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The development of minerals industry to get the added value of minerals in the long run according to Law no. 4 Year 2009 About Mineral and Coal Mining, can be realized in an industrial cluster, and its success is determined by the availability of mineral reserves, human resources availability, investment willingness and availability of electricity infrastructure, for government support. The contribution of the government in the implementation of hilirisasi policy in Indonesia is manifested in the form of government expenditure in capital expenditure at the district level, where a mining business area (WUP) is located, so it can affect the increase of added value of minerals in Indonesia. Direct government spending has a positive effect on the increase of added value of minerals in Indonesia, but indirectly, government expenditures have a significant effect on increasing mineral added value, through increased mining and industrial investment, increasing the number of mining workers, and increasing electricity infrastructure. Keywords: value-added of minerals, mineral industry, government expenditure PRELIMINARY The issue mineral of value added that can be obtained from a mineral resource utilization, is increasing with the increase of science and technology. The issue, especially in countries with abundance of natural resources, including Indonesia. In the past 10 years, Indonesia as a country with its abundance of natural resources, has been lacking significant added value to mining and mining business fields, thus contributing to Indonesia's economic growth is also less significant (Financial Services Authority, 2015, BPS in Suyanto, 2011). In fact, Indonesia is classified as a fairly productive country in the export of minerals, especially nickel, iron, copper and bauxite commodities, but in general in the form of raw minerals, thus providing less value for economic growth (Keynes, 1935). However, on the other hand Indonesia is also listed as a country with imports of semi-finished materials (concentrates) and finished materials (metals) large enough to meet the needs of industry, construction, energy and telecommunications in the country (Ministry of Industry, 2017). Considering the above phenomena, the low added value of Indonesian minerals, among others, is due to the high export of crude minerals, followed by the import of semi-metal and metal materials which are also quite high, and caused by the limitations of the mineral industry in the country. Auty (2003) states that for the development of natural resource potential in developing countries, industrialization is the key www.scirj.org

Increasing mining investment as an effect of government spending in the development of the mineral industry in Indonesia, aims to obtain mineral value added in the long run according to Law No. 4 of 2009 concerning Mineral and Coal Mining, can be realized with mineral industry clusters in a mining business area (WUP). The method used is Simultaneous Equation Model (SEM).The increase in mining investment has a significant effect on increasing mineral value added, which has positive implications for people's welfare which is manifested in the form of increasing contribution to the mining and quarrying business sector of the Regency GRDP, increasing employment opportunities and industrial CSR towards local communities.The increase in mineral reserves that have a significant effect on increasing mineral value added as an effect of government spending and mining investment has positive implications for the longer duration of mineral production and industrial activities in a mining business area (WUP), so that economic and social transformation can be realized well. Keywords-Mining investment, government expenditure and implications, value added, mineral industry cluster. I.