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

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  • van der Eng, Pierre

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.

Suggested Citation

  • van der Eng, Pierre, 2014. "Mining and Indonesia’s Economy: Institutions and Value Adding, 1870-2010," PRIMCED Discussion Paper Series 57, Institute of Economic Research, Hitotsubashi University.
    • Handle: RePEc:hit:primdp:57
    Note: This version: 27 August 2014
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    File URL: https://hermes-ir.lib.hit-u.ac.jp/hermes/ir/re/26822/No57-dp.pdf
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    References listed on IDEAS

    as
    1. van der Eng, Pierre, 2010. "The sources of long-term economic growth in Indonesia, 1880-2008," Explorations in Economic History, Elsevier, vol. 47(3), pages 294-309, July.
    2. Kosim Gandataruna & Kirsty Haymon, 2011. "A dream denied? Mining legislation and the Constitution in Indonesia," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 47(2), pages 221-231.
    3. Pierre van der Eng, 2005. "Indonesia's new national accounts," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 41(2), pages 243-252.
    4. James Alm & Jorge Martinez-Vazquez & Sri Mulyani Indrawati (ed.), 2004. "Reforming Intergovernmental Fiscal Relations and the Rebuilding of Indonesia," Books, Edward Elgar Publishing, number 3152.
    5. Spiegel, Samuel J., 2012. "Governance Institutions, Resource Rights Regimes, and the Informal Mining Sector: Regulatory Complexities in Indonesia," World Development, Elsevier, vol. 40(1), pages 189-205.
    6. Hal Hill, 2000. "Indonesia: The Strange and Sudden Death of a Tiger Economy," Oxford Development Studies, Taylor & Francis Journals, vol. 28(2), pages 117-139.
    7. Ana Duek & Ridwan Rusli, 2010. "The natural resources industry in decentralised Indonesia: how has decentralisation impacted the mining, oil and gas industries?," DEM Discussion Paper Series 10-25, Department of Economics at the University of Luxembourg.
    8. George Fane, 2012. "Allocating and taxing rights to state-owned minerals," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 48(2), pages 173-189, August.
    9. Hill,Hal, 2000. "The Indonesian Economy," Cambridge Books, Cambridge University Press, number 9780521663670.
    10. Charles E. McLure, Jr. & Jorge Martinez-Vazquez, 1998. "Intergovernmental Fiscal Relations in Vietnam," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper9802, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    11. Lloyd, Bruce, 1975. "Indonesia's mineral resources : Performance and prospects," Resources Policy, Elsevier, vol. 1(6), pages 326-342, December.
    12. MALCOLM GILLIS & Glenn Jenkins, 1978. "Performance Evaluation Of Public Sector Enterprises - The Case Of Mining In Bolivia And Indonesia," Development Discussion Papers 1978-01, JDI Executive Programs.
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Is it Possible to Escape the #ResourceCurse?
      by mlmorell in NEP-HIS blog on 2015-03-10 14:07:37

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    More about this item

    Keywords

    natural resources; mining sector; Indonesia; resource rents;
    All these keywords.

    JEL classification:

    • L71 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Hydrocarbon Fuels
    • L72 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Other Nonrenewable Resources
    • L78 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Government Policy
    • N55 - Economic History - - Agriculture, Natural Resources, Environment and Extractive Industries - - - Asia including Middle East
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development

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