Following our previous Legal Alert on the ban of the exportation of unprocessed raw minerals (i.e. copper, nickel, and bauxite), we will now assess the development of the processing and refining industry ("P&R"), which is also Indonesia's priority to expedite the progress of the downstream industry. This priority is more focused now than ever as Indonesia seeks to accelerate the construction of new smelters to prepare for its appeal on its nickel dispute against the European Union by 2024 or 2025.

Further Commitment to Indonesia's Ban Policy: Boosting the P&R Industry

1. Introduction of Smelters and Increase in Domestic Value of Minerals

Following the ban on exporting raw minerals and in order to accommodate the higher volume of raw minerals within the country, the P&R industry introduces new P&R facilities such as smelters, which play an imperative role to boost P&R and ensure that Indonesia is capable to reap the benefits of the ban - primarily to materialize the added value of by-products, open employment opportunities, and/or satisfy domestic demand.

This insight is shared by the Ministry of Energy and Mineral Resources ("MEMR") embodied in Law No. 4 of 2009 on the Mining of Minerals and Coals, as lastly amended by Government Regulation In Lieu of Law No. 2 of 2022 on Job Creation ("Mining Law") as holders of Mining Business License Production Operation ("IUP PO") and Special Mining Business License Production Operation ("IUPK PO") are obliged to increase the added-value of minerals domestically through:

i. Processing and refinery for metal mineral mining commodity;

ii. Processing for non-metal mineral mining commodity; and/or

iii. Processing for rocks mining commodity.1

Furthermore, Government Regulation No. 96 of 2021 on Implementation of Mineral and Coal Mining Business Activities ("GR 96/2021") regulates that holders of IUP PO and IUPK PO may only conduct overseas sales of minerals commodities produced once it fulfils the criterion of:

i Fulfilling the minimum limit of processing and/or refining; and

ii. Fulfilling the domestic mineral needs.2

The minimum limit aforementioned varies upon the commodity with the specifics mentioned within the Attachments of MEMR Regulation No. 25 of 2018 on Mineral and Coal Mining Business, as lastly amended by MEMR Regulation No. 17 of 2020 on Third Amendment of MEMR Regulation No. 25 of 2018 ("MEMR 25/2018").3 In the instance that a certain commodity is not listed within the appendixes, such commodities may only be sold abroad once the minimum limit has been determined by the Minister of MEMR.4 Furthermore, holders of IUP PO for metal minerals or IUPK PO for metal minerals may carry out sales of processed products abroad using the post tariff/harmonized system up to no later than 10 June 2023 if it fulfils the criterion of:

i. Producing processed products; ii. Paying export duty in accordance with prevailing laws and regulations; and

iii. Currently building their own refinery facilities or cooperating in conducting refining activities.5

The above provisions determine the positive obligations onto the entities of the mining sector to actively conduct and/or construct P&R in the Indonesian territory rather than sell such unprocessed commodities directly to overseas buyers.

2. Development of Nickel Smelter

It can be conceived that, particularly for nickel, Indonesia adopted the methodology to execute the ban on the raw mineral prior to the establishment of new nickel smelters; once the particular raw mineral has been banned for export, then the construction of new P&R facilities shall soon follow. The above process has been demonstrated by the fact that the majority of smelters in Indonesia are nickel smelters since the ban on nickel exports in 2019.6 Nonetheless, this strategy of establishing the ban and then having parallel progress between the ban policy and the construction of new P&R facilities is susceptible to attacks as Indonesia's sub-par infrastructure conditions for smelters are not definitively able to support the ban policy. This is evident especially since the Panel of the World Trade Center cited the present downstream industry in Indonesia to be immature.7

One perspective is that the policy of banning such raw materials exports is too hasty when taking into consideration that the production volume of domestic copper concentrate does not match the rate of domestic absorption. This drawback has already been identified by the Association of Indonesian Mining Experts (Perhapi) which exclaimed that the annual production of 4 (four) million tonnes of copper per year shall not be fully absorbed due to the national smelter capacity volume only being 1.3 (one point three) million tonnes per year.8

To view the full article please click here.


1 Article 102 paragraph (1) and Article 103 paragraph (1) of Mining Law.

2 Article 158 paragraph (2) of GR 96/2021.

3 Article 17 paragraph (1) of MEMR 25/2018.

4 Article 17 paragraph (2) of MEMR 25/2018.

5 Article 47 paragraph (1) and (2) of MEMR 25/2018.


7 Point 7.119. of Report of the Panel No. WT/DS592/R dated 30 November 2022.


The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.