Indonesia’s illegal mining crackdown facing structural hurdles, BMI says

[Ben Graham]

Indonesia’s planned operation to seize more than 1,000 illegal mining sites starting this month is unlikely to deliver “meaningful environmental gains” and will yield only a “modest boost to state revenues,” according to a new analysis from BMI, a Fitch Solutions company.

The Indonesian government aims to transfer seized mining sites to state ownership, positioning the move as part of President Prabowo Subianto’s wider anti-corruption campaign. But BMI notes that the real motivation appears to be revenue recovery rather than ecological protection.

The approach echoes a March 2025 crackdown on illegal palm oil farms, which critics said disproportionately affected smallholders and indigenous communities while sparing large corporate interests.

Environmental watchdogs argue that Indonesia’s weak institutions, red tape and entrenched corruption have long hampered enforcement of resource regulations. These systemic issues are likely to limit the effectiveness of the crackdown, even as Jakarta seeks to upgrade its mining sector up the global value chain, where stronger governance credentials could attract more international partners and capital, BMI said.

Corruption-linked polarization remains a flashpoint in public life. Recent unrest over high parliamentary housing allowances underscores the extent to which corruption-related controversies can spark broader protests, complicating policy implementation, it added.

Still, despite the governance shortcomings, BMI forecasts Indonesia’s mining industry will continue to expand. The report suggests that economic imperatives will outweigh environmental, social and governance (ESG) considerations in the near term, leaving the sector’s sustainability profile weak compared with global peers.