Jakarta – Indonesia is currently undergoing the accession process to become a member of the Organisation for Economic Co-operation and Development (OECD). This step aligns with the ambitious vision of Indonesia Emas 2045, which aims to make Indonesia one of the developed countries’ favorites. This accession process involves a rigorous evaluation by 26 technical committees to assess how Indonesia can align itself with OECD policies and practices. Of course, many things must be adjusted, from policies to institutional governance and readiness to implement OECD standards.
One of the main focuses in accession to the OECD is the adoption and implementation of the Responsible Business Conduct (RBC) instrument. RBC is an essential guideline for multinational companies adopted by all OECD members. It is also open to interested non-member countries. Currently, around 50 countries have adopted or are in the process of adopting the RBC guidelines.
The implementation of RBC shows the company’s commitment to respecting and contributing to human rights, protecting the environment, protecting consumer interests, and fighting corruption. This guideline also aims to create fair market competition by supporting an international investment climate based on regulations.
To ensure compliance with the RBC guidelines, the OECD has developed sectoral guidance that helps companies identify and address risks related to people, the environment, and society in their business operations. This was stated by the Deputy Director of Publish What You Pay (PWYP) Indonesia, Meliana Lumbantoruan, at the launch of a book entitled Reviewing Indonesia’s Accession to the Organisation for Economic Co-operation and Development (OECD) in a Civil Society Perspective, published by the International NGO Forum on Indonesian Development (INFID) on July 23, 2024 in Central Jakarta.
Meliana, one of the authors in the anthology, specifically examines the relationship between Indonesia’s accession to the OECD and the implementation of RBC in the extractive sector. Although the mining sector makes a significant economic contribution, it also faces environmental and social challenges. Therefore, all stakeholders in this sector need to meet the RBC standards and related guidelines.
RBC is a reliable framework for analyzing the impact of the extractive sector on society and the environment. Given this sector’s large contribution to Gross Domestic Product (GDP), the negative consequences, especially for indigenous peoples and the environment, are increasingly becoming unavoidable. The OECD encourages the implementation of RBC as a process of mitigating and managing the negative impacts of companies’ production of goods and services, especially those on an international scale.
The Indonesian government’s commitment to accession to the OECD also aims to increase investment. Increased investment has the potential to open up more opportunities in the extractive sector, but this also carries risks for society and the environment. Therefore, efforts must ensure that these investment efforts are safe from the domestic business climate. After becoming a member of the OECD, Indonesia must be ready to face free market competition and industrial liberalization.
Becoming a member of the OECD opens up new market access. It requires readiness so that Indonesia can avoid becoming trapped as a market for other OECD countries. This requires a strong stakeholder commitment to utilize this accession to strengthen responsible extractive sector governance.
Specifically, Meliana delivered nine recommendations for implementing RBC in the extractive sector. The recommendations include:
- Updating and aligning national regulations with the OECD RBC standards, including environmental, social, and corporate governance aspects.
- Increasing the capacity of supervisory institutions (Non-Governmental Organizations, NCPs) to monitor and enforce compliance with RBC regulations.
- Implement incentives for companies that comply with RBC standards and sanctions for those who violate them.
- Requiring companies to conduct transparent public reporting on their operations’ social and environmental impacts.
- Implementing business integrity in economic governance.
- Involving local communities in the decision-making process through effective public consultation;
- Providing an easily accessible complaint mechanism for the public to report RBC violations;
- Establishing cooperation between local governments, the private sector, civil society, and international organizations to support the implementation of RBC;
- Conducting periodic evaluations of the implementation of RBC in the extractive sector and adjusting policies as needed.