A practical legal guide to foreign ownership, licensing, mining services and divestment in Indonesia’s mineral and coal sector.
By Adhistya Christyanto, Founder & Principal, Adhistya Christyanto Attorney at Law (ACLAW), Jakarta
Foreign capital is no newcomer to Indonesia. Investors from across Asia, Australia, Europe and North America have long been active in its resources sector. Singapore alone, Indonesia’s largest source of foreign direct investment for more than a decade, accounted for roughly 30 percent of all realized FDI in 2025, according to Indonesia’s Ministry of Investment (BKPM). Depending on their home jurisdiction, foreign investors may also benefit from Indonesia’s network of investment treaties, such as the ASEAN Comprehensive Investment Agreement and newer-generation bilateral investment treaties, including the Singapore–Indonesia BIT in force since March 2021, some of which provide access to international arbitration.
Yet in mining, familiarity with the market is not the same as legal readiness. Indonesia holds some of the world’s most significant reserves of nickel, coal, bauxite, copper and tin, and its down streaming policy has turned mineral processing into one of the region’s most dynamic investment themes. The same sector, however, is among the most heavily regulated in the country, and its rules changed materially in 2025.
In more than twenty years of corporate work, commercial litigation and in-house compliance in Indonesia, I have observed a consistent pattern: mining investments rarely fail because of geology. They fail because of structure, the wrong entity, the wrong license, an overlooked divestment clock, or a shareholding arrangement that does not survive scrutiny. This article sets out what a foreign investor should understand before committing capital.
Is Indonesia’s Mining Sector Open to Foreign Investors?
In principle, yes. Under Article 12 of Law No. 25 of 2007 on Investment (as amended, including by the Job Creation Law, Law No. 6 of 2023), all business sectors are open to investment unless they are expressly closed or reserved for the central government. Mineral and coal mining is not a closed sector.
“Open”, however, does not mean “unconditional”. Foreign participation is shaped by sector-specific rules on corporate form, licensing, the use of mining services providers and the mandatory transfer of shares to Indonesian parties over time. The right question is therefore not whether a foreign investor may enter, but through which route, and on what terms.
Three Entry Routes, Three Different Legal Regimes
The single most common mistake is treating “investing in Indonesian mining” as one activity. Legally, it is at least three, and each is governed differently:
1. Operating a mine directly. This requires an Indonesian foreign-investment company (PT PMA) holding the appropriate Mining Business License (IUP) or Special Mining Business License (IUPK), and it triggers divestment obligations once production begins.
2. Key issues for acquiring equity in a license holder include license status, mining area validity, compliance history, and divestment obligations. Change of control and license transfers require ministerial approval.
3. Providing services to license holders, or investing in processing. Mining services, smelting and refining, construction and technical consultancy each carry different business classifications (KBLI), licenses and, in some cases, different supervising ministries.
An RKEF nickel project isn’t automatically a mining activity. Depending on scope, it may be classified as processing and refining, industrial activity, construction, or mining services, dictating its regulator, required license, and ownership rules.
Establishing the Vehicle: The PT PMA
Article 5(2) of the Investment Law requires foreign investors to conduct business through a limited liability company established under Indonesian law and domiciled in Indonesia, the PT PMA. Under BKPM Regulation No. 5 of 2025, which took effect in October 2025, the minimum issued and paid-up capital of a PT PMA has been reduced from IDR 10 billion to IDR 2.5 billion. The minimum investment value, however, remains more than IDR 10 billion per five-digit business line (KBLI) per project location, excluding land and buildings, and the paid-up capital must remain in the company’s account for at least 12 months.
Two points deserve emphasis. First, incorporating a PT PMA does not by itself authorize any mining activity; the licenses must be obtained separately. Second, investors should be wary of “nominee” structures in which Indonesian shareholders hold shares on behalf of a foreign party. Article 33 of the Investment Law expressly prohibits such arrangements and declares them null and void by operation of law. In a dispute, a nominee structure offers the foreign investor no protection at all.
Licensing: The 2025 Framework
Mining activities must be conducted under business licenses issued by the central government pursuant to Article 35 of Law No. 4 of 2009 on Mineral and Coal Mining, as last amended by Law No. 2 of 2025 (the “Mining Law”). The principal implementing regulation is Government Regulation No. 96 of 2021, amended by Government Regulation No. 25 of 2024 and, most recently, by Government Regulation No. 39 of 2025, which came into force on 11 September 2025. General business licensing now runs through the Online Single Submission (OSS) system under Government Regulation No. 28 of 2025, which replaced the earlier Government Regulation No. 5 of 2021.
In practical terms, an investor should expect the following layers:
a. Business Identification Number (NIB). The company’s business identity, issued through OSS. It is a prerequisite, not a permit to mine.
b. IUP or IUPK. The core mining licenses, each with its own scope depending on the mining area and the stage of activity (exploration or production operation). Obtaining them involves administrative, technical, environmental, and financial requirements.
c. Processing and refining licenses. Required where the business involves processing or refining and assessed separately from extraction.
d. Supporting approvals. Environmental approval, spatial-use conformity and, where relevant, approvals for the use of forest areas, frequently the true critical path of a mining project.
Investors should also note a strategic shift introduced by Law No. 2 of 2025 and Government Regulation No. 39 of 2025: priority access to certain mining areas for cooperatives, small and medium enterprises and business entities of religious community organizations. For foreign investors, this changes the landscape of potential local partners and of competition for new mining areas, and it makes careful partner due diligence even more important.
Mining Services: A Separate Gateway
Many foreign companies enter Indonesian mining not as owners but as service providers. Article 124 of the Mining Law requires IUP and IUPK holders to engage local and/or national mining services companies; only where such companies are not available may a mining services company established in the context of foreign investment be engaged. The services covered include exploration, feasibility studies, mine construction, transportation, mining safety, mining operations, and processing.
Accordingly, a foreign company offering technical consultancy, mine planning, or engineering support for a processing facility must first determine the correct classification of its activities. Core mining services generally require a Mining Services Business License (IUJP), while consultancy and planning work must satisfy the applicable KBLI and standard-certification requirements.
Foreign experts deployed to Indonesia must also be covered by an approved foreign worker utilization plan (RPTKA) and comply with Indonesian manpower regulations.
Divestment: The Clock That Starts at Production
Article 112 requires foreign IUP/IUPK holders in production to progressively divest 51% equity to Indonesian entities (government, SOEs, or national private companies). Schedule, pricing, and exceptions vary by license type, operational stage, processing integration, and transitional rules.
Divestment should therefore be built into the investment model from day one: in the valuation, the shareholders’ agreement, the exit strategy, and the financing documents. Investors acquiring an existing company must confirm whether a divestment obligation has already accrued, and whether it has been fulfilled.
Five Questions to Ask Before You Sign
1. Which exact activity will we carry out, extraction, processing, services or construction, and what KBLI and license does that require?
2. Is the target’s IUP or IUPK valid, registered with the Ministry of Energy and Mineral Resources, and free from overlapping with forest areas or other concessions?
3. Does our shareholding structure comply with the law on its face, with no nominee or side arrangements?
4. When will the divestment obligation arise, and how have we priced it into the deal?
5. If a dispute arises, where will it be resolved, and have we structured the investment to benefit from any investment treaty between Indonesia and our home jurisdiction?
Conclusion: Structure First, Capital Second
Indonesia remains one of the most compelling mining and downstream processing destinations in the world, and well-prepared foreign investors are well placed to benefit from it. But the 2025 reforms, a new mining law amendment, a new implementing regulation, a new OSS licensing regime and new PT PMA capital rules, mean that assumptions made even two years ago may no longer hold.
Investors who address entry routes, corporate structure, licensing and divestment at the outset are the ones who protect both their capital and their exit. In my experience, legal clarity at the beginning costs a fraction of what legal disputes cost at the end.
Disclaimer: This article is provided for general information only and does not constitute legal advice. Indonesian laws and regulations change frequently; readers should obtain specific legal advice before making any investment decision.
This press release has also been published on VRITIMES