Indonesia is among the top 10 producers in the world for gold, copper, nickel
and tin. Its world-class mines include Grasberg, Batu Hijau and Soroako. Active
mining companies include Antam, Freeport, Koba Tin, Newcrest, Newmont and Timah.
The country is a key supplier of minerals and metals to Asia's leading
industrialised and industrialising nations. Mining is a significant contributor
to Indonesia's GDP and the major contributor to the GDP of a number of its
provinces (Papua, Bangka- Belitung, West Nusa Tenggara, Riau, South Sulawesi and
Indonesia is highly prospective geologically. But
exploration for minerals and mine development (in particular of known nickel
deposits) has been impeded in recent years by legal uncertainties arising from
decentralisation, the prohibition by Law No. 41/1999 of open-cut mining in
designated 'protected' forest areas and illegal mining. In addition, proposed
reforms to mining laws and the possible end to the country's long-standing
Contract of Work regime have eroded investor confidence.
the Department of Energy and Mineral Resources reported that investments in
mining in 2005 under Contracts of Work were US$506.09 million, up from US$323.78
million in 2004. The mining industry's commodity export value increased from
US$7,304 million in 2004 to US$9,385 million in 2005 (including coal).
Legal and regulatory structure
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Indonesia has a civil law system, inherited from the Dutch who governed
portions of Indonesia from the early 17th century until 1949. Indonesia's Civil
Code has not been substantially amended for over a century.
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The mining industry in Indonesia is regulated by central, provincial,
regional and municipal levels of government. Mining rights or authorisations
(known as kuasa pertambangan or KPs) may be granted and regulated at all levels
of government pursuant to centrally enacted mining laws and regulations and,
increasingly, regional regulations. Provincial and regional governments have
also begun to exercise their perceived authority by attaching conditions to
grants of mining rights and imposing additional obligations and taxes on their
holders. These, and regional regulations, may conflict with central laws and so
be subject to review and cancellation by the central government (ie, the
Ministry of Domestic Affairs).
Indonesia's mining laws also contemplate
the granting of mining rights under contracts (kontrak karya or contracts of
work, KK or COW) between government and private sector contractors. COWs are in
theory 'negotiated' but in practice have followed a series of evolving standard
form agreements (from the first, through to the seventh, and perhaps the eighth
'generation'), all of which have been approved by parliament and the president.
But obtaining a new COW is currently a complex and sometimes impossible
The existing mining law (as described below) is perceived to be
inadequate in many ways. There is a need to resolve jurisdictional confusion and
more fully define the environmental and reclamation obligations of mining
Since 1999, the Forestry Law has prohibited open-cut mining in
'protected forest' areas (a catch-all category applying to much of Indonesia's
forested land mass). The central government had enacted decrees and regulations
exempting contractors under 13 COWs, Coal COWs and holders of KPs approved
before the enactment of the Forestry Law in 1999 from that Law's prohibition of
open-cut mining in protected forest areas. The Forestry Law requires holders of
KPs and contractors under COWs or Coal COWs to nevertheless obtain use and
borrow approvals from the Forestry Department under regulations that are aimed
at limiting the impact of mining operations on forested areas. But the
implementing regulation issued by the minister of forestry, Regulation No.
P-14/2006, sets forth difficult requirements that are almost impossible for such
mining right holders to perform. Regulation P-14/2006 appears to permit limited
and conditional use of forest areas for mining activities in exchange for
reforestation commitments in other areas or compensation.
From 1967 until
1999, Indonesia had a centrally regulated mining law regime with an 'open-door'
policy for foreign investment in mining that was viewed as attractive and
reliable by international mining companies. For foreign mining companies, the
foundation of reliability was the COW. Considered to be lex specialis, it
granted exclusive mining rights to a corporate contractor over a defined,
usually extensive, area for a 30-year term. The rights and obligations of
government and contractors under COWs are, when so stated, immune from
subsequent changes in law, royalties and tax rates. Furthermore, unlike KPs,
disputes between the government and the contactor granted mining rights under a
COW (except for those concerning tax matters) can be resolved through
international arbitration. Enforcement of arbitral awards may be assisted, as
Indonesia is a party to the New York Convention on the Enforcement of Foreign
In 1999, decentralisation and regional administration
laws (Law No. 22/1999 regarding regional government, replaced by Law No.
32/2004) transferred substantial authority over hardrock mining from the central
government level to provincial, regional and municipal government levels.
Further to Government Regulation (GR) No. 75/2001, mining rights in the form of
KPs may be issued, administered and regulated at the central, provincial,
regional or municipal level, depending primarily on whether provincial, regional
or municipal boundaries intersect the area in question. At the same time, Law
No. 25/1999 and 33/2004 confirmed significant increases in the share of revenues
allocated to provincial, regional and municipal governments from dead rent, tax
and royalty payments made by holders of mining rights.
GR No. 75/2001
also provided that COWs "should be stipulated separately" in consultation with
the People's Representative Assembly Parliament. Since May 2005, parliament has
considered a new Mining Law. This has effectively blocked consideration and
issuance of new COWs for the past seven years even though there are a number of
major international mining company applicants.
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- Article 33 of the constitution of the Republic of Indonesia of 1945; Law No.
11/1967 on Basic Provisions of Mining, GR No. 32/1969, GR No. 79/1992 and GR No.
75/2001; and minister of energy and mineral resources Decree No. 1614/2004)
(collectively referred to as the Mining Law).
- GR No. 45/2003 on Tariffs of Non-Tax State Revenues Effective Within the
Ministry of Energy & Mineral Resources (GR No. 45/2003).
- Law No. 32 and 33/2004 on regional government.
- Law No. 41/1999 on Forestry and Law No. 19/2004; and Regulation P-14/2006
(the Forestry Law).
- Law No. 5/1960 on Basic Provisions of Agrarian Principles (the Agrarian
Principal regulatory bodies:
- Minister and Department of Energy & Mineral Resources (DEMR);
- Minister and Department of Forestry; and
- central (BAPEDAL) and regional environmental authorities.
For centrally issued or agreed KPs and COWs:
- Minister of energy and mineral resources (MEMR)
- DEMR/the director general of mineral, coal and geothermal resources (DGMCG),
formerly known as director general of geology and mineral resources (DGGMR)
For KPs provincially, regionally and municipally:
- Governors of 33 provinces; and
- regents (bupati) and mayors (walikota) of 428 regions (kabupaten) and
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The JORC Code and Guidelines for Reporting of Identified Mineral Resources
and Ore Reserves, a joint initiative of the Australasian Institute of Mining &
Metallurgy, the Minerals Council of Australia and the Australian Institute of
Geoscientists through the Joint Ore Reserves Committee, is widely used in
Under article 33 of the constitution of the Republic of Indonesia, 1945,
natural resources (ie, land, water and natural riches contained therein) are to
be 'controlled' by the state and made use of for the people. As a result, the
state (ie, the government of the Republic of Indonesia) is deemed to have title
to minerals in the ground and to mined and processed minerals and metals.
Parties granted mining rights under the Mining Law are in effect 'contractors'
of the government and do not by virtue of holding mining rights acquire title to
minerals in the ground. Parties holding mining rights for exploitation,
transport and sale under KPs or COWs are granted the exclusive right to sell and
export mined minerals and retain the proceeds of sale (assuming royalties and
other payments to the government are made in a timely manner). Title is acquired
by a purchaser from the government in accordance with agreements for sale and
purchase between the purchaser and the KP holder or the COW contractor (in
effect, acting as the government's agent), or at the point of export.
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The central DEMR in Jakarta provides published information about Indonesia's
mining law regime but such information is not comprehensive and may not be up to
date, especially with respect to regional regulations.
The DEMR will on
the request of any party, and for a fee, provide printed maps showing areas
covered by grants of mining rights to identified parties. These maps may not be
up to date nor include mining rights granted by provincial governors, regents or
mayors but not yet reported to the DEMR. Failure to report, however, does not
invalidate a KP. Lack of coordination amongst government levels can result in
overlapping grants and resultant uncertainty.
Geological information and
data can be purchased from the DEMR for a fee per hectare for areas not subject
to a currently valid grant of mining rights. Such information and data has
usually been generated by prior holders of mining rights for the area in
question and provided as legally required to the DEMR.
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Mining rights are granted pursuant to the issuance of KPs (for smaller areas)
and, in theory, COWs (for larger areas) on a first come, first served basis.
Such rights give the holder or contractor the exclusive authorisation to conduct
mining activities in a defined area within a certain period of time subject to
performance of specified obligations. The holder of a KP or a contractor under a
COW has a right to keep and sell minerals mined in its KP or COW area provided
that dead rent, certain taxes and royalties are paid. KP holders and COW
contractors (to the extent specified in COWs) are subject to generally
applicable laws, such as environmental and forestry laws.
COWs are unlikely to be approved until the Mining Law is amended and such
amendment retains the COW as one means of granting mining rights. Nevertheless,
the process for obtaining a COW continues to be initiated by an application for,
and issuance of, a preliminary investigation permit (SIPP) or an exploration
permit. Such permits are issued by the central, provincial or regional levels of
government depending on the location of the area covered by the permit. The
holder of the permit may be a foreign company. The holder has the right to
request a COW for such area or part thereof. The processing of such requests
involves obtaining approvals of the DGMCG and all levels of government,
negotiation of the terms and conditions of the COW and tabling of the proposed
COW before parliament for its 'approval'. The COW is signed for the government
by the MEMR following approval by the president. It is also signed by a new
Indonesian company formed by the permit holder and at least one other party
(both of which can be foreign companies).
An alternative but little used
way to obtain a COW by foreign investor involves conversion of KPs to a COW.
This requires negotiations and approvals concerning all levels of government and
additional approvals of the DGMCG, the Capital Investment Coordinating Board
(BKPM), parliament and the president (see MEMR Decree No. 1614/2004).
Mining rights may also be acquired through direct transfer of KPs by their
holders to third parties provided the transfer is first approved by the granting
authority. Mining rights granted to contractors under COWs or of a contractor's
interest under a COW may be assigned and transferred to qualified parties if
such assignment and transfer is permitted under the terms of the COW in question
and approvals have been obtained, both as may be required under the COW
(normally from the MEMR or DGMCG) and under regional administration laws.
Assignments of mining rights have been approved as security for project loans
for funding mine construction. Obtaining approvals can be a prolonged process
and as a result, transfers and assignments are relatively infrequent.
simpler but indirect method of obtaining or rather controlling mining rights is
(subject to restrictions on foreign ownership) by purchasing the shares of a
contractor under a COW or of its shareholders.
KPs may be granted by the
regent or mayor if the KP area is located entirely within a regency or
municipality. KPs may be granted by the provincial governor if the KP area
straddles two or more regencies or municipalities within a province and there is
no coordination between the regents or mayors concerned. KPs may be granted by
the MEMR if the KP area straddles two or more provinces and there is no
coordination between the governors concerned. The authority of regents and
mayors extends to four miles offshore, of governors to between four and 12 miles
offshore and of the MEMR to KP areas more than 12 miles offshore.
grant exclusive mining rights to the holder for specified minerals or metals,
stages of mining activity and specific time periods within a defined KP area.
However, a holder of a KP for exploration of a specified mineral has a priority
in applying for a KP for other minerals discovered in the same area. The holder
of a general survey KP has priority over other applicants for an exploration KP
within the same area. The holder of an exploration KP has priority over other
applicants for an exploitation KP within the same area. Applications for later
stage KPs and extensions must be initiated during the term of an existing KP.
COW contractors that are PMA (foreign capital investment) or PMDN (domestic
capital investment) companies normally have special privileges or concessions
confirmed in the COW, for example, with respect to duty-free import of capital
equipment, unrestricted export of mineral products and exemption from currency
exchange control if ever adopted by the government. COWs may also establish
special tax regimes for the COW contractors and fix corporate tax rates at the
then current rate, with the government undertaking to hold that rate for the
life of the COW and in some instances to give the COW contractor the benefit of
any future lower rate.
Some COWs require COW contractors to 'work towards
and assist' the government in establishing metal-processing facilities in
Indonesia, if economically feasible. If such facilities have been established in
Indonesia by other parties, the COW contractor may be required to process its
mineral products at such facilities if terms and conditions no less favourable
than offshore alternatives can be obtained.
Mining-related obligations of
a holder of mining rights are set forth in the Mining Law, for KP holders as
conditions attached to the KP permit and for COW contractors as terms and
conditions in the COW. Other obligations are imposed in environmental and
To apply for and then maintain a KP or COW in force, the
holder or COW contractors must pay prescribed deposits, dead rent, exploration
or other contributions, and land and building tax to specified government
Work must commence within six months from issuance of
exploration KPs, within six months for pre-exploitation work under exploitation
KPs and within one year for exploitation work under exploitation KPs. A
six-month hiatus when no work is carried on can result in the KP being deemed
abandoned. Failure to comply with such deadlines, work obligations and permit
conditions can result in KPs or COW companies being terminated. An issuing
authority may suspend performance of obligations due to force majeure or other
Holders of mining rights are entitled to conduct
exploration, construct required infrastructure and carry on other mining
activities using proper mining techniques and equipment. But holders must at the
same time acquire consents, relinquishments or transfers from surface rights
holders (see below). Holders are required to deposit reclamation funds.
KP holders must submit preliminary reports detailing mining plans, production
targets and quarterly and annual reports in a prescribed form.
obligations of COW contractors are more extensive and spelled out in detail in
the COW. Special obligations of COW contractors include, without limitation,
obligations for employment and training of Indonesian nationals, maximisation of
regional economic and social benefits, regional and local business development
(with regional and local levels of government involved in the programme and
budgeting process), providing public access to and use of infrastructure, such
as airstrips, harbours, roads and bridges and payment of regional and local
government levies and taxes as approved by the central government as such
existed on the date of signing of the COW. The decentralisation and delegation
of authority to regional has resulted in attempts by such levels to collect
additional levies when authority to do so may be questionable or lacking.
COW contractors are obligated to sell mineral products at arms' length
international prices, report sales revenues and justify sales prices.
Government approvals are required as a COW advances from general survey through
to exploration, feasibility study, mine construction and finally to the 30-year
Mine and infrastructure plans are also subject to
government approval. Since regionalisation, this means in practice approval by
all levels of government in the affected area.
Under certain COWs, PMA
contractors and their foreign shareholders are obligated to offer shares for
sale in the COW contractor to Indonesian nationals and companies owned by
Indonesian nationals. These COWs specify the extent of such offerings and the
percentage of shares in the COW contractor company involved. For some COWs, such
offerings must continue until such Indonesian parties own no less than 51% of
all shares of the COW company. Offering prices are specified as being 'fair
market' prices but in practice are the prices as agreed between the COW company
and the central government.
Since the enactment of GR No. 20/1994 and GR
No. 83/2001, the mandatory level of Indonesian ownership in a COW PMA company
has been reduced to nil on formation and some level (probably a nominal
percentage) after 15 years of production. COWs issued thereafter have referred
to GR No. 20/1994 as being 'at all times' (ie, for the life of the COW) the
governing requirement for Indonesian ownership of COW contractor companies.
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Under the Mining Law, KPs can only be granted to Indonesian individuals and
legal entities. Although the Mining Law contemplates that the KP holder has a
demonstrable capacity to exploit minerals in its KP area, this is often not the
case. As a result, KP holders on occasion enter into agreements with foreign
mining companies to carry out mining activities on their behalf. Some KPs
contain conditions requiring approval of such agreements (sometimes referred to
as 'cooperation agreements') by the issuing authority.
individual or entity cannot be a direct party to a COW but can be a shareholder
of an Indonesian PMA COW contractor company. As mentioned above, and subject to
the terms of the COW in question, foreigners can hold as much as 100 per cent of
the issued shares of such companies for 15 years. Thereafter, a nominal
percentage of shares in the PMA COW contractor company must be offered to
Indonesians at fair-market or agreed prices.
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KP holders and COW contractor companies may attempt to enforce mining and
related rights against third parties in the Indonesian courts. Litigation is
slow and costly, judicial processes are cumbersome and outcomes are difficult to
As mentioned above, COW contractors have the additional right of
being able to resolve disputes about their COW rights and the government's COW
obligations by arbitration. COWs contain arbitration provisions of disputes and
specify applicable arbitration rules. The arbitration location may be offshore
if so specified in the COW or the initiating party. Enforcement of an offshore
arbitration award may be facilitated given Indonesia's adherence to the New York
Convention on Enforcement of Foreign Arbitral Awards. Enforcement, in any event,
is likely to be difficult and slow.
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Indigenous people are not recognised constitutionally or otherwise as having
any legal rights to mineral deposits. Ownership of metals and minerals in the
ground is vested in the state, as described above. However, local people and
cooperatives are in theory to be given priority in the event of competing
applications for KPs. In practice, a 'first-come, first-served' approach may
preclude this priority from being exercised.
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The holders of mining rights have the right to enter and remain in the area
covered by such rights in order to exercise their mining right subject to
acquisition or relinquishment of surface rights held by other parties. Surface
rights may be based on customary law, use or occupation and titles granted
pursuant to the Agrarian Law.
Holders of mining rights must negotiate and pay compensation mutually
acceptable for surface rights and crops, trees and other plants of commercial or
subsistence value. Holders must also pay for affected buildings and resettlement
if necessary. Some COWs provide that such compensation for surface rights is to
be 'reasonable' but expectations can cause negotiations to be difficult and
protracted. Regional and local officials may assist in the acquisition of
surface rights, but there are no compulsory acquisition laws or administrative
tribunals empowered to fix compensation.
The Agrarian Law established nine land titles, of which three are relevant to
the acquisition of surface rights by holders of mining rights, namely:
- right of ownership (hak milik);
- right to build (hak guna bangunan - HGB); and
- right to use (hak pakai).
Companies holding mining rights may obtain HGB and hak pakai titles (which
have a defined term of years) and would normally do so for areas of land on
which plants, fixed equipment and infrastructure are to be located. Hak milik
may only be granted to Indonesian individuals and certain entities but a hak
milik holder can relinquish his rights and allow conversion of the title to HGB
issued in the name of the mining rights holder. Laws and procedures governing
the acquisition of land titles are complex and the process can be lengthy.
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A holder of mining rights is required to pay the state dead rent, royalties
during exploration and exploitation and other payments related to mining
activities and the area covered by the holder's mining rights as may otherwise
be required by law.
GR No. 45/2003 specifies the dead rent and royalty
obligations of KP holders. COWs specify such obligations for COW contractors and
these may differ from those set forth in GR No. 45/2003. DGGMR Circular Letter
No. 008.E/84/DJG/2004 provides instructions for calculating payments of dead
rents and royalties. Law No. 25/1999 specifies to which level of government KP
holders and COW contractors are to pay royalties and how such levels of
government are to allocate and transfer these funds to other levels of
Dead rents are charged based on the number of hectares
covered by a KP or COW and the stage of mining involved. For KPs, dead rent
charges begin at 500 rupiah per hectare per year during the General Survey and
Preliminary Investigation KP and increase to as much as 25,000 rupiah per
hectare per year during the Exploitation KP. For COWs, dead rent charges begin
at US$0.05 and increase annually to as much as US$4.00 per hectare per year.
Royalties for KP holders and COW contractors not otherwise governed by royalty
rates specified in their COWs are defined as percentages (3 per cent to 5 per
cent) of FOB sales prices per ton or kilogramme of metal exported as such or as
contained in exported concentrates.
Companies holding KPs also pay
corporate income tax at generally applicable rates (currently 30 per cent) and
are subject to generally applicable tax laws. COW contractors pay corporate
income tax at rates specified in their COWs that may be more or less or the same
as generally applicable rates. COWs have customarily contained special tax
provisions for COW contractors that constitute a special tax regime for the life
of the COW. Tax officials may not at times respect the lex specialis nature of
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Few special tax advantages or incentives are available to holders of KPs.
However, KP holders are eligible for relief (in the form of a reduction to a
maximum of 5 per cent) for a two-year period from import duty imposed on
machinery, goods and materials. Mining services companies are also eligible for
such relief (minister of finance Decree No. 135/KMK.05/2000 and Decree No.
PMDN and PMA companies holding mining rights either as
KP holders or COW contractors are eligible for relief or exemption from duties
on imported capital equipment. COW contractors may also be eligible for other
preferential tax treatments if contained in the provisions of their COWs. For
example, a COW contractor may be eligible for a reduced rate of withholding tax
on dividend payments made to a foreign shareholder if so provided in its COW.
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Please see question 14, having regard to the fact that KP holders must be
Indonesian nationals or entities owned by Indonesian nationals whereas COW
contractors may be Indonesian companies owned by foreign shareholders.
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Mining activities in Indonesia are normally carried on by Indonesian limited
liability companies (PT companies) formed under the Company Law. Foreign parties
may only participate in mining activities as shareholders of PT PMA companies as
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There are few Indonesian sources of financing for private parties carrying on
mining activities. Exploration funds tend to be raised through offshore stock
offering of listed affiliates of COW contractors or parties with cooperation or
similar agreements with KP holders. Such funds are then lent to the mining
rights holder. Offshore banks have provided limited recourse project finance
loan facilities for mine development and construction. Although several mining
companies are listed on Indonesia's stock exchanges, the Indonesian public
securities market does not play a significant role in financing mining
There are no material restrictions or limitations of any kind imposed under
Indonesian law in connection with the importation of machinery and equipment
normally required for mining activities. Normally required services for mining
activities may also be obtained and provided in Indonesia. But the 'importation'
of such services is closely regulated to the extent that individual or corporate
service providers establish a physical presence or are deemed to have a
permanent establishment for tax purposes in Indonesia.
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There are no restrictions or limitations imposed on the use of domestic
employees for mining activities in Indonesia. Companies holding and exercising
mining rights may employ foreigners (expatriates) except for personnel work (see
Presidential Decree No. 75 of 1995). Employers must obtain a number of approvals
to employ expatriates. The expatriates must obtain the requisite visas,
residence and work permits in order to work in Indonesia.
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There are presently no mandatory restrictions to or limits on the processing,
export or sale of metallic minerals mined in Indonesia by KP holders although
exploitation KPs may, and certain COWs do, require contractors to process
minerals within Indonesia if economically feasible. Mining rights holders
normally produce concentrates from minerals mined. Regional and local
development obligations of COW contractors impose the need to maximise
employment of Indonesian nationals and otherwise enhance development and this
can be a factor in determining the extent to which minerals will be processed in
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Indonesia does not have any foreign exchange controls. There are no
restrictions or limitations on the import of funds for mining purposes (except
that foreign loans must be reported to Bank Indonesia). COWs and other laws may
require that imported funds be deposited into special PMA accounts.
are no restrictions or limitations on the use of proceeds from the sale or
export of metallic minerals. There are no obligations to repatriate or use
export or sale proceeds in Indonesia. COW contractors have specific rights to
transfer funds abroad entrenched within their COWs. The standard article 15 of a
COW permits COW contractors to transfer abroad net operating profits, repayments
of loan principal and payments of interest on foreign loans, allowances for
depreciation of capital assets generally applicable to PMA companies under the
Foreign Investment Law, proceeds from the sale of shares to Indonesians,
expenses for employed expatriates and the training of Indonesians abroad,
technical assistance and licence fees.
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The principal environmental laws are:
- Law No. 23/1997 on Environmental Management
- GR No. 27/1999 on Analyses on Environmental Impact (in Indonesia known as
- Minister of the Environment Decree No. 17/2001 on Types of
Business/Activities Plans Which Must Be Accompanied with Analyses on
See also: MEMR Decree No. 103.K/008/M.PE/1994 for the role of the Inspector
from the DGMCG in supervising Environment Management Plans (RKLs) and
Environment Monitoring Plans (RPLs); GR No. 82/2001 on prohibition on
discharging solids (including muds and slurries) into water or water sources;
and GR No. 18/1999 which may apply to all tailings disposals.
The principal health and safety laws specifically applicable to the mining
- GR No. 19/1973 on Regulation and Supervision of Work Health and Safety in
- MEMR Regulation No. 01/PM/Pertamb/1978 on Supervision of Mine Dredging Work
- MEMR Decree No. 2555.K/201/MPE/1993 on Implementation of Work Health and
Safety and Mining Environment Mines Inspection in General Mining
- Joint Decree of MEMR and the minister of manpower No. 1245.K/26/DDJP/1993 on
Supervision Implementation of Work Health and Safety and Mining Environment
Mining companies must prepare AMDAL documents (Reference Outline,
Environmental Impact Analysis (ANDAL), RKL and RPL) (see MEMR Decree No.
AMDAL documents are open to the public. Review of AMDAL documents is carried
out by either a central review team (located in Jakarta) or a regional review
team (ie, a team designated in the relevant province). Central review teams
report to the minister and regional review teams report to the provincial
governor for their respective approvals.
A first step is the conduct and completion of baseline studies. This is the
collection and analysis of data on all physical aspects and issues, including
climate, flora, fauna, soils, river flows, tides, waves, topography (land and
sea), social studies on population, health, education, employment and religion.
Community consultation is required. For a substantial mine project, this could
take at least one year.
This is followed by submission of the Terms of Reference for the ANDAL for
approval (a process normally requiring no less than three months), preparation
and submission of the ANDAL, RKL and RPL (six to nine months), and approval of
the ANDAL (three months). The entire process can take between 18 and 30 months.
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Reclamation obligations are defined by MEMR Decree No. 1211.K/008/M.PE/1995;
minister of forestry and plantation Decree No. 146/Kpts-II/1999 and Regulation
No. P-12/Menhut- II/2004; and DGGMR Decision No. 336.K/271/DDJP/1996.
Holders of mining rights are required to submit annual plans for
environmental management that include a reclamation plan before commencing
exploitation. Reclamation must be conducted in accordance with reclamation plans
and applicable laws. Completion of reclamation must be confirmed by a DEMR
Before commencing exploitation, a KP holder and a COW company must deposit a
reclamation fund in a bank appointed by the relevant government authority (ie,
central or regional). The amount of the reclamation fund is based on estimated
reclamation costs under the relevant AMDAL.
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Indonesia is not a party to any international conventions or treaties
specifically applicable to the mining industry. Indonesia is a party to a number
of bilateral treaties on foreign investment.
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|Updates and trends|
Indonesia is experiencing increased interest in mining given high commodity
prices. However, the existing legal regime imposes difficulties and delays in
obtaining mining rights. A bill to amend the Mining Law as brought before
parliament would, if enacted in its present form, result in greater