On July 16, 2026, in the same plenary session, the Constitutional Court (MK) read two important rulings regarding Law No. 2 of 2025 on the Fourth Amendment to the Mineral and Coal Mining Law.
Ruling No. 160/PUU-XXIII/2025 emphasized that the mechanism of granting Mining Business Permit Areas (WIUP) “by way of priority”—whether for cooperatives, MSMEs, or business entities owned by religious mass organizations—is only constitutional as long as it is granted through clear, objective, transparent, and accountable parameters, rather than direct appointments.
On the same day, Ruling No. 202/PUU-XXIII/2025 affirmed that within the priority scheme for downstreaming interests, fulfilling domestic supply chains must take precedence over global supply chains. At first glance, both rulings bring a breath of fresh air to legal certainty in the extractive sector. However, in Indonesia’s natural resource governance, legal certainty is not the sole indicator of success. The crucial question is: will these rulings truly reform practices on the ground, or merely remain as redational cosmetics on paper?
Closing “Fast-Track” Loopholes and the Formalism Trap
Since the revision of the Mining Law was passed in February 2025 through a rapid process outside the National Legislation Program (Prolegnas), the scheme of “granting by way of priority” to various entities—from cooperatives, mass organizations, and higher education institutions to private companies—has essentially functioned as a shortcut outside open bidding mechanisms. This path is fraught with significantly greater discretionary power for permit issuers compared to competitive, merit-based market mechanisms.
Ruling No. 160/PUU-XXIII/2025 candidly uncovers this risk: without measurable parameters, the word “priority” is vulnerable to being abused as direct appointments that perpetuate political clientelism.
However, this constitutional validation will only be tested when translated into implementing regulations, namely the revision of Government Regulation (PP) No. 39 of 2025.
If the regulation is drafted in a closed-door manner, the requirements of being “objective, transparent, and accountable” risk being reduced to mere bureaucratic jargon. Without a strict obligation to publish the list of applicants, assessment criteria, and Beneficial Ownership data, dark discretionary practices will persist.
This standard of transparency is by no means new. Through Requirements 2.2 and 2.5 of the Extractive Industries Transparency Initiative (EITI) 2023 Standard, Indonesia has committed to disclosing permit allocation processes and beneficial ownership structures. Unfortunately, the 2024 Indonesia EITI Validation results—which yielded a score of only 67 out of 100—serve as a strong alarm that this international commitment remains stalled at the domestic implementation level.
Questioning the Essence of Downstreaming: For Whom and at What Cost?
Meanwhile, Ruling No. 202/PUU-XXIII/2025, which mandates prioritizing domestic supply chains, corrects an overemphasis on export orientation. Nevertheless, this correction has yet to answer the most fundamental question: who has national downstreaming truly been serving, and at what cost?
Indonesia stands as one of the world’s largest exporters of nickel and coal, yet ironically remains dependent on importing high value-added derivative products—ranging from electric vehicle components to methanol. This pattern repeatedly positions Indonesia merely as a supplier of raw materials and a consumer market, while the largest profit margins are enjoyed by processing countries.
At the site level, the realization of nickel downstreaming in Morowali and Halmahera reveals a heavy socio-ecological toll: deforestation, water and air pollution, carbon emissions from coal-based captive power plants, as well as recurring agrarian conflicts and violations of indigenous peoples’ rights. The dominance of foreign investment with minimal technology transfer to the local workforce further highlights that the downstreaming pie has not been fairly distributed.
On the other hand, the project to process coal into dimethyl ether (DME) faces a dead end in economic viability. An analysis by the Institute for Energy Economics and Financial Analysis (IEEFA) shows that this project is not viable without massive state subsidies, while risking plunging Indonesia back into a cycle of fossil fuel reliance instead of accelerating a clean energy transition.
The Way Forward: From Court Rulings to Socio-Ecological Justice
These two Constitutional Court rulings should serve as a turning point for governance evaluation, not the end of the debate. State sovereignty over natural resources under Article 33 of the 1945 Constitution cannot be safeguarded merely by drafting priorities on paper. The true measure of justice lies in whether communities around mining and smelter areas genuinely enjoy economic benefits or are left inheriting environmental degradation.
The government bears a major responsibility to prove this through the revision process of PP No. 39 of 2025: drafting it inclusively and transparently, opening up Beneficial Ownership data, mandating independent environmental audits, and ensuring every strategic project passes rigorous feasibility tests.
Without radical corrective steps, these progressive rulings from the Constitutional Court will remain nothing more than well-written legal documents—yet powerless against the extractive oligarchy
Read the full article on Katadata.