Building a Sustainable Mining Governance Model Through Decentralization Performance and Governance Transformation in Indonesia

Governance plays a critical and strategic role in ensuring the sustainability of national and state systems, influencing a country's long-term political, social, and economic stability. In the realm of public administration, public policy is defined as all government activities that aim to solve public problems, thereby maintaining social order and preventing unrest [1]. Public policy, as part of public governance, forms the backbone of the state's responses to issues that arise within the public domain, with the ultimate goal of managing societal challenges and fostering a balanced environment for social welfare. Effective governance, therefore, requires an administrative framework that can address societal problems in an efficient, effective, and sustainable manner.

In Indonesia, the control and management of mineral and coal mining are regulated under the 1945 Constitution, with Article 33, paragraph (3) mandating state control over natural resources for public welfare. Law Number 4 of 2009 on Mineral and Coal Mining replaced Law Number 11 of 1967, reinforcing state authority over these non-renewable resources to ensure national prosperity [2]. Governance is shared between the central and regional governments, aligning with principles of economic democracy, sustainability, and national unity. However, Law Number 23 of 2014 limits district and city governments' authority in mineral and coal management, creating administrative complexities [3]. Mining revenue distribution is outlined in Law Number 33 of 2004, with 20% allocated to the central government and 80% to regional governments. Government Regulation Number 23 of 2010 emphasizes value addition, good mining practices, compliance enforcement, and environmental protection. Key governance issues include corporate social responsibility (CSR), environmental rehabilitation, and mining-related climate change mitigation. The effectiveness of mining governance relies on legal frameworks, resource efficiency, and stakeholder engagement [4]. Collaborative governance is crucial for policy improvements, ensuring sustainable and equitable resource management through participatory and accountable decision-making.

The concept of governance within public administration is especially important at both the central and regional levels, where it is crucial for government institutions to collaborate and improve organizational capacities [5]. Sustainable governance extends beyond mere governance processes, aiming to establish frameworks that not only address current needs but also support future generations. In particular, sustainable governance involves integrating environmental protection into policy-making, ensuring that governance activities are ecologically responsible and beneficial for the long term. In Indonesia, the governance of the mining sector is a notable example where governance practices must consider the complex dynamics between various stakeholders, including government bodies, private enterprises, regional governments, and international entities.

Despite the recognition of these complexities, Indonesia's mining governance continues to face challenges stemming from fragmented approaches that do not adequately address the systemic nature of these issues. These issues represent a significant gap in the governance of mineral and coal resources. To address this gap, this study will examine Indonesia's mining governance through a collaborative governance lens, which emphasizes cooperation between state and non-state actors in managing public concerns [6]. This paper aims to offer a detailed analysis of sustainable mining governance in Indonesia, proposing a model based on collaborative governance principles. It will contribute to the body of knowledge in public policy and administration, specifically in the area of systemic governance and decentralization, which are essential for achieving sustainable state welfare and resource management [4, 7, 8].

This study aims to examine the influence of environmental quality, governance, society, and economy on the performance of decentralization and sustainable mining governance. By analyzing how these factors contribute to decentralization, the study explores their roles in fostering efficient resource management, policy implementation, and institutional collaboration. Furthermore, the study investigates the mediating role of decentralization performance in shaping sustainable mining governance, emphasizing the need for a well-structured decentralization framework. In addition, the study assesses the moderating effects of mining governance transformation, highlighting the impact of policy reforms, institutional changes, and regulatory updates on governance sustainability.

This study analyzes mineral and coal policy governance in Indonesia to achieve sustainable mining governance using a quantitative methods approach to examine governance in mining sector in Indonesia (Figure 1).

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Figure 1. Research framework

The key constructs in this study—governance quality, environmental quality, economic development, and CSR quality—were operationalized through various measurement indicators. Governance quality was assessed based on transparency, stakeholder participation in decision-making, regulatory enforcement, and policy effectiveness, capturing respondents’ perceptions of government and corporate accountability in mining governance. Environmental quality was evaluated through indicators such as pollution control, land rehabilitation, adherence to environmental regulations, and the implementation of environmental impact assessments (EIAs), reflecting the extent to which mining operations mitigate negative environmental impacts. Economic development was measured by examining employment opportunities, income generation, infrastructure development, and regional economic growth attributed to mining activities, with respondents providing insights into the socio-economic contributions of the sector. Lastly, CSR quality was determined through indicators related to community engagement, social welfare programs, investment in local education and health initiatives, and corporate commitments to sustainable development, assessing how CSR initiatives contribute to the well-being of communities affected by mining operations.

The quantitative analysis utilizes SEM with the WarpPLS [19] to build a sustainable mining governance model. Data collection for the quantitative study was conducted online using Google Forms. Accordingly, a nonprobability sampling technique was applied, combining accidental sampling and quota sampling. Accidental sampling was used under the consideration that any respondent encountered online who met the specified criteria was included as part of the sample. Meanwhile, quota sampling was implemented to ensure a predetermined sample size of n = 200. Once this number was reached, the sampling process was stopped.

Sample size estimation in SEM is generally determined as 5 to 10 times the number of indicators in the model. This study includes 26 indicators, meaning that the recommended sample size falls between 130 and 260 respondents. To maintain methodological rigor, this study selected a midpoint of 200 respondents. These 200 individuals served as both the research sample and the respondents for the quantitative analysis.

WarpPLS was chosen due to its suitability for models with recursive structures, reflective measurement models, and latent variables, which were measured using a structured questionnaire. This method, originally developed from Partial Least Squares Structural Equation Modeling (PLS-SEM) Wold [20], is particularly effective for analyzing weak theories, small sample sizes, or non-normally distributed data. Sustainable mining governance is evaluated based on insights from the Stakeholder Network Analysis (SNA) and the statistical modeling results obtained through SEM.

The study demonstrates that environmental quality, governance quality, community quality, and economic quality significantly influence decentralization performance. Among these, governance quality (X2) exerts the strongest impact, affirming the necessity of well-structured policies and regulatory frameworks for effective decentralization. Environmental quality (X1) also plays a crucial role, emphasizing the importance of sustainable resource management in local governance. While community quality (X3) and economic quality (X4) contribute meaningfully, their relative influence is lower, suggesting that additional mechanisms may be needed to maximize their effects. The study further highlights that decentralization performance (Y1) mediates the relationships between these factors and sustainable mining governance (Y2), underscoring the role of decentralized governance in promoting sustainable practices. Additionally, governance transformation (M) moderates these relationships, enhancing the influence of environmental, governance, community, and economic quality on mining governance outcomes.

The mediation effect of decentralization is facilitated by specific governance mechanisms, including multi-stakeholder decision-making processes, adaptive regulatory frameworks, and participatory resource management. Multi-stakeholder governance fosters collaboration between local governments, industry representatives, and community groups, ensuring diverse interests are considered in mining policies [22]. Adaptive regulatory frameworks allow decentralization policies to respond to evolving environmental and socio-economic challenges, promoting flexibility and sustainability. Furthermore, participatory resource management encourages local communities to take an active role in monitoring and decision-making, reinforcing accountability and transparency in decentralized governance structures. These mechanisms collectively enhance the effectiveness of decentralization in bridging stakeholder interests with governmental policies, leading to improved sustainable mining governance.

The findings align with existing literature on governance and sustainability. Harris [15] emphasized the integration of environmental protection into mining governance, a principle validated by this study's results. The role of governance quality echoes the findings of Ansell and Gash [6], who underscored the importance of collaborative governance in resource management. Similarly, studies by Alberts et al. [11] and Domínguez-Gómez and González-Gómez [9] highlight regulatory challenges in mining governance, which this study also confirms. However, unlike Cheshire et al. [12], who found that local governments struggle with mining regulations, this study suggests that decentralization performance can mediate these difficulties effectively. The findings further support Hayati [3] and Dutu [23] reinforcing the notion that balancing central and decentralized governance structures is critical for mining sustainability. Additionally, the study complements Yang et al. [21], who demonstrated the role of digital governance in improving resource management.

A key strength of this study is its comprehensive analysis of multiple quality factors influencing decentralization performance and sustainable mining governance. The study employs robust statistical methodologies, including path analysis, which strengthens the reliability of the findings. Furthermore, the introduction of governance transformation as a moderating variable provides a novel perspective on enhancing governance mechanisms. However, a limitation lies in the potential for regional variability, as the study primarily focuses on Indonesia. Future research should consider comparative analyses across different governance systems to validate these findings further. Additionally, while governance and environmental quality showed strong effects, the insignificant direct impact of community and economic quality on sustainable mining governance suggests that further investigation into mediating or contextual variables is necessary [24].

A surprising result of this study is the insignificant direct impact of community quality (X3) and economic quality (X4) on sustainable mining governance (Y2). This contrasts with prior research suggesting that economic incentives and community engagement are primary drivers of sustainability [25]. This discrepancy implies that without decentralization mechanisms, community and economic factors may lack direct influence, necessitating further investigation into potential mediating variables such as policy frameworks or CSR initiatives.

This study validates the hypotheses (H1-H8) and contributes to the growing body of research on decentralization and sustainable governance. The results emphasize the importance of governance quality and environmental stewardship in achieving sustainability, reinforcing the need for regulatory enhancements and policy reforms. By demonstrating the mediating role of decentralization performance, this study highlights how local governance structures can effectively channel various quality factors into sustainable mining practices. The findings have practical implications for policymakers, suggesting that decentralization policies must integrate governance and environmental considerations to enhance mining sustainability [26, 27].

Several avenues for future research emerge from this study. First, further investigation into the indirect effects of community and economic quality on sustainable mining governance is warranted, particularly through policy interventions or stakeholder collaborations. Second, future studies should explore cross-country comparisons to assess how different regulatory frameworks impact decentralization and mining governance outcomes. Third, the role of digital governance in mining oversight remains underexplored and warrants deeper examination, building on insights from Yang et al. [21]. Lastly, longitudinal studies could provide a more dynamic understanding of how governance transformations evolve and their long-term effects on mining sustainability.