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Mining and Indonesia’s Economy: Institutions and Value Adding, 1870-2010

Pierre van der Eng ()

No 57, PRIMCED Discussion Paper Series from Institute of Economic Research, Hitotsubashi University

Abstract: Indonesia has long been a major producer of minerals for international markets. Starting in 2014, it implemented legislation banning exports of unprocessed minerals and requiring producers to invest in processing facilities to add more value before export. This paper establishes what light past experiences in Indonesia with mining sheds on this recent development. It quantifies and discusses the growth of mining production in Indonesia since 1870. It analyses the institutional arrangements that past governments used to maximise resource rents and domestic value adding. The paper finds that production and exports of mining commodities were long dominated by oil, but increased and diversified over time, particularly since the 1960s. The development of the mining sector depended on changes in market prices, mining technologies and the cost of production, but particularly on the institutional arrangements that guided the decisions of foreign investors to commit to mining production and processing in Indonesia.

Keywords: natural resources; mining sector; Indonesia; resource rents (search for similar items in EconPapers)
JEL-codes: L71 L72 L78 N55 O13 Q32 (search for similar items in EconPapers)
Pages: 42 p.
Date: 2014-08
New Economics Papers: this item is included in nep-ene, nep-his and nep-sea
Note: This version: 27 August 2014
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