Mining market in Indonesia

Indonesia is a major player in the global mining industry. Located in the Pacific Ring of Fire, the country consists of 17,000 islands with immense mineral reserves and production, including coal, copper, gold, tin, bauxite and nickel. The mining sector has been one of the key sectors contributing to Indonesia's economic growth over many decades. The sector makes a significant contribution to Indonesia's:

gross domestic product
exports
government revenue
employment
development of its many remote regions, where most mines are located

Key opportunities for Canadian mining suppliers

Refineries and smelting technologies

The Ministry of Energy and Mineral Resources' grand strategy on coal and mineral commodities (the GSKM) will lead development of downstream industries from 2021 to 2045. The GSKM also includes ensuring the availability of reserves, improving purification processes and developing manufacturing capabilities. The strategy follows the Indonesian government's decision to ban exports in January 2020 to boost expansion of the domestic smelting industry.

Direct opportunities resulting from the strategy for Canadian mining supply and services firms are to provide innovative solutions that create greater efficiencies in coal and mineral processing, such as refinery optimization and energy efficiency.

Renewable energy / low-carbon technologies

Indonesia is one the world's largest coal producers, and dry fuel contributes to 14% of the country's exports. Of its total coal production, 80% is exported and 20% is used domestically (to produce power, cement). To achieve net zero emission by 2060, state-owned electricity utility Perusahaan Listrik Negara (PLN) announced it would schedule the retirement of coal-fired power plants and would not renew their contracts, aiming to phase them out by 2055. Closing coal-fired power plants means that Indonesia requires innovation in renewable energy technologies to replace them. The government is looking toward renewable energy to move from fossils and is considering hydro, solar and biomass.

With Indonesia implementing a carbon tax in July 2022, domestic demand for low-carbon technologies is generating more opportunities for Canadian capabilities in sustainable mining. Opportunities exist for Canadian companies offering technology and services for (off grid) renewable energy application in mining sites considered to replace, or complement, fossil fuels and support energy transition (solar, biomass, electric vehicle), energy storage, methane emission detection/measurement/capture, et cetera.

Industry highlights

Open

Export Development Canada's position

1.2%

Global exploration share

69.8

World Bank Ease of Doing Business score

Coal, nickel and gold

lead Indonesia's mining sector

Can $5.5 million

Indonesia ranks 66th overall in Canadian mining assets abroad

Canadian companies operating in Indonesia

11.6%

5-year compound annual growth rate of industry

5.4%

5-year production compound annual rate of change

US $35.6 billion

National mining revenues

Rare earth element extraction and mapping

The government has laid out plans to map Indonesia's rare earth element (REE) reserves as part of a wider plan to develop downstream rare earth industries with an emphasis on the defense and renewable energy industries. There are eight known locations, which are still in an early exploration stage. As with the treatment of mineral and coal, rare earth elements are also subject to domestic processing into finished products. Opportunities presented in the REE industry are consultancy, mapping, extraction and processing capabilities.

Underground mining

Considering the impact of surface mining activities on the environment, more companies are considering exploring and expanding underground reserves. Niche opportunities include electric vehicles and energy efficiency. Targets are mainly mineral producers and a few coal mines with deep high calorific value (that is, underground coal gasification).

Notable challenges for Canadian mining suppliers in Indonesia

The price sensitive and competitive market for mining suppliers. Competition notably comes from China, which usually brings strategic partnerships and turnkey solutions.
Indonesia requires that foreign firms have a local presence through local representative, distributorship or agency to allow follow-up with local companies, especially when dealing with state-owned enterprises.
Indonesia is a relationship-driven market: a long-term commitment is expected from foreign companies.

Indonesia business landscape

Indonesia is Canada's 24th largest trading partner globally and 4th largest in the Association of Southeast Asian Nations; two-way merchandise trade totaled Can$4.2 billion in 2021. Canadian merchandise exports to Indonesia were valued at Can$2.2 billion in 2021 (up from Can$1.8 billion in 2020), making it Canada's largest export market in Southeast Asia.
Indonesia is the second-largest destination of Canadian direct investment abroad in Southeast Asia, with a total stock of about Can$3.5 billion in 2020. Canadian portfolio investments in Indonesia reached Can$7.9 billion at the end of 2020, and includes investments in toll roads, container ports and industrial logistics parks.
Establishing a local presence is key to advance business development in the market. This can be done through a local representative (agency, distributorship) or ultimately through a foreign-owned investment.
Canada and Indonesia launched negotiations of a comprehensive economic partnership agreement in June 2021 and the first round of negotiations was held in March 2022. Canada also launched free trade agreement negotiations with ASEAN.

Request a meeting

To learn more about the mining industry in Indonesia, contact Melani Ismail (Melani.Ismail@international.gc.ca), Trade Commissioner, at the Embassy of Canada to Indonesia.

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