Planned Royalty Increase Deemed Risky Amidst Slowdown in Mining Industry
Jakarta, TAMBANG - The government’s plan to increase mining royalty rates starting in June 2026 has come under scrutiny amidst the current slowdown in the mining sector and increased investor sensitivity towards long-term policy certainty. The policy needs to be carefully reviewed to avoid putting pressure on the investment climate and the sustainability of the national mineral and coal industries.
Edi Permadi, a professional at the National Institute of Defence Studies (Lemhannas RI), believes that the royalty increase has the potential to increase non-tax state revenue (PNBP) in the short term. However, he argues that the policy also carries significant economic risks if implemented when the industry is under pressure.
“The main problem is not simply whether or not the royalty increases, but what happens after the revenue enters the state treasury. Without a mechanism to ensure that resource rent funds are channeled into productive investment, the royalty increase could become a short-term fiscal solution with medium-term economic costs,” said Edi in a statement, quoted on Saturday (16/5).
He explained that Indonesia’s current royalty rates are already relatively high compared to many other mining-producing countries. For nickel commodities, for example, the royalty rate for ore is already in the range of 14-19 percent. This situation is considered to limit the room for increasing rates without disrupting the sector’s economy.
On the other hand, the mining industry is also facing pressure from falling global commodity prices, rising operational costs, and market uncertainty. Edi believes that the recent response in the stock market is a signal of increasing policy risk in the mining sector.
“This market response is not just a short-term speculative reaction, but a signal of increasing policy risk in the midst of a weakening sector,” he said.
Edi also reminded that the main challenge for resource-rich countries is not only to collect more revenue, but to transform it into sustainable long-term investment. He believes that regulatory certainty is essential to maintain investment in downstream industries, job creation, and the attractiveness of foreign direct investment in Indonesia.
“Sustainable long-term investment needs to be carefully maintained in order to attract other sustainable investment to enter Indonesia,” he concluded.