Indonesia has implemented a downstreaming policy in the mining sector to boost economic growth, such as generating state revenues, creating new jobs, and technology transfer. This policy's impact varies across different mining commodities and significantly influences Indonesia's international trade landscape.

1. Legal Brief
Downstream Mining Policy:
Pathway to Optimizing Mining Commodities

2. Holders of IUP or IUPK at the production operations activity stage may carry out coal development and/or utilization, which is an effort to improve the quality of coal
with or without changing the physical or chemical properties of the original coal.
Art. 102 (2) and 1 (20b) Law No. 4/2009
Processing is an effort to improve the quality of mineral mining
commodities to produce products with physical and chemical
properties that do not change from the properties of the original
mining commodities for refining or to become industrial raw
materials.
Art. 1 (20) Law No. 4/2009
BACKGROUND
A H R P L e g a l B r i e f
Increasing the added value of minerals through processing and/or refining activities
must meet the minimum threshold for processing and/or refining by taking into
account:
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Mining downstreaming is a policy that pushes to add value to the country's mineral resources domestically rather than exporting raw
materials. This entails processing raw minerals and natural resources within Indonesia to convert them into higher-value products before exporting or
using them domestically. By focusing on downstream activities, the government aims to generate greater economic benefits from the mining sector,
such as increased revenue, job creation, and technology transfer.
Refining is an effort to improve the quality of Mineral mining
commodities through physical and chemical processes as well as
further purity improvement processes to produce products with
different physical and chemical properties from the original mining
commodities to metal products as industrial raw materials.
Art. Law (20a) Law No. 4/2009
the increase in economic value, which must: (i) provide optimal
economic benefits for the country; (ii) support the availability of a mineral
supply chain in the context of supplying and developing domestic
industry by considering the comparative advantages of mineral
resources; and (iii) considering the continuation of mining operations.
market needs, which means it must consider the absorption of products
at a certain level of purity that can be absorbed by the domestic and/or
international market.
Art. 169 (1) – (3) GR No. 96/2021
Holders of Mining Business License/Izin Usaha Pertambangan (“IUP”) and Special Mining Business License/Izin Usaha Pertambangan Khusus (“IUPK”) are
obliged to increase the added value of mineral. To specify, holders of either an IUP or IUPK who are at the production operations stage must increase the
added value of minerals through processing and/or refining activities within their mining business operations.
Article 102 (1) of Law No. 4/2009
Mandatory for Mineral Commodities
Voluntary for Coal Commodities

3. Integrated Activities Criteria
GOVERNMENT SUPPORT TO INCREASE
THE MINING COMMODITIES’ ADDED VALUE
IUP/IUPK holders at the mineral production operations activity stage are required to carry out the processing and/or refining of minerals
resulting from mining within the country. Should the holders at this production operations stage fulfill these processing and/or refining
requirements, the Government guarantees the continued utilization of the processed and/or refined products.
Art. 168 GR No. 96/2021
IUP/IUPK holders engaged in production operation activities integrated with (i) processing and/or refining activities for mineral
commodities; or (ii) development and/or utilization activities for coal commodities, are eligible for unlimited term extensions, with each
extension lasting 10 years. In contrast, those who are not integrated with such activities are limited to a maximum of two times of extensions.
Art. 54 (1) – (2) and Art. 109 (1) – (2) GR No. 96/2021
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Export facility for the processing and/or refining
products
Fiscal and/or non-fiscal incentives for companies that build derivative
industries for processing and/or refining products
by providing
Metallic Minerals
Coal Mining
Processing and/or refining activities are conducted by business entities
holding IUP/IUPK that carry out mining activities.
Has reserve availability to meet the operational needs of processing and/or
refining facilities.
Development and/or Utilization activities are conducted by business entities
holding IUP/IUPK that carry out mining.
Has reserve availability to meet the operational needs of the development
and/or utilization.
Fulfill the provisions on the type of coal development and/or utilization and/or
the minimum percentage limit on the amount of coal produced for
development and/or utilization activities determined by the Minister of
Natural and Mineral Resources.
A H R P L e g a l B r i e f
Article 56 (1) (a) and 111 (1) (a)
GR No. 96/2021
Article 56 (1) (b) and 111 (1) (b)
GR No. 96/2021.

4. A H R P L e g a l B r i e f
The Coordinating Minister for the Economy by virtue of CME Reg. 9/2022 designates PSN pertaining to the construction of facilities aimed at
enhancing the added value of mining commodities. This aligns with the objectives of downstreaming in the mining sector. Below are the
identified results for the PSN:
NATIONAL STRATEGIC PROJECT:
ACCELERATING THE MINING DOWNSTREAMING
National Strategic Project is a project and/or program implemented by the Government, Regional Government, and/or business entities that have a
strategic nature to increase growth and equitable development in order to improve community welfare and regional development (“PSN”).
Art. 1 (1) PR No. 3/2016
Construction of Processing and Refining Facilities for Nickel Commodities, by:
Construction of Processing and Refining Facilities for Copper Commodities, by:
Construction of Processing and Refining Facilities for Bauxite Commodities, by:
Construction of 1 Processing and Refining Facilities for Iron Sand and Vanadium, by:
Construction of Processing and Refining Facilities Integrated with Mining:
Construction of Nickel Commodity Processing and Refining Facilities Integrated with Mining and Industrial Areas in the framework of the
National EV Battery Development of PT Aneka Tambang Group, PT Industri Bateri Indonesia, and their partners – East Halmahera, North
Maluku.
• PT Artabumi Sentra Industri – Morowali, Central Sulawesi
• PT Wanxiang Nickel Indonesia – Morowali, Central Sulawesi
• PT Artha Mining Industry – Bombana, Southeast Sulawesi
• PT Ceria Nugraha Indotama – Kolaka, Southeast Sulawesi
• PT Macika Mineral Industri – South Konawe, Southeast Sulawesi
• PT Virtue Dragon Nickel Industry – Konawe, Southeast Sulawesi
• PT Aneka Tambang P3FH – East Halmahera, North Maluku
• PT Aneka Tambang Nittera Haltim – East Halmahera, North Maluku
• PT Dinamika Sejahtera Mandiri – Sanggau, West Kalimantan
• PT Well Harvest Winning Alumina – Ketapang, West Kalimantan
• PT Freeport Indonesia – Gresik, East Java
• PT Amman Mineral Industri – West Sumbawa, West Nusa Tenggara
• PT Bahodopi Nickel Smelting Indonesia’s Smelter and PT Vale Indonesia Blok Bahodopi’s Mining – Morowali, Central Sulawesi
• PT Kolaka Nikel Indonesia’ Smelter and PT Vale Indonesia Blok Pomala’s Mining – Kolaka, Southeast Sulawesi
• PT Alchemist Metal Industry – North Halmahera, North Maluku
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5. ENHANCING THE ADDED VALUE
OF MINERAL COMMODITIES
A H R P L e g a l B r i e f
As previously outlined, holders of IUP and IUPK in the production operations stage for mineral commodities are mandated to undertake
processing and/or refining activities, to enhance the added value of minerals mined domestically. Below is the detailed scheme for such
processing and/or refining activities:
Processing and/or Refining Activities
Cooperation Self-Handling
other IUP holders
who have integrated
processing and/or
refining facilities
other IUPK holders
who have integrated
processing and/or
refining facilities
other parties who carry
out processing and/or
refining activities that are
not integrated with mining
activities
Processing and/or
Refining Activities
Processing and/or
Refining Services
Sale and Purchase
The processing and/or refining
are conducted in jointly
constructed processing and/or
refining facilities.
Sale and purchase of ore, concentrate,
by-products, or remaining processing
and/or refining results.
The processing and/or refining
conducted in processing and/or
refining facilities constructed by other
IUP holders, IUPK holders, and/or
other parties who carry out processing
and/or refining activities that are not
integrated with mining activities.
Processing and/or refining services on
ore, concentrate, by-products, or
remaining processing and/or refining
results.
The processing and/or refining
conducted in processing and/or
refining facilities constructed by other
IUP holders, IUPK holders, and/or
other parties who carry out processing
and/or refining activities that are not
integrated with mining activities.
Should an IUP holder be engaged in the production operations
stage for specific types of non-metallic mineral commodities and
also be involved in integrated processing activities within the
cement industry, two regulatory frameworks apply: mining activities
adhere to the guidelines of the IUP for the production operations
phase, as specified by GR No. 96/2021, while the cement industry
activities comply with permits and laws established under the
industrial sector.
Art. 52 GR No. 96/2021
with
by way of
Reference:
• Art. 167 (2) GR No. 96/2021
• Art. 16 (4) and (5) MoEMR Reg. 25/2018

6. MINIMUM THRESHOLD FOR PROCESSING
AND/OR REFINING MINERAL COMMODITIES
A H R P L e g a l B r i e f
Appendix of MoEMR Reg. No. 25/2018 specifies minimum threshold for the processing and refining of mineral mining commodities within
the country, specifically targeting the following commodities:
Metallic minerals, which include copper, nickel, bauxite, iron, tin, manganese, lead, zinc, gold, silver, chromium, zirconium, and
antimony.
Non-metallic minerals, which consist of zircon, kaolin, clay, zeolite, bentonite, silica (quartz sand), calcite (limestone), feldspar, and
diamond.
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Based on the information provided in Slide four (4), it is evident that the PSN on the construction of smelters, primarily focuses on nickel
commodities, with the objective of enhancing their added value. Below is an overview of the minimum thresholds for processing and/or refining
nickel commodities
In addition to these, the regulation also specifies minimum threshold for further refining of by-products or refined outputs from metal
mineral mining.
Commodity
Processed Products Refined Products
Ore Mineral
Nickel and/or cobalt (smelting
process), namely saprolite and
limonite.
Pentlandite
Garnerite
Serpentinite
Carolite
- Nickel mate, alloy metal, nickel metal, and
metal oxide
Nickel and/or cobalt (leaching
process), namely limonite
- Metals, metal oxides, metal sulfides, mixed
hydroxide/sulfide precipitate, and hydroxide
nickel carbonate
Nickel and/or cobalt (reduction
process), namely saprolite and
limonite.
- Alloy metal

7. ENHANCING THE ADDED VALUE
OF MINERAL COMMODITIES
A H R P L e g a l B r i e f
Development and/or Utilization Activities
Cooperation
Types of Development
and/or Utilization Activities
other IUP holders
who have integrated
development and/or
utilization facilities
other IUPK holders
who have integrated
development and/or
utilization facilities
other parties who carry
out development and/or
utilization activities that
are not integrated with
mining activities
Development and/or
Utilization Cooperation
Development and/or
Utilization Services
Sale and Purchase of
Ore
The development and/or utilization
conducted in jointly constructed
development and/or utilization
facilities.
The development and/or utilization
conducted in development and/or
utilization facilities constructed by
other IUP holders, IUPK holders,
and/or other parties who carry out
development and/or utilization
activities that are not integrated with
mining activities.
The development and/or utilization
conducted in development and/or
utilization facilities constructed by
other IUP holders, IUPK holders,
and/or other parties who carry out
development and/or utilization
activities that are not integrated with
mining activities.
with
by way of
Reference:
• Art. 170 (2) GR No. 96/2021
• Art. 16 (4) and (5) MoEMR Reg. 25/2018
As stated earlier, holders of IUP and IUPK in the production operations stage for coal commodities may undertake the development and/or
utilization efforts aimed at enhancing the added value of domestically mined coal. Presented below is the schema for such coal development
and/or utilization activities:
coal upgrading coal briquetting
coke making
coal gasification, including underground coal gasification
coal slurry/coal water mixture
coal liquefaction
Unlike the case for nickel commodities, where minimum threshold
exist for processing and/or refining activities, no similar regulations
are in place for enhancing the added value of coal commodities
Art. 16 (3) MoEMR Reg. 25/2018

8. EU V. INDONESIA WTO CASE
A H R P L e g a l B r i e f
However, WTO ruled in favor of the European Union in a dispute over a ban on nickel ore exports. Indonesia later filed an appeal against
WTO panel in December 2022, and the whole process of submitting an appeal by Indonesian Government is still ongoing.
Under Joko Widodo regime, Indonesia is undoubtedly aiming to become a developed country by creating jobs and increasing state income
in the field of mining. Indonesia was the world’s biggest exporter of nickel before it banned ore exports in order to attract foreign investors to
develop nickel smelters as well as downstream industries onshore. Particularly, in 2020, Indonesia, as the leading actor on the nickel ore supply,
has imposed nickel ore export ban which subsequently created a disruption and has not been perceived well in the different corner of the world,
especially for the European Union/EU countries. On 22 November 2019, European Union officially submitted request for consultations with
Indonesian Government to Dispute Settlement Bodies under WTO.
Consultations
Requested by EU
Panel Requested
by EU
Panel
Established
Panel Composed
Panel Report
Circulated
Indonesia
Applying Appeal
Nov 22 2019
Jan 14 2021
Feb 22 2021
April 29 2021
Nov 30 2022
Dec 2022
EU’s Argument
Indonesian export restrictions on raw materials was unfairly harming its stainless-steel industry
A product that has great economic importance in terms of providing employment or government revenue may not be
essential if it does not address a particular vital need of the population.
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Indonesia Government’s Argument
The importance of mining for the Indonesian economy, accounting for a substantial portion of its GDP. In this
regards, Indonesia notes that Indonesia is a top nickel producer in the world accounting for 7% of global output, and
nickel mining contributes significantly to government revenue and to employment.
Nickel is an indispensable input for the steel industry which accounts for 3.94% of total industrial GDP. Indonesia
notes that the domestic steel industry is not able to meet demand and that nearly half of Indonesia’s demand for
steel is supplied from abroad.
Indonesia points to the implementation of a strategic plan to expand EV battery production in Indonesia in the short
term, which results in a need to secure a critical input for such production, i.e nickel.
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9. Downstream Road Map
Fisheries Marine Plantations
Natural Gas
Oil
Coal
Minerals
Forestry
Iron Steel
Gold/Silver Asphalt
Copper
Tin
Coal
Nickel Bauxite
Pine Resin Shrimp Fish
Oil Palm
Oil
Gas
Coconut
Rubber
Biofuel Timber
Due to its critical role in Indonesia’s economic development, Ministry of Investment/BKPM
has conducted a Strategic Downstream Investment Roadmap for Indonesia’s
downstream industry, which provides investors with a clear overview of:
Technology Natural Resources
& Natural Reserves
Market Projections
1 2 3
8 Sectors
21 Commodities
Seaweed
Salt
Crab
Priority Downstream Industries Investment Target
Mineral and Coal USD431.8 billion
Oil and Gas USD68.1 billion
Marine, Fishery, Plantation,
Forestry
USD45.5 billion
TOTAL USD545.3 billion
To sum up, according to Strategic Downstream Investment
Roadmap, it can be argued that downstream will later applies
to many sectors and is not limited to mining sector
Investment in Downstream Industries
*) Investment target estimation until 2024
A H R P L e g a l B r i e f

10. We will continue to follow the developments on this topic and provide additional information as it becomes
available. If you have any questions on this topic, please contact:
Aryangga Pradana Febrianto
aryangga@ahrplaw.com
Daffa Hadyansha
daffa@ahrplaw.com
Merina Elfian
merina@ahrplaw.com
This publication has been prepared by AHRP for educational and informational purposes only. The information contained in this publication is not
intended and should not be construed as legal advice. Due to the rapidly changing nature of law, AHRP makes no warranty or guarantee concerning
the accuracy or completeness of this content. You should consult with an attorney to review the current status of the law and how it applies to your
circumstances before deciding to take any action.
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