Foreign investment in large-scale mining has encountered serious obstacles
Over the past decade, foreign investment in large-scale mining has been hampered by the enactment of Law No. 4/2009 concerning mineral and coal, which replaced the more liberal Law No. 11/1967. The replacement act and its subsequent regulations have been the subject of intense national policy debate.
Apart from a host of uncertainties due to regulatory changes, some argue that the new law substantially undermines favourable conditions for foreign mining investment. Initially, at least, the policies restricted the inflow of transnational mining capital.
Most criticism of the current development of mining investment is directed at government policy for being heavily nationalistic, for example the prohibition on exporting unprocessed ores in the 2009 law; the mandatory requirement for in-country processing and refining; and the imposition of partial but significant divestiture of foreign mining capital on domestic mining firms, both-state owned and private.
Commentators commonly blame rent-seeking behaviour of government officers and politicians as the main reason for the restrictions, as it happened in the recent scandal dubbed ‘Papa Minta Saham’ (Papa Asks for Shares). Many pro-market pundits and institutions have dubbed these attempts by government to control the mining industry as ‘resource nationalism’.
While the claim of nationalism has some truth, this charge fails to consider the underlying class relations of mining that allow extraction of surplus value from the exploitation of the relatively low-paid workers by the transnational capitalist enterprises. From an imperialist perspective of class relations, this labour exploitation gives a high rate of return for transnational mining capital. This is the first feature of imperialism in this sector.
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