1 CHAPTER I INTRODUCTION 1.1 Background The global shift toward sustainable energy has driven Indonesia’s position in critical mineral industry. The country has a huge number of proven reserve of critical minerals which are the main components of lithium-ion batteries. The proven reserve for several commodities like nickel up to 21 million ton, copper 28 million ton, bauxite 1,2 billion ton, tin 1.2 billion tons and cobalt 800,000 tons. Production volume for nickel ore in 2023 reached up to 1,8 million tonnes or equivalent to 50% of total worldwide production in the first rank. While the second largest production coming from cobalt commodity which reached up to 17,000 tonnes as per 2023. And the third production is tin which reached up to 18% shared of global production or estimated around 52,000 tonnes (US Geological Survey, 2024). This condition reflect that the industry’s market size is huge and need to be fulfilled to support the global demand in the next 7 years. Therefore, Indonesia has strategic position to capitalize on this potential for economic expansion and industrial development. The trend of using electric vehicle and renewable energy has accelerated the rising demand of critical mineral. The electric vehicle experienced a 35% growth in sales to around 14 million units in 2023 and projected to reached over 145 million by 2030, with an expected compound annual growth rate (CAGR) around over 20% in the next decade. Furthermore, the development of solar power electricity will contribute 88% of the total metal applied. Besides that, infrastructure sector and consumable also contribute to the rising demand of aluminium commodity. Thus encourage the government of Indonesia has to capitalize on this trend and become the global market leader in critical mineral industry. 2 Although the nickel commodity has experienced a decrease in pricing due to higher supply and inventory levels, the market value for critical minerals is projected to more than double by 2040 (Global Critical Mineral Outlook 2024). Furthermore, Indonesia has took a decisive step in 2020 by banning the export of raw nickel ore and focusing instead on refining and processing its minerals domestically to capture more value downstream. This regulation brought a competitive advantage economically based on nickel export value which surged from USD 1.06 billion to USD 34 billion. Law 3 year of 2020 not only boost national revenue but also attract foreign direct investor in mining sector in Indonesia. MIND ID, a government-owned mineral holding company in Indonesia, is assigned to lead the management of the nation’s critical mineral resources. As the only holding company in Indonesia regulating in this sector, MIND ID is responsible for resolving supply chain concerns, guaranteeing sustainable and ethical sourcing, negotiating complex regulatory frameworks, and supporting innovation and technological advances. Based on Government Regulation No.46 of 2022 concerning the Equity Participation of the Government of the Republic of Indonesia in the establishment of a Limited Liability Company (Persero), MIND ID has transformed it’s entity as the only strategic holding company in mining sector. This strengthen MIND ID’s authority to explore, discover, study, innovate and manage Indonesia’s abundant potential wealth beneath the surveillance of the government. MIND ID has at least three mandates; first, managing Indonesia’s mineral resources and reserves; second, enhancing added value through the down streaming of mining commodities; and third, enhancing business scale towards becoming a world-class company listed in Fortune Global 500. As the competitiveness in global market is getting higher, MIND ID need to formulate a strategic approaches and assess the effectiveness of the company. 3 Furthermore, the Indonesian government’s pursuit of downstream industry development in which raw materials are processed locally to add value. By emphasizing downstream processing, MIND ID can augment Indonesia’s revenue, generate employment opportunities, and fortify its position as a critical participant in the mineral supply chain. This corresponds with Indonesia’s economic objectives and MIND ID’s long-term development strategy. An ideal scenario for MIND’ID to establish itself as a global leader is created by the company’s momentum in the development of sustainable mining practices and a government- supported drive for increased value-added production. The alignment of national policy with corporate objectives establishes MIND ID as a critical entity that can impact the critical minerals market while adhering to ESG standards, thereby increasing its global credibility and appeal. This research will investigate the ways in which MIND ID can leverage its resources, capitalize on market trends, and navigate regulatory landscapes to accomplish its vision of becoming a global market leader in critical minerals. This study strives to offer MIND ID valuable insights into the measures it can implement to maintain its global leadership while adhering to sustainable and responsible practices by examining both its internal strategies and external market conditions. 1.2 Company Profile 1.2.1 Company History PT Mineral Industri Indonesia (Persero) is a holding company for a state-owned mining industry (BUMN). The journey began in 2017 with the official formation of PT Indonesia Asahan Aluminium (Persero) known as INALUM, which became the holding company for three of Indonesia’s top mining companies: PT Aneka Tambang Tbk, PT Bukit Asam Tbk, and PT Timah Tbk. In 2019, PT Mineral Industri Indonesia (Persero) was transformed into MIND ID, 4 distinguishing INALUM as the operator of an aluminium smelting plant, while MIND ID served as the holding company. Later, in December 2022, the Indonesian government issued Government Regulation No.45 of 2022, which concerned the Reduction of Equity Participation of the Government Republic of Indonesia in Limited Liability Company (persero) PT Indonesia Asahan Aluminium. Therefore, INALUM discontinued to be a holding company and became a member of MIND ID. On the same day, the Indonesian government issued Government Regulation No.46 of 2022 concerning the Equity Participation of the Government of the Republic of Indonesia in the establishment of a Limited Liability Company (Persero) in the mining sector, confirming MIND ID’s corporate transformation as a new strategic holding entity in Indonesia. Based on this legal basis, MIND ID was officially formed and legalized by the Minister of Law and Human Rights of the Republic of Indonesia through Deep of Establishment No.59 dated February 17 th , 2023. 1.2.2 Vision and Mission MIND ID’s vision is to become an integrated global mining company that implement sustainable mining practices as well as strengthening ecosystem and industrialization of natural resource management. MIND ID’s missions are : ▪ create prosperity among the country, the community and all stakeholders. ▪ control Indonesia’s natural resources and reserves with a world-class upstream and downstream business ▪ create corporate value through integrated upstream & downstream business 5 ▪ realize operational excellence through increased synergy and productivity, and by adopting the latest technologies ▪ become the market leader and global excellence awareness as a leading natural resources company in innovation and technology, partnership, business and market intelligence and energy management While the culture and value of MIND ID is align with the Ministry of State Own Enterprises well- known as “AKHLAK”. Figure 1. 1 Company Culture & Value (source : MIND ID, 2024) 6 1.2.3 Organization Structure Figure 1. 2 Organizational Structure (source : MIND ID, 2024) 1.2.4 Share holder composition & Company’s Entities The government of Republic of Indonesia is the only shareholder of MIND ID’s with a hundred percent of ownership as shown in Figure 2. Below. Figure 1. 3 Shareholder Composition (source : MIND ID, 2024) While the company entities as per 2023 is as shown below in Figure 3. There are several members under the management of MIND ID. PT Antam Tbk and PT Vale Indonesia are procucing nickel, PT Indonesia Asahan Aluminium (Inalum) focus in refining bauxite to become alumina and aluminium,PT Freeport Indonesia is producing copper, and PT Timah is producing tin. President Director Director of Portfolio & Business Development Corporate Strategy Business Development Portfolio Management Director of Finance Strategic finance Financial Management & Control Supply Chain Management ICT & Digitalization Director of Risk Management & HSSE Health, safety, & Security Governance & Compliance Sustainability Risk Management CSR Internal Audit Vice President Director Project Management Office Strategic Reserves Development IMMRI Human Capital Management Talent Committee Strategic Initiatives Corporate Secretary Corporate Legal Institutional Relations 7 Figure 1. 4 MIND ID members (source : MIND ID, 2024) 1.2.5 Operational Areas Figure 1.