Sector
Mining
Indonesia, a country rich in natural resources, boasts a mining sector that is undeniably one of its leading sectors. With vast reserves of mineral and non-mineral mining resources, the country stands as a global powerhouse in the mining industry. As of 2022, Indonesia’s mining industry contributed Rp2.3 quadrillion to the national GDP, accounting for 12.22 percent.
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Mining
Indonesia, a country rich in natural resources, boasts a mining sector that is undeniably one of its leading sectors. With vast reserves of mineral and non-mineral mining resources, the country stands as a global powerhouse in the mining industry. As of 2022, Indonesia’s mining industry contributed Rp2.3 quadrillion to the national GDP, accounting for 12.22 percent.
Mining flourishes across various regions of the country, each contributing to the nation’s economy. It is present in regions such as South Sumatra, Riau, Riau Islands, Bangka-Belitung, Central Kalimantan, East Kalimantan, South Kalimantan, and North Kalimantan. Additionally, mining is also prevalent in Southeast Sulawesi, Central Sulawesi, West Nusa Tenggara, North Maluku, Papua, and West Papua.
Indonesia’s wealth of mineral resources offers a wide variety of materials available for mining. From abundant reserves of gold, bauxite, tin, and copper concentrates to nickel ore, the country’s rich mineral resources signify significant potential for economic growth and development. In addition, Indonesia is also rich in coal mining, with its abundant coal reserves catering to the energy needs of both domestic and international markets.
The country's mining sector thrives on these resources. In 2023, mineral resources such as bauxite reached a production of 28 million tons, gold at 85 thousand kilograms, tin concentrate at 57 thousand metric tons, copper concentrate at 3 million metric tons, along with nickel ore at 98 million metric tons.3 Meanwhile, Indonesia’s coal production reached 775.2 million tons in 2023, almost double than ten years earlier when coal production stood at 421 million tons.
Additionally, Indonesia is home to oil and gas exploration and exploitation, although its output has been dwindling. Once an exporting country of oil and gas, Indonesia has transitioned into a net importer of these commodities since 2008 when consumption surpassed outputs, which stood at around 1 million barrels per day (bpd). In the first semester of 2023, Indonesia’s oil output stood at 615 bpd.
Subsequently, the government has worked hard to reverse the trend of falling oil output and has set a target to restore oil lifting to 1 million bpd in 2030, alongside a gas production target of 12 billion standard cubic feet per day (BSCFD). As of January 2023, Indonesia’s documented oil reserves were 2.41 billion barrels, and its natural gas reserves stood at 35.5 trillion cubic feet.
As for investments, Indonesia secured US$30.3 billion for the energy and mining sector in 2023, marking an 11 percent increase from the previous year. That same year, the oil and gas sector led the way,
achieving US$15.6 billion in investments, followed by mineral and coal at US$7.46 billion, electricity at US$5.8 billion, and renewable energy at US$1.5 billion.
Latest News
The establishment of the Indonesia International Financial Center (IFC), introduced through the revised Financial Sector Development and Strengthening (P2SK) Law, has raised concerns that it could become a channel for illicit funds. The concern stems from the law's simultaneous introduction of legal protections for buyers of special government bonds, shielding them from criminal, civil and tax investigations while prohibiting the bonds from being used for tax assessments or as evidence in court proceedings.
The IFC represents an ambitious effort to position Indonesia as an international financial hub. However, the legal protections afforded to buyers of Danantara's special bonds, including the Patriot Bonds and Red and White Bonds, risk undermining the credibility the IFC needs to attract sophisticated institutional investors, including family offices. Moreover, the government's three-month deadline to complete the IFC Law may leave insufficient time to develop the robust institutional framework such a financial center requires.
Article 248A of the P2SK Law defines the IFC as a zone primarily dedicated to financial sector activities with financial and administrative autonomy, as well as a special legal jurisdiction based on "international principles and/or standards".
The zone will be governed by an IFC Council, and more than one IFC may be established. Businesses operating within the IFC will be subject to special taxation procedures and enjoy tax incentives and other facilities. The article also mandates that the IFC Law be enacted within three months of the P2SK Law coming into force on June 17, 2026.
As for the incentives, Coordinating Economy Minister Airlangga Hartarto signaled that the IFC could become a tax haven, noting that international financial centers such as Dubai and Singapore provide tax incentives of up to zero percent to remain globally competitive. He argued that Indonesia also needs to offer an attractive fiscal regime if it wants to compete for international capital.
Policymakers see the possibility of Indonesia becoming a tax-friendly jurisdiction, similar to Singapore, Hong Kong, and the United Arab Emirates, as an acceptable trade-off for attracting significantly higher investment. For comparison, Indonesia attracts an average of Rp 2.2 quadrillion in investment annually, compared with around Rp 5 quadrillion in Singapore. Meanwhile, Dubai attracted around US$800 billion in foreign direct investment and capital inflows associated with its financial center ecosystem.
However, Finance Minister Purbaya Yudhi Sadewa rejected suggestions that the IFC would turn Indonesia into a tax haven. He explained that the IFC would be established as a new special economic zone in Bali covering around 100 hectares, with tax incentives applying only to funds held within the zone, while investments made outside the IFC would remain subject to Indonesia's normal tax regime. Purbaya also said the IFC could adopt a common law system separate from Indonesia's civil law framework, potentially giving effect to the "special legal jurisdiction according to international principles and/or standards" stipulated in the P2SK Law.
The Dubai International Financial Centre (DIFC), one of the main benchmarks for Indonesia's IFC, is one of the UAE's Financial Free Zones (FFZ). It is exempt from the UAE's federal civil and commercial laws but remains subject to federal criminal laws, including anti-money laundering legislation. Analysts argue that the DIFC's institutional autonomy is one of the key features Indonesia's IFC should emulate. However, they caution that Indonesia must first develop strong financial infrastructure, data security, and regulatory oversight to establish credible safeguards against money laundering and terrorism financing
