28 Oct 2026
Indonesia: New Mining Decree Restricts Use of Affiliated Mining Contractors and Emphasizes Local Providers

On 18 September 2026, the Minister of Energy and Mineral Resources (“MEMR”) issued Decree No. 365.K/MB.01/MEM.B/2026 on Technical Guidelines for the Implementation of Approvals for the Use of Subsidiaries and/or Affiliates in the Mineral and Coal Mining Services Business Sector (the “Decree”). The Decree took effect on the same date and revokes Director General of Minerals, Coal and Geothermal Regulation No. 376.K/30/DJB/2010 on the same subject.

The Decree is generally concise, but it has drawn wide media and industry attention for two reasons. First, it widens the restriction on mining license holders using their subsidiaries or affiliates as contractors, and limits approvals to holders carrying out a government assignment. Second, it requires mining companies to prioritize mining services companies located in the regencies or municipalities (kabupaten/kota) around the mining area.

The Decree is relevant to holders of Mining Business Licenses (Izin Usaha Pertambangan, “IUP”) and Special Mining Business Licenses (Izin Usaha Pertambangan Khusus, “IUPK”). It also applies, with any necessary changes, to holders of Contracts of Work, Coal Contracts of Work (PKP2B) and IUPKs issued as a continuation of those contracts. Mining services companies holding a Mining Services Business License (Izin Usaha Jasa Pertambangan, “IUJP”), and investors and lenders in integrated mining groups, should also take note.

1. Background

The preference for local and national contractors is not new. Article 124(1) of Law No. 4 of 2009 on Mineral and Coal Mining, as most recently amended by Law No. 2 of 2025, already requires IUP and IUPK holders to use local and/or national mining services companies. Government Regulation No. 96 of 2021, as most recently amended by Government Regulation No. 39 of 2025 (“GR 96/2021”), adds two factors for choosing a contractor: how close it is (at the kabupaten/kota, provincial or neighboring-province level) and whether it is a domestic investment company.

GR 96/2021 also prohibits IUP and IUPK holders from involving their subsidiaries and/or affiliates in mining services in their own mining area unless MEMR gives permission. Permission may be given if no similar, capable or interested mining services company is available. GR 96/2021 does not define “subsidiary” or “affiliate”, and leaves the approval mechanism to a Ministerial Regulation. In practice, many large mining groups use in-house or group contractors for core work such as overburden removal and hauling.

2. Key Changes

Priority for kabupaten/kota-level contractors

Under the First Dictum, IUP and IUPK holders using mining services must engage IUJP holders and prioritize mining services companies located in the kabupaten/kota around the mining area.

This is more a change in emphasis than a new obligation. GR 96/2021 already requires IUP and IUPK holders to give preference to local and national mining services companies, taking into account proximity at the kabupaten/kota, provincial and surrounding-provincial levels. The Decree, however, specifically emphasizes the kabupaten/kota level.

Importantly, the operative requirement is to “prioritize” (mengutamakan). The Decree does not expressly prohibit the use of contractors operating across provinces. It also does not define a “local” company or set any threshold or selection process for showing compliance with this priority.

The provision has nevertheless attracted significant attention, including concern that it could restrict the use of large contractors operating across multiple provinces. In our view, the wording of the Decree does not go that far. Rather, it strengthens the existing preference for local providers by placing particular emphasis on companies in the kabupaten/kota surrounding the mining area. Further guidance may be needed on how this priority will be applied in practice, including what constitutes a local company and how IUP and IUPK holders are expected to demonstrate compliance. In the meantime, regional governments and local stakeholders may expect local mining services companies to be more involved, particularly when contracts are tendered or renewed.

Wider scope of the affiliate restriction

Under the Second and Third Dicta, IUP and IUPK holders may not involve subsidiaries and/or affiliates in mining services without MEMR’s approval. The restriction applies where:

• the IUP or IUPK holder directly owns shares in the IUJP holder; or

• the IUP or IUPK holder and the IUJP holder have one or more ultimate beneficial owners in common.

The beneficial ownership test is significant. It covers sister companies under a common owner even if neither company holds shares in the other. One shared beneficial owner is enough. The Decree does not define “ultimate beneficial owner” or refer to the existing beneficial ownership rules under Presidential Regulation No. 13 of 2018, so it is not yet clear which ownership or control criteria MEMR will apply.

Approval limited to government assignments

The Fourth Dictum is the main substantive change. MEMR approval may only be granted to IUP or IUPK holders carrying out a government assignment (penugasan oleh Pemerintah). The table below compares this with GR 96/2021:

The test therefore moves from whether other contractors are available to whether the license holder is carrying out a government assignment. Outside these categories, the Decree does not appear to allow approval for the ordinary commercial use of group contractors. This appears to be the main substantive difference between the Decree and the existing rules.

Applications are submitted to MEMR, or to the governor for governor-issued IUPs. MEMR must decide within 14 working days after receiving a complete application. An approval is limited to the fields and sub-fields of the affiliate’s IUJP and is valid until that IUJP expires.

Several points are unclear:

• What counts as a “government assignment”. The Decree does not say whether a specific assignment is required, or whether compliance with general obligations is enough. This matters most for domestic supply. If complying with the ordinary domestic market obligation (DMO) qualifies, most coal producers could apply. If a specific assignment is needed, the exception would be much narrower. 

• Relationship with GR 96/2021. The Decree does not refer to the availability criteria in Article 137A(2), so it is unclear whether the new requirement replaces those criteria or applies in addition to them. In practice, a Ministerial Decree is framed as technical guidelines which affect how MEMR assesses applications. Therefore, applicants should, as a precaution, address both sets of criteria pending further guidance.

• Procedure. The Decree does not list the required documents or evaluation criteria, or say what happens if MEMR does not decide within 14 working days. Filing an application should not be treated as permission to continue using an affiliate.

No transitional provision

The Decree has no transitional provision. It does not address affiliate contracts signed before 18 September 2026, approvals granted under the revoked 2010 regulation, or existing contracts with non-local contractors. The Decree neither expressly protects existing arrangements nor cancels them.

Until MEMR issues a circular letter or implementing guidelines to IUP holders, it remains unclear how existing mining services contracts with affiliates will be treated. In our view, existing contracts should remain valid until they expire and be adjusted afterwards, but MEMR has yet to confirm this.

3. ABNR Commentary

The Decree’s main legal effect is on the use of affiliates. The beneficial ownership test widens the range of arrangements caught, and approval now depends on a government assignment rather than the availability of other contractors. The local priority has attracted more public attention, but as worded it reinforces an existing preference and does not bar large national contractors.

Important questions remain open, including the treatment of existing contracts, the meaning of “government assignment”, the beneficial ownership criteria and the relationship between the Decree and GR 96/2021. These may be addressed in any circular letter or implementing guidelines that MEMR may issue.

In the meantime, mining companies and contractors may wish to map shareholding and beneficial ownership links between their mining and services companies, review existing mining services contracts (including scope, expiry and change-in-law provisions), and assess whether any government assignment applies. Where group contractors are used, an early application for approval may be preferable to waiting for transitional guidance. Where non-local contractors are used, it would be prudent to record how they were selected. Mining companies could also consider involving local companies, for example through subcontracting, which Article 138(1) of GR 96/2021 permits with the license holder’s approval.

ABNR will continue to monitor MEMR’s implementing guidance and practice under the Decree.

By partners Ayik Candrawulan Gunadi (agunadi@abnrlaw.com) and Mahatma Hadhi (mhadhi@abnrlaw.com).

This ABNR client alert is intended solely to provide a general overview, for informational purposes, of selected recent developments in Indonesian law. It does not constitute legal advice and should not be relied upon as such. ABNR accepts no liability of any kind in respect of any statement, opinion, view, error or omission that may be contained in this update. You are strongly advised to consult a licensed Indonesian legal practitioner before taking any action that could affect your rights and obligations under Indonesian law.