Can Jokowi Reverse Five Decades of Poor Mining Governance in Indonesia?

Emanuel Bria
Senior Associate - Asia Pacific, Natural Resources Governance Institute (NRGI)

Like in most countries of Southeast Asia, state institutions in Indonesia are historically weak, argued Frank Timpton (2008). Growing nationalism through stronger state direction does not correspond well with the state capacity for strategy making, policy formulation and administrative capacity to execute. In the same line of argument, Michael Ross (2004) is also puzzled with these questions: why does the Indonesian government mismanage so badly their natural resources? Why have the governments of many developing states done the same? And why do states generally squander their natural resources? In fact, resource boom damage state institutions through a rent-seeking economy.

Historically in the mining sector, for instance, the issuance of Mining Law No. 11/ 1967 soon after Suharto came to power paved the way for rent-seeking practitioners to flourish. The allocation of extraction rights during this time was mainly given to individuals or companies close to Suharto and who played a key role in securing his regime rather than through a competitive and transparent bidding process. As a result, what emerged were environmental problems, human rights abuses through state sponsored militarization of the extractive sector and conflicts with local communities, which received little or no benefits from resource extraction.

December 23, 2014