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View all search resultsIllegal mining, inconsistent oversight scare off foreign investors
For foreign direct investment to flow into upstream projects and high-value processing facilities, investors need certainty that their concessions will be protected and that the rule of law will be enforced consistently.
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Rescue workers insert a hose to extract water from an illegal gold mining pit on July 26, 2023, at Pancurendang village, Banyumas, in an effort to rescue eight miners trapped underground. (AFP/Dida Nuswantara)
D
espite President Prabowo Subianto’s vow to crack down on illegal mining, industry players warn that weak supervision continues to drive away foreign investors from Indonesia’s resource-rich mining sector.
Amman Mineral Nusa Tenggara, one of the country’s largest copper and gold producers, said rampant illegal mining is creating an uneven playing field and a climate of regulatory risk that undermines Indonesia’s appeal to international capital.
“The perception of weak governance and unchecked illegal mining reduces investor confidence, limiting foreign and domestic capital inflows into Indonesia’s mining sector,” Amman vice president for corporate communications Kartika Octaviana told The Jakarta Post on Friday.
She said legitimate operators were forced to compete with illicit miners who evade royalties, taxes and environmental compliance costs, distorting the market and raising reputational risks for multinational companies seeking to meet environmental, social and governance (ESG) standards.
This sentiment reflects what analysts often call an “Indonesia risk premium,” where the costs and risks of operating in a chaotic regulatory environment make investments less attractive than in more stable jurisdictions like Australia or Canada.
While Amman confirmed that its Batu Hijau mine had not suffered direct losses, the company stressed that the damage was systemic. The widespread use of mercury and other destructive practices in illegal operations, Kartika warned, tarnishes the entire sector’s image abroad.
The miner suggested that the government’s focus on recovering lost state revenue must be paired with a stronger commitment to create a level playing field. For FDI to flow into upstream projects and high-value processing facilities, investors need certainty that their concessions will be protected and that the rule of law will be enforced consistently.
