Courtesy of CORE Indonesia
Under Indonesia’s newly revised Mining Law, the government may grant concessions in the form of Community Mining Permits (IPR) to local community cooperatives or medium, small and micro enterprises (MSMEs). This is intended to be a way of democratising access to the nation’s mineral wealth.
Supporters of this policy present it as a corrective to decades of extraction dominated by conglomerates and multinational firms. Critics, however, see something else: a risky experiment that will redistribute more environmental costs, rather than more prosperity.
In fact, the new policy is not democratising access. Instead, it disperses environmental damage while leaving underlying inequalities intact.
The policy draws legitimacy from Article 33 of the 1945 Constitution, which mandates that natural resources be controlled by the state for the greatest benefit of the people. Yet ‘state control’ does not necessarily imply direct transfer of extraction rights to society.
Rather, it implies responsibility – the obligation to regulate, supervise, and safeguard resources whose depletion is irreversible. Mining differs from most other economic activities because minerals extracted today cannot be replaced tomorrow. As Harold Hotelling has argued, decisions made now shape intergenerational welfare.
The central question, therefore, is not whether communities should have access to mining, but whether the state retains the capacity to govern extraction once operations fragment across thousands of sites with uneven technical and environmental standards.
Technically, Community Mining Permits for artisanal and small-scale mining (ASM) are initiated through the designation of Community Mining Areas (WPR) by the central government, which, as of 2024, encompasses more than 66,000 hectares distributed across 19 provinces in Indonesia.
In the case of tin, although no Community Mining Permits have yet been issued, conditions on the ground suggest otherwise. Artisanal mining operations have continued to expand even before technical regulations have been finalised, with unlicensed miners extracting tin on a significant scale across the Bangka-Belitung islands.
In Belitung, particularly, these activities have encroached into urban forests, mangroves, river systems, and coastal areas. The local governments, with limited authority and fiscal capacity, struggle to enforce compliance and remediate abandoned mining pits (kolong).
International experience suggests that formalising artisanal mining rarely resolves this dilemma. In Peru’s Nazca–Ocoña gold belt, Ghana’s galamsey operations, and Democratic Republic of Congo’s cobalt fields, governments have granted licenses and tightened rules, yet mercury use, environmental degradation, and informal supply chains persist largely unchanged. The result is a complex system in which legality expands on paper while informality persists on the ground.
Enforcement drives operations to shut down periodically, only for artisanal mining operators to relocate, reorganise, or re-enter formal supply chains through intermediaries. Once artisanal mining becomes embedded both as a livelihood strategy and a component of commodity supply chains, formal and informal systems tend to intertwine rather than replace one another.
Misdiagnosing the problem
One reason formalisation struggles is that policymakers often treat artisanal mining as simply a smaller version of industrial mining, scaling down regulations but not fundamentally redesigning them. Requirements such as costly feasibility studies, complex environmental documentation, and significant fiscal obligations may be routine for multinational firms but prohibitive for small operators.
This makes compliance economically irrational and makes informally operating more viable than following the rules. Licensing does not necessarily produce responsible mining; it may simply produce licensed irresponsibility.
As Elinor Ostrom’s work on natural resource governance suggests, policy design that fails to account for institutional arrangements and local ecological and social realities is unlikely to succeed, especially when imposed in a uniform, top-down manner.
Formalisation also assumes that states possess the capacity to monitor thousands of dispersed operations. In reality, artisanal mining often occurs in remote areas where infrastructure is weak and regulatory presence thin.
Indonesia illustrates this dilemma starkly. With only a limited number of mining inspectors responsible for supervising vast territories — in Indonesia’s case, roughly 700 officials tasked with overseeing all mining commodities nationwide — multiplying small-scale permits risks creating a formally legal, but practically ungoverned, sector.
Between safety net and structural trap
Artisanal mining persists because it performs a crucial social function. In regions where formal employment is scarce, it operates as a buffer or a fallback option that offers immediate income with relatively low entry barriers, often acting as a buffer against economic shocks.
Yet this very function can entrench long-term underdevelopment. Short-term earnings from resource extraction may reduce incentives to diversify local economies or invest in sustainable livelihoods, creating a structural trap. Communities become dependent on activities that generate cash quickly but degrade environmental assets and offer very limited prospects for achieving long-term prosperity.
A clear example can be seen in Indonesia’s community-based tin mining. Rising global tin prices draw large numbers of local residents into mining, including youth who may leave school for quick earnings. When prices fall, however, local economies lose momentum, exposing a classic boom-and-bust cycle characteristic of resource-dependent economies.
This dynamic echoes what Richard Auty described as the ‘resource curse’, the paradox that resource-rich regions often experience slower development, institutional weakness, and economic volatility, reinforcing vulnerability over time.
Pro-people reform, or redistribution of risk?
Indonesia’s attempt to broaden access to mining rights may be motivated by legitimate concerns about inequality in resource governance. But international experience suggests that simply expanding who can mine does not guarantee equitable outcomes.
Without strong institutions, transparent oversight, and viable economic alternatives, formalising artisanal mining can redistribute extraction without redistributing benefits. It can simply create new arenas for patronage and elite capture under the banner of ‘community empowerment’.
Control over natural resources, whether by the community or the state, does not automatically translate into alleviating structural poverty. If Indonesia is serious about making mining more inclusive, the focus should shift from distributing licences to strengthening economic benefit sharing.
Without addressing institutional capacity, decent job creation, well-intentioned reforms may end up normalising informality rather than overcoming it, distracting attention from the deeper challenge of structural economic transformation.
