Towards the end of May 2024, the government officially implemented Government Regulation Number 25 of 2024 (“Amendment 25/2024”), which amended Government Regulation Number 96 of 2021 regarding the Implementation of Mineral and Coal-Mining Business Activities (“Regulation 96/2021”).
Amendment 25/2024 marks a significant shift in the legal landscape of mining business permits in Indonesia. In addition to a wide scope of changes in the mineral and coal-mining industry, notably, Amendment 25/2024 now allows religious organizations to obtain mining licenses, a move that has sparked debate regarding its larger implications towards the participation of religious organisations in business and industry. This article provides a comprehensive analysis of the amendment, exploring its background, legal standing, potential impacts, and broader concerns.
The Foundation: Regulation 96/2021
Regulation 96/2021 was enacted to ensure the effective implementation of Law No. 4 of 2009 regarding Mineral and Coal Mining (“Minerba Law”). The government recognized the need for a detailed and current regulation to manage the evolving and complex industry. Regulation 96/2021 expanded upon a wide scope of provisions:
a) Licensing
It mandated that mineral and coal-mining activities must be based on specific business licensing documents issued by the central government, including Business Identification Numbers, Standard Certificates, and Licenses.
The regulation listed various types of licenses, such as Mining Business License (“IUP”), Special Mining Business License (“IUPK”), and Community Mining License (“IPR”).
b) Eligibility
IUPs could be issued to various business entities like state-owned enterprises (“BUMN”), regionally owned enterprises (“BUMD”), and privately owned business entities (including those with foreign investments).
The process of securing an IUP involves two key stages (not including specific licenses): (1) securing IUP areas; and (2) securing the IUP itself, with specific procedures based on the type of minerals involved, including the approval of administrative, technical, environmental, and financial documents.
c) Operation Framework
The regulation addresses the licensing of mining service businesses, ensuring that entities providing services to the mining sector are properly regulated and compliant with legal standards.
The regulation aimed to streamline the licensing process and make it easier for businesses to operate within the legal framework. The regulation provided detailed requirements for the companies seeking licenses to comply with, enforced transparency measures, and aimed to reduce bureaucratic interference.
Amendment 25/2024: Introduction of Special Mining Licenses for Religious Social Organizations
One of the most notable changes introduced by Amendment 25/2024 was the insertion of Article 83A, which amends the Prioritization of Special Mining Business License Areas (Wilayah Izin Usaha Pertambangan Khusus – “WIUPK”) to now be available to religious community organizations. Previously, Regulation 96/2021 restricted WIUPKs exclusively for BUMNs, BUMDs, and privately owned businesses.
Amendment 25/2024 defines “Religious community organizations” as organizations in which one of the organs carries out economic activities as well as aiming at the economic empowerment of members and the welfare of the community/ummah[1].
Key Points:
- Eligibility: Religious community organizations must be controlling shareholders in the businesses applying for WIUPK.
- Duration: The prioritized offerings will remain valid until 30 May 2029.
- Prohibitions: Religious community organizations are prohibited from transferring IUPK and/or ownerships without prior approval from the Minister.
Criticisms of Offering WIUPKs to Religious Community Organizations
Amendment 25/2024 has faced substantial criticism for its perceived conflict with the Minerba Law. Critics argue that Article 83A of Amendment 25/2024 contradicts with Article 75 of the Minerba Law, which restricts IUPK issuance exclusively to BUMNs, BUMDs, and private business entities.
Critics emphasize that the amendment also overlooks Article 74(1) of the Minerba Law, which mandates considering regional interests in granting IUPKs. This neglect raises concerns about Amendment 25/2024’s potential impacts on the mining industry, some of which are listed below:
a) Technical Mining Risks
Prioritizing religious organizations, potentially inexperienced in mining, could lead to unsafe practices, causing environmental damage and safety hazards. Mining operations require specialized knowledge and expertise, and entrusting these tasks to organizations without sufficient experience could result in inefficient and dangerous practices. This not only threatens the safety of workers and nearby communities but also undermines the integrity of Indonesia’s mining sector.
b) Conflicts of Interest
The amendment could foster preferential treatment and undue influence by external forces, undermining fair governance and exacerbating social tensions. Prioritizing religious organizations for mining licenses may create opportunities for bureaucracy and favouritism, leading to an uneven playing field where decisions are influenced by personal or political connections rather than merit and fairness. This could further entrench existing power imbalances and contribute to social unrest, particularly in regions with diverse religious and ethnic communities.
Broader Concerns and Impacts
a) Impacts on Indonesia’s Energy Transition
The emphasis on prioritizing religious organizations in mining activities may further increase coal production, hindering Indonesia’s energy transition goals. Despite Presidential Regulation Number 22 of 2017 capping coal production at 400 million tons, recent approvals suggest targets exceeding this limit, with 922.14 million tons projected for 2024. This poses a severe threat to energy transition efforts and contradicts commitments to reducing coal reliance.
b) Transparency and Public Participation
The amendment has been criticized for lacking transparency and public participation in its formulation, raising concerns about democratic governance and policy implementation. Genuine public involvement is essential for regulations that serve the public interest and align with sustainability goals. The exclusion of public voices from the decision-making process can lead to policies that do not adequately address the needs and concerns of affected communities, undermining trust in the government and the legitimacy of its regulations.
c) Social Concerns
The broader implications of this regulation on social justice and community conflicts are also of great concern. Granting mining permits to religious mass organizations has the potential to ignite conflicts, particularly in customary areas with indigenous populations. Historical instances of violence and human rights violations by mining companies in these regions underscore the need for cautious and equitable policy implementation. The exclusion of local communities from meaningful participation in decision-making processes only exacerbates these conflicts, leading to feelings of disenfranchisement and creating new vulnerable groups.
To mitigate these risks, it is essential to involve local communities in the decision-making process and ensure that their voices are heard. This includes conducting thorough consultations, respecting customary rights, and implementing measures to address any potential negative impacts on local populations. By fostering an inclusive approach, the government can help build trust and support for mining activities, promoting sustainable and equitable development.
Additional Changes Introduced by Amendment 25/2024
a) Adjusted Extensions of Mining Permits for Subsidiaries of BUMN
The amendment allows mining permit extensions for BUMN subsidiaries for 10 years, previously restricted to BUMNs. This change recognizes the interconnected nature of state-owned enterprises and their subsidiaries, allowing for more flexible and extended operations. This provision could enhance the operational efficiency and longevity of state-affiliated mining projects, contributing to more stable and predictable production outputs.
b) Mandatory Share Ownership under Production-Operation Mining Permits
Mining permit holders must now ensure a minimum of 30% share ownership in processing, refining, development, and utilization activities to secure 10-year extensions. This requirement aims to integrate mining activities with downstream industries, promoting value-added processes and economic diversification. By encouraging mining companies to invest in processing and refining, the government hopes to create more job opportunities, increase local content, and reduce dependency on raw material exports.
c) Production Operation IUPK: Extension into IUPK as Operation Continuation
The amendment clarifies the extension of production-operation IUPK for operation continuation, subject to criteria like integrated domestic processing and 51% Indonesian share ownership, with evaluations every 10 years. This provision aims to ensure that mining operations remain aligned with national development goals, promoting local ownership and control over natural resources. Regular evaluations are intended to maintain high standards of operation and adapt to changing conditions, ensuring that mining activities continue to meet environmental and economic objectives.
Future of the Indonesian Mining Industry
In conclusion, the implementation of Amendment 25/2024 represents a pivotal moment in Indonesia’s mining industry, as it opens the door for religious organizations to participate in mining activities. This move, while potentially fostering economic empowerment for these groups, raises significant concerns about technical expertise, environmental stewardship, and social justice. Critics highlight the risk of exacerbating bureaucracy, undermining regional governance, and conflicting with Indonesia’s commitments to sustainable energy transitions.
As Indonesia navigates this new regulatory landscape, it is imperative to ensure transparent governance, inclusive public participation, and a balanced approach that harmonizes economic development with ethical and environmental responsibilities. The success of this amendment will ultimately hinge on its implementation and the extent to which it addresses these multifaceted challenges.
Should you have any inquiries related to this regulation or wish to ascertain its impact on your business or personal interests, please feel free to contact us.
[1] Defined as a “holy community”.
