Inequality in the Recognition of Status and Fiscal Benefits of Mineral Processing Regions

Abstract

Morowali Regency and North Morowali Regency in Central Sulawesi Province have emerged as major nickel processing hubs in Indonesia, with production capacities comparable to or exceeding those of regions designated as Mineral Processing Regions under Decree of the Minister of Energy and Mineral Resources Number 157.K/KU.01/MEM.S/2026. Similar circumstances exist in Palu City, where PT Citra Palu Minerals (CPM) conducts integrated gold processing activities without the region being formally recognized as a Mineral Processing Region. These three jurisdictions are recognized only as Producing Regions and, consequently, do not receive the additional 8% allocation from the Revenue Sharing Fund (Dana Bagi Hasil, DBH) provided for under Article 116 of Law Number 1 of 2022 concerning Financial Relations between the Central Government and Regional Governments (Hubungan Keuangan antara Pemerintah Pusat dan Pemerintahan Daerah, HKPD Law). The findings indicate that the primary issue lies not in the provisions of the HKPD Law but in the restrictive interpretation of the criteria for integrated processing facilities by the Ministry of Energy and Mineral Resources. This interpretation has not adequately accommodated industrial estate models involving supply chains supported by multiple Mining Business Permits (Izin Usaha Pertambangan, IUP), as practiced in Morowali and North Morowali. Employing the Urgency, Seriousness, and Growth (USG) method to prioritize policy problems and Bardach's (2012) policy analysis criteria to assess alternative solutions, this study recommends accelerating the verification process and revising the fourth and sixth operative provisions of Ministerial Decree Number 157.K/KU.01/MEM.S/2026. These recommendations align with initial administrative measures reportedly undertaken by the Central Sulawesi Provincial Government to address disparities in regional recognition and fiscal benefit allocation.