Outstanding Issues in Mineral Resource Economics: The Case of Indonesia
Abstract
Mining industry in Indonesia has proven to give good results as a source of state revenue. However, the development of the mining sector in order to create people welfare is facing various problems. Critical issues as reviewed in this article related to mineral and energy resources economics are divided into eight sections, namely economic modeling, regional and sub-regional development, regional autonomy, contract of work, management of resources and modern management, mineral added value, policies, and outlooks. Problems associated with those issues should be solved immediately so that Indonesia can determine the direction of development of mineral and energy resources in the future. In order to solve these problems, there must be management and supervision as well as good cooperation between stakeholders those are government, mining companies, and the society so that mining sector could perform its function toward Indonesia incorporated in achieving sustainable development. Methodology applied in this study is based on description and analysis related to the author’s experiences and professionals.
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Introduction
Indonesia is blessed with abundant natural resource including minerals such natural oil and gas, coal, metallic-, nonmetallic-, radioactive-minerals, and rocks. Since 1970s, Indonesia has produced several varieties of metallic minerals for instance iron sand, bauxite, tin, copper, gold,silver and nickel. However, Indonesia faces many problems since the first exploitation of mineral resources. The problems of the mineral resources development faced by the government may include the management supervision the economic transformation from the resources into economic capital toward social capital in the purpose of improving the capability and viability of the Indonesian human resources facing their future in their self reliance brightly in terms of intellectual, welfare and peace in line with the constitutional guideline. Problems associated with those issues should be solved immediately so that Indonesia can determine the direction of development of mineral resources and energy because it plays an important role as one of the key supporting sectors for the industrialization process growth.
At first glance, mining and minerals would seem to be quintessential unsustainable activities. Individual mines have finite reserve that once mined are gone. The earth's crust contains only a limited quantity of any mineral. So, the purpose of the article is to explore how exponential growth of mineral demands interacts with finite resources especially in Indonesia case. Because the size of resources is not known, only the general behavior can be explored [Figures 1a and 1b [39,41,42,65].
This study aims to review the outstanding issues in mining sector into eight main sections, namely economic modeling, regional and sub-regional development, regional autonomy, contract of work, resources and modern management, mineral added value, policies, and outlooks. These issues are expected to be considerations for the government in determining the direction of Indonesia policy in the development of mineral and energy resource to achieve sustainable development in the near future.
Conclusion
As a country that relies on mineral resources and energy as one of the main economic sectors, in order to save and secure the national interest of economic development, the issues explained above should be overcome since 1970s when the economic development has been launched up to the present. This effort should also be in lieu with the global trend especially on environmental and economic phenomena, among others global warming and global economic trend, such as free trade and investment, intellectual property right and human right.
Regional and global cooperation and regional autonomy is an opportunity to develop the potency of mineral resources and energy. Through regional and global cooperation, Indonesia may reach a wider market on mineral and energy resource. In addition, with the regional autonomy the licensing process of minerals will become easier. However, in practice regional autonomy even cause new problems, i.e. overlapping mining permits which issued by Minister, Governor, or the Regent/Mayor related to the euphoria of democracy. In order to overcome this problem, there must be a good controlling system.
Resource management and modern management is supporting tools for processing inputs into economical, efficient, effective and optimum outputs. Similarly, the increase in value-added minerals used in transforming mineral resources into a more valuable product. Both of these tools should be used to obtain optimum and sustainable benefits of mineral resources.
The outstanding issues in the field of mineral and energy exploitation as explained above could be a basis for decisionmaking and policy-making for Indonesia government. Minerals and energy policy is a part side in achieving national goals. However, too many changes in the mining regulatory framework may cause uncertain investment climate in Indonesia and as the result Indonesia less attractive to foreign investors.