BMI's Executive Summary

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The mining industry is crucial to the Indonesian economy. Globally, Indonesia features among the ten leading mining industries in the world in terms of mineral and metal potential. Ranked second in the production of tin, third in copper and fourth in nickel, the industry is forecast to contribute more than 10% to Indonesia's gross domestic product (GDP) in 2007. Indonesia's gold mining industry also has great potential with huge resources available in West, Central and East Kalimantan. Coal mining is another significant sector and the country ranks only behind Australia in terms of export of thermal coal.

Indonesia's coal production has grown twenty-fold since the 1990s and at present, more than 70% is exported. Reserves of coal are primarily sourced from Sumatra, Kalimantan, Java, Sulawesi and Papua. Even though the geology of Indonesia offers tremendous potential for both local and overseas mining companies, only 0.5% of the global exploration funds on greenfield sites is dedicated to the southeast Asian nation. The low scale of exploration activity is of serious concern for the long-term success of the industry. On the positive side, the Indonesian government is planning to introduce measures to encourage the domestic mining equipment industry by offering incentives to local companies that fulfil the state's mandate in this regard. However, illegal mining remains a major concern for the nation, and as a step towards precluding illegal extraction, the government introduced stringent export regulations in early 2007.

Indonesia's mining industry is heavily regulated at the central, provincial, regional and municipal levels. Often, the regional regulations are not aligned with central laws and are, hence, subject to review and cancellation by the central government. These inconsistent legislative interpretations result in procedural delays and increase uncertainties for mining companies.

Industry Forecast

Increase in exploration, discovery and development of new metal and mineral reserves is essential for sustaining the Indonesian mining industry in the long term. According to BMI, the Indonesian mining industry is forecast to log an average growth of 5.82% in 2007-11. The industry is also forecast to be valued at nearly US$50bn by 2011.

Executive Summary

Industry Trends And Developments

Market Overview

Regulatory Structure

Project And Property Updates

Metals

Minerals

Precious Stones

Table: Mines In Indonesia

Business Environment

Introduction

Regional Overview

Table: Regional Ave. Scores 1

Indonesia: Business Environment Ranking

Table: Business Environment Rankings

Legal Framework

Labour Force

Table: Demographic Indicators (2005)

Table: Employment Indicators

Table: Indonesia, Annual Fdi Inflows

Table: Asia, Annual Fdi Inflows

Foreign Investment Policy

Political Environment

Political Strife May Stall Reform Drive

Elections In Aceh

Industry Forecast Scenario

Metals Price Outlook

Risks To Outlook

Global Industry Overview

Regional Analysis

Indonesia Mining Industry Forecast

Table: Indonesia Mining Industry Forecast

Competitive Landscape

Company Monitor

Kaltim Prima Coal

Arutmin

Rio Tinto

Appendix A: Mining Ratings: Methodology

Introduction

Breakdown of Ratings

Breakdown of Components

Appendix B: The World Economy

Outlook and Risks

Table: Global Assumptions

United States

Soft Landing Ahead

Risks To Outlook

Europe

Moderating, But Solid Economic Growth

Medium-Term Growth Outlook

Japan

Japan In 2007 & 2008

Japan’s Medium-Term Prospects

China

China In 2007 & 2008

China’s Medium-Term Prospects

Oil

Appendix C: Regional Demographic Data

Table- Manufacturing Wages (ave. per annum), US$

Table - Population

Household Spending Per Capita, US$

Private Consumption Per Capita, US$ PPP

Market Size, GDP, US$bn