AFG Venture Group Dispatches

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Mining Industry Regulation in Indonesia – Domestic Processing & Refining – The Emperor has no Clothes

May 15th, 2013

Bill Sullivan of Jakarta based law firm Christian Teo Purwono & Partners has once again written an excellent overview of the goings on in the Indonesian mining industry where the Government recently issued a Presidential Instruction on Acceleration of Domestic Processing & Refining.

The purpose of the Presidential Instruction is to facilitate the process of making domestic processing and refining of certain metal minerals and non-metal minerals (but not coal) a reality by January 2014 or soon thereafter as contemplated by the 2009 Mining Law.

The Presidential Instruction, however, is almost certainly far too little, far too late. Further, if a recent USAID study is to be believed, the Presidential Instruction is actually predicated on the erroneous assumption that domestic processing and refining of Indonesia’s major metal mineral products is an economically viable proposition.

Contrary to the Government’s good intentions, insisting upon domestic processing and refining may actually make Indonesia worse off rather than better off compared to the current situation of no compulsory domestic processing and refining.

This seems to be an unfortunate case of “the Emperor has no clothes”.

Bill Sullivan is one of the leading mining, energy and resources lawyers in Indonesia and is regarded as one of Indonesia’s leading experts on the local mining law and regulatory regime.

The full text of his article may be accessed here: Coal Asia – Mining Industry Regulation in Indonesia – Domestic Processing & Refining – The Emperor has no Clothes