entities such as religious groups (through a business entity controlled by the group) and small and medium-sized enterprises (SMEs). Universities, however, have been removed from the list of groups that can receive priority access, though they can still receive benefits such as research funding and scholarship funds through state-owned or private businesses that manage the mining area on their behalf, according to Reuters.
Other entities that may gain priority access include cooperatives and local non-SME private businesses, intending to provide more opportunities to local communities.
Prioritization of sales to the domestic market
The amendment also seeks to prioritize sales of minerals for domestic use rather than for exports. Per Reuters, companies engaged in the “operation production” stage of mining must prioritize sales to the domestic market. However, the specifics of this rule have not yet been revealed and will be fleshed out in a separate regulation.
“Operation production” (Operasi Produksi) in the Mining Law refers to activities conducted after the exploration phase, including the construction of facilities, mining, processing and refining, and transport and sales of minerals, among others.
The focus on sales to the domestic market speaks to Indonesia’s ambitions to grow domestic green industries. Seeking to capitalize on the transition to green energy, the government is looking to attract investment in and foster industries such as battery production for electric vehicles (EVs), solar panels, and green steel.
Key to the success of these industries will be the supply of critical minerals, of which Indonesia has rich deposits. In particular, the Indonesian government is hoping that legislating and incentivizing domestic processing and sales of minerals will attract foreign investment by companies in the green industries, who will move production to Indonesia rather than exporting either the raw or processed minerals required to be utilized elsewhere.
This strategy has already begun to bear fruit; in July 2024, Indonesia opened Southeast Asia’s first electric vehicle battery plant in the province of West Java. The plant is a result of a US$1 billion investment by a consortium comprising Hyundai Motor Group, LG Energy Solution, and the Indonesia Battery Corporation. The consortium plans to expand the production capacity of the plant with a further US$2 billion investment.
Changes to contract extensions and provisions on overlapping licenses
The amendment to the Mining Law allows for an additional extension period for holders of Coal Contracts of Work (CCoWs). A CCoW is a type of coal-specific Contract of Work (CoW), whose terms can override applicable Indonesian laws. For instance, specific taxation provisions stipulated in a CCoW would apply to the CCoW holder even if the government were to change the country’s tax regulations.
This licensing regime was previously expanded in the 2020 amendment to include new permits, notably the Operation Continuation IUPK, which allows companies to extend CoW and CCoW contracts. The 2020 amendment clarified the transition process for CoW and CCoW holders, allowing them to convert their contracts into Operation Continuation IUPK licenses.
The 2020 amendment guaranteed a 20-year extension of a CCoW if it had not been extended before, or one 10-year extension if it had previously been extended. Now,
under the 2025 amendment, holders of CCoWs can receive two 10-year extensions, even if the contract has previously been extended. As was previously the case, the issuance of the Operation Continuation IUPK license depends on several factors, such as contribution to state revenue and the CoW or CCoW company demonstrating good performance in mining operations.
Meanwhile, regarding mining permits, the 2025 amendment stipulates that the government will “evaluate and revoke overlapping permits” before the law comes into force, according to Jakarta Globe, and that supporting regulations will be issued within six months.
Stricter rules on land use and mining licenses
Besides the changes to priority access, the amendment implements stricter rules on land use for mining and the issuance of mining licenses. Under the 2025 amendment, the land designated as mining areas must remain unchanged. Moreover, mining areas must meet certain criteria, such as “resource availability, production capacity, and domestic needs”, per the Jakarta Globe.
In the 2020 amendment, the government removed previous land use restrictions. Specifically, companies with metal mineral operations under the Operation Continuation IUPK no longer have to adhere to the previous 25,000-hectare cap, while coal operations were no longer restricted to 15,000 hectares.
