New ESDM Regulation Strengthens Local Contractors In Indonesia’s Mining Industry

English
30 September 2026

Use of Subsidiaries and Affiliates Now Requires Ministerial Approval

ICN News, Jakarta – Opportunities for local mining service companies to secure contracts from mining permit holders are expected to increase following the issuance of Minister of Energy and Mineral Resources (ESDM) Decree No. 365.K/MB.01/MEM.B/2026.

The decree, issued by Energy and Mineral Resources Minister Bahlil Lahadalia on 18 September 2026, establishes technical guidelines for obtaining approval to use subsidiaries and/or affiliated companies in mineral and coal mining services. The regulation is currently in force and has been recorded in the Ministry of ESDM’s legal information system.

One of its key provisions requires holders of Mining Business Licences (IUP) and Special Mining Business Licences (IUPK) that use mining services to engage companies holding a Mining Services Business Licence (IUJP), while giving priority to mining service companies located in regencies/cities surrounding the mining operation.

The provision is expected to create greater opportunities for regional mining contractors to participate in the mining industry’s supply chain.

Subsidiaries and Affiliates No Longer Free to Provide Mining Services

In addition to prioritising mining service companies located near mining operations, Decree No. 365/2026 also introduces tighter controls on the use of subsidiaries and affiliated companies.

IUP and IUPK holders can no longer freely appoint subsidiaries or affiliated entities as mining service providers. Their use requires approval from the Minister of ESDM. For licences under regional government authority, the approval mechanism may be handled by the governor in accordance with applicable regulations.

The government has also provided certain exemptions. According to Director General of Mineral and Coal Mining Tri Winarno, the use of affiliates may still be permitted in certain circumstances, including fulfilment of domestic needs, National Strategic Projects (PSN), and downstream industrial activities.

Applications to use subsidiaries or affiliated companies are subject to evaluation, with the assessment process taking a maximum of 14 working days after complete and correct documents have been submitted.

Greater Opportunities for Independent Contractors

The new policy could alter the competitive landscape of Indonesia’s mining services sector, A number of large mining companies have subsidiaries or affiliated companies that perform mining services within the same corporate group. With the introduction of the new approval mechanism, mining companies may need to consider other service providers, including independent contractors and local companies operating near their mining areas.

The policy could therefore provide additional opportunities for independent mining contractors that have previously faced competition from affiliated service companies.

However, implementation will also present challenges. Not every mining area has local contractors with sufficient capital, heavy equipment fleets, technology, occupational safety standards and operational capacity to handle large scale mining operations.

Therefore, prioritising local mining service companies does not mean that every local contractor will automatically receive mining contracts. The ability to meet technical, financial, operational and safety requirements remains an important consideration.

A New Momentum for Regional Mining Contractors

For regional mining service companies, the new regulation could provide an important opportunity to strengthen their capabilities and competitiveness. Local contractors holding valid IUJP licences and equipped with adequate heavy equipment, competent personnel, sound safety management systems, sufficient financial capacity and relevant operational experience will be better positioned to participate in mining activities within their respective regions.

The implementation of Decree No. 365/2026 therefore goes beyond changing the mechanism for appointing mining contractors. It could also contribute to strengthening the regional mining-services ecosystem.

The Ministry of ESDM has stated that the policy is aimed at encouraging greater participation by local businesses in Indonesia’s mineral and coal mining activities.

According to information gathered by ICN NEWS, the implementation of this regulation will be closely watched by mining companies, mining contractors, heavy equipment companies and other mining service providers across Indonesia.