The recent upturn in commodity prices has helped Indonesia achieve economic growth forecasts placing it behind just China and India in 2010. Southeast Asia's largest economy is expected to grow by 5.2% in 2010 while the government aims for 6.6-7% growth rate in the coming years. After some years of modest growth in the mining industry, BMI now expects the sector to grow above 10% year-on-year (y-o-y) through to 2014.
Low costs in the country's mining industry continue to attract foreign investors, who must nonetheless check their caution over regulation at the door. Regulatory uncertainty and political risk remain the greatest weaknesses in Indonesia's mining industry. The government is making efforts to reduce laborious procedures in acquiring permits and increasing legal certainty, however. An equivalent impetus for the mining industry proper is comparatively sluggish, and greater resolve would secure Indonesia's benefit from any sustained commodities price surge.
Regulatory discomfort notwithstanding, BMI expects the value of the mining industry to grow at a steady pace of 10-11% y-o-y in between 2010-2014 to reach a value of US$125bn by the end of the forecast period. The mining sector will represent 11-12% of Indonesia's GDP throughout the next four years. Interestingly, Australian Prime Minister Kevin Rudd's recent announcement of a 40% resources tax has provoked an uproar in the country's mining industry. The development has led to speculation that the tax hike could persuade some Australian miners to overlook the rougher edges of Indonesia's reform efforts and relocate projects to the neighbouring country.
In a bid to achieve a 26% carbon emissions cut, the government may wind down open pit coal mining in Indonesia, according to former environment minister Emil Salim. The former minister claimed that the government had made the decision to phase out open pit mining and that it could lead to a near-term reduction in coal output. Any such move against open pit mining is unlikely, however, especially as the government recently opened up protected forests to miners.
Meanwhile, the government responded to tumbling revenue at state-owned miners over 2009 by reducing dividends for 2010. The reduction from 50% to 35% of total revenue payable to the government by Aneka Tambang (Antam), Tambang Batubara Bukit Asam and Timah will allow the firms to accelerate recovery.
Tin miners were able to resume work offshore Bangka and Belitung in mid-April 2010 after months of monsoon rains relented. Smelters were forced to scale back exports as heavy rains since December 2009 weighed heavily on ore supply, although demand for tin over the period also fell.
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Report Table of Contents:
Executive Summary
SWOT Analysis
- Indonesia Political SWOT
- Indonesia Economic SWOT
- Indonesia Business Environment SWOT
Global Mining Outlook
- Table: Rio Tinto's Capital And Major Evaluation Projects For 2010
- BMI Views
- Risks To Outlook
Industry Trends And Developments
- Market Overview
- Table: Mines In Indonesia
- Table: Global Mining - Key Players' Future Investment Plans (selected projects)
- Latest Developments
- Regulatory Structure And Developments
Key Projects
- Coal
- Tin
- Copper, Gold And Silver
- Nickel
- Diamonds
- Bauxite And Alumina
Business Environment
- Asia Pacific Mining Business Environment
- Table: Asia Pacific Mining Business Environment Ratings
- Indonesia's Business Environment Rating
- Legal Framework
- Table: BMI's Legal Framework Ratings
- Labour Force
- Table: Labour Force Quality
- Foreign Investment Policy
- Table: Asia's FDI Inflows, 2005-2006
- Table: Indonesia's FDI Inflows, 2001-2006
Political Environment
- Domestic Politics
- Regional Security
- Long Term Political Outlook
Industry Forecast
- Commodities Forecast - Nickel To Average US$22,000/tonne In 2010
- Table: BMI Nickel Forecast
- Table: Nickel
- Aluminium Update: Downside Risks To Average Price of US$2,100/tonne In 2010
- Table: BMI Aluminium Forecast
- Table: Aluminium
- Commodities Forecast - Gold To Average US$1,150/oz In 2010
- Table: BMI Gold Forecast
- Table: Gold
- Commodities Forecast - Copper
- Table: BMI Copper Forecast
- Table: Copper
- Indonesia's Mining Industry Forecast
- Table: Indonesia's Mining Industry, 2007-2014
Competitive Landscape
- Table: Key Players In Indonesia's Mining Sector
Company Monitor
- BHP Billiton
- Bumi Resources
- PT Aneka Tambang Tbk (Antam)
- Rio Tinto
Global Assumptions Q310
- Table: Global & Regional Real GDP Growth
- Table: Global Assumptions
- Table: Developed States, Real GDP Growth Forecast
- Table: Emerging Markets Aggregate Growth
Business Environment Ratings Methodology
- Table: Mining Business Environment Indicators
- Table: Weighting Of Components
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