Cleaning Up Indonesia's Chaotic Mineral & Coal Mining Sector
Efforts of Indonesian authorities to clean up the nation's mineral and coal mining industries met resistance. Various local mining companies that saw their Mining Business Permit (in Indonesian: Izin Usaha Pertambangan, or IUP) being revoked by Indonesia's Energy and Mineral Resources Ministry object to the government's move, despite authorities' claim that they are only revoking those permits of miners that have failed to obtain the mandatory clean and clear certificate (CnC).
If Indonesian mining companies fail to obtain the CnC status it basically means that they still have outstanding royalty obligations and other tax debts, or did not fulfill its exploration and environmental commitments, has property delineation issues or failed to obtain the necessary forestry permits (if the mining activity occurs in a forest area). A big investigation that started in 2011, led by Indonesia's anti-corruption watchdog the Corruption Eradication Commission (in Indonesian: Komisi Pemberantasan Korupsi, or KPK), found many cases of miners failing to pay taxes (implying the government misses out on much-needed revenue).
In an effort to clean up the troubled mineral and coal mining sectors of Indonesia, the government introduced the mandatory CnC status in 2014, but gave time up to 31 December 2016 for companies to obtain this status. However, of the 9,433 IUPs that have been issued by local governments (per 30 January 2017), there are still 3,203 mining companies that are yet to obtain the CnC status. It needs to be emphasized that not all miners who have not obtained the CnC status are necessary guilty of tax evasion or other misconduct. It has also been mentioned that miners fail to obtain the CnC status due to Indonesia's tough bureaucratic hurdles or the lack of communication between local governments and local miners (various miners claim they do not know where to request the recommendation for the CnC status).
So far, the Energy and Mineral Resources Ministry of Indonesia revoked a total of 238 IUPs since January 2017 when the deadline ended. Critics remind, however, that if a miner obtained the CnC certificate three years ago, it does not necessarily mean the miner presently still complies with all regulations.
Mining Business Permits (IUPs) and Clean & Clear (CnC) Status in Indonesia:
| Phase/Status | Commodity | Number of IUPs |
| IUP - Production/Operation | Minerals | 1,392 |
| IUP - Exploration | Minerals | 852 |
| IUP - Production/Operation | Coal | 286 |
| IUP - Exploration | Coal | 673 |
| Non-CnC IUPs | - | 3,203 |
| Total IUPs | - | 9,433 |
| CnCs IUPs | - | 6,230 |
Sources: ESDM
Since the Reformation period when the process of decentralization was started, the regional governments of Indonesia in coal-rich areas (particularly on Kalimantan and Sumatra) have been issuing thousands of IUPs - possibly because local officials could make some additional "under-the-table money" with the issuance of each license - without keeping proper administration. Hence, there currently occur numerous cases of overlapping concession areas on Sumatra, Kalimantan, and Sulawesi.
Based on the Local Government Performance Index (in Indonesian: Indeks Kinerja Pemerintah Daerah, or IKPD), West Kalimantan, South Sulawesi and South Kalimantan are the three Indonesian provinces that scores the worst. This index, compiled by the KPK, measures the degree of coordination and supervision within Indonesian provinces regarding policies and actions related to the prevention of corruption in the mining and energy sectors. In other words, the index shows to what extent local governments are serious about enhancing good management practices in the mining and energy sectors. One of the key troubles in resource-rich provinces are frequent cases of overlapping land (concessions) and natural resource rights.
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