The mineral resources sector plays a crucial role in the Indonesian economy. The mining industry contributes to approximately 5% of the country's gross domestic product (GDP). The Indonesian government has been making efforts to attract foreign investors to participate in the development of mineral resources. In recent years, Indonesia has achieved significant progress in mineral development, especially in the areas of coal, copper, and nickel. However, in order to protect the environment and ensure sustainable use of resources, the government has implemented stricter policies towards mineral development.
The main foreign investment policies include:
Equity Limitations: Foreign investors are restricted in their equity ownership in mineral development projects. According to the revised Mineral Law in 2018, foreign investors can hold a maximum of 49% equity ownership in mineral development projects.
Mineral Processing Business: The government requires foreign mining companies to transfer their mineral processing business to Indonesia within a certain period of time. This policy aims to promote the development of Indonesia's mineral processing industry, increase domestic employment and economic growth.
As of late April 2022, the Indonesian government has gradually banned the export of nickel ore and required domestic processing before exporting. Starting in June 2023, the export of bauxite will also be prohibited. In November 2021, Indonesian President Joko Widodo expressed plans to cease tin exports by 2024. During the Mandiri Investment Forum on February 1, 2023, plans to prohibit copper exports were also conveyed.
Tax incentives: The Indonesian government provides certain tax incentives to foreign investors to encourage the development of mineral resources, including exemptions from tariffs, value-added tax and income tax. In addition, the government provides favorable policies for coal mining companies, such as land use rights and mineral resource development rights.
Environmental Protection: The government enforces strict environmental protection policies on mineral development projects, requiring foreign investors to comply with relevant regulations to ensure sustainable development of mineral resources.