Indonesia prioritizes local communities in mining sector reform
Energy Minister Bahlil Lahadalia announced plans to expand local participation in mining operations through new legislation giving priority to small enterprises and cooperatives, addressing concerns that many permit holders remain headquartered in Jakarta while producing regions see limited benefits.
New legal framework for community participation
Energy and Mineral Resources Minister Bahlil Lahadalia has called for expanded local participation in Indonesia's mining sector, emphasizing that communities in resource-rich regions must benefit directly from mineral extraction activities.
Speaking at the 11th Regional Conference of the Golkar Party's South Sumatra Regional Executive Board in Palembang on Sunday, Lahadalia, who also serves as General Chairman of Golkar, highlighted a persistent challenge in the sector: many mining business permit holders maintain their headquarters in Jakarta while operating in resource-producing regions, limiting local economic benefits.
New legal framework for community participation
The government enacted Law No. 2 of 2025 on 19 March 2025 as the fourth amendment to the 2009 Mineral and Coal Mining Law, representing the latest in a series of regulatory reforms following amendments in 2020 and 2023. The law introduces significant changes to how mining permits are allocated, creating pathways for broader community involvement.
Under the new legislation, micro, small, and medium enterprises, cooperatives, and religious organization-owned entities can now obtain mining permit areas through either auction or priority allocation. This marks a departure from previous requirements that limited access primarily to auction processes.
The law also affirms for the first time the prioritization of domestic utilization of minerals and coal in the national interest, establishing specific obligations for permit holders to support local development.
"We have formulated a policy for MSMEs and cooperatives. We are giving them priority so that people in the regions can become masters in their own homeland," Lahadalia stated.
South Sumatra's resource potential
The minister specifically cited South Sumatra, which holds coal reserves estimated at 9.45 billion tons according to 2019 Geological Agency data, making it one of Indonesia's three largest coal resource regions alongside South and East Kalimantan. Despite these substantial reserves, local communities have not fully benefited from the province's natural wealth.
Lahadalia emphasized that natural resource management should not benefit only certain groups but instead provide broader opportunities for public participation in regional development.
Implementation strategy
To facilitate the new policy direction, the minister encouraged regional heads to identify mining areas that have not yet received mining business permits. These areas can be proposed for priority allocation to local communities under the new regulatory framework.
Mining business permits in Indonesia are divided into exploration permits, covering general survey, exploration and feasibility study stages, and operation production permits, which encompass construction, mining, processing and refining activities.
Lahadalia, who assumed his current ministerial position on 19 August 2024 after serving as Minister of Investment since April 2021, has demonstrated a willingness to enforce mining regulations. During his tenure as investment minister, he revoked numerous mining permits deemed inactive.
Indonesia's mining sector plays a significant global role, with the country producing 830 million tons of coal in 2024, accounting for 54 percent of world nickel production, and ranking as the sixth-largest copper producer as of 2023. The push for greater local participation aims to ensure these substantial resources translate into tangible benefits for communities in producing regions.