Ilustration: here

*This is a personal opinion from the writer


Posted in Kontan Newspaper, Tuesday, 25 Agustus 2015

During 2015, the price of crude oil and gas and mining commodities collapsed, reaching their lowest point in the last five years. The price of crude oil type Brent Crude reaches USD. 46.96 / barrel, WTI Crude Oil reached USD. 40.62 / barrel, the price of natural gas reaches USD. 2.71 / mmBTU, and the coal price reaches USD. 42.88 / st. The explanation on the demand side shows that there was a decrease in demand as a result of the global economic slowdown throughout 2015.

For Indonesia, the impact of the decline in the price of Oil and Gas (Migas) and mining is a signal for economic performance. Apart from having an impact on export performance because Indonesia’s exports are still dominant from oil and gas, mineral, and coal (Minerba), the effect of the price reduction also affects the government’s fiscal policy. Several macroeconomic assumptions are built on the performance of oil and gas lifting and crude oil prices (ICP). From the revenue aspect, the contribution of Oil and Gas and Mineral and Coal to State revenues, both tax revenue and Non-Tax State Revenue (PNBP), is still large.

It is undeniable that Indonesia is currently facing a difficult situation as a result of the weakening global economy. The plan to cut interest rates from The Fed Fund Rate, the decline in oil prices to their lowest point, and the weakening of the rupiah, has made the Government’s fiscal burden even heavier. This situation is economically supported by the weak performance of an investment in the oil and gas and mining sectors, as well as the performance of oil and gas production which is also heavy enough to be achieved by oil wells in the country today.

If we look back at our current fiscal situation, the dependence of state revenues on the oil and gas and mining sectors is still high. In the 2015 APBN-P, around 59.78% of PNBP still relied on oil and gas and mining. Meanwhile, tax revenues, the contribution of oil and gas PPh reached 7.82% and the contribution of corporate income tax for the mining sector reached 10.57%. Thus, the less conducive performance and global economic situation of these two sectors will affect the realization of state revenues. This situation has been very pronounced in 2015.

The realization of Oil and Gas PPh revenue in the first semester of 2015 was only Rp. 31.3 trillion, down by 39.5% compared to the same semester in 2014. The government also lowered the PNBP target from oil and gas and general mining in 2015 from Rp. 238.25 trillion to Rp. 113.03 trillion. This situation certainly has an impact on our fiscal resilience, which is indicated by the narrowing of the Government’s fiscal space.

If seen in the 2016 Draft State Budget, the government has set a target of Oil and Gas PPh of Rp. 48.46 trillion and PNBP of Oil and Gas and Minerba of Rp. 125.63 trillion. The government must be able to ensure that this revenue target can be achieved by 2016.

Meanwhile, on the other hand, the poor governance of the Oil and Gas and Mineral and Coal sectors also has an impact on development performance and State revenues. There are still around 6 million hectares of mining land located in conservation and protected forest areas – which in fact will disturb the stability of the environment. And around 6,042 non-CnC IUPs, both in terms of administration, land use (which causes overlapping), royalty, and fixed fees payment obligations.

From the data on the results of the Coordination and Supervision of the Corruption Eradication Commission and the Ministry of Energy and Mineral Resources and related agencies, of the 7,834 companies that DGT recorded, 24% did not have a TIN, and around 35% did not report their SPT The data above shows that, there are still problems in spatial planning and land/forest destruction in the mining licensing system, and there are still issues of non-compliance with companies in making state revenue/tax payments.

Solutions for the Government

Several notes are made so that the achievements of the development of the Oil, Gas and Mineral, and Coal sector can be achieved to achieve fiscal resilience. First, taking strategic steps to mitigate the impact of the decline in international oil prices and the depreciation of the Rupiah against the United States Dollar on the development of the Oil, Gas and Mineral, and Coal sector. This is important to map problems so that the targets the government wants to achieve can be realized and fiscal stability can be maintained.

Second, developing a diversification strategy for the economy that does not depend on commodities from the natural resource sector; Downstream programs in both the mining and oil and gas sectors must be carried out consistently, strictly and integrated by providing supporting factors such as electricity demand and others. This needs joint support from the private sector and the government.

Third, strengthening the transparency and accountability in the oil, gas and mining sectors’ governance, which includes encouraging company compliance in paying state revenues and taxes to avoid leakage, and avoid information asymmetry with the public while still paying attention to environmental protection, so as not to cause social conflicts for environmental disasters.

Fourth, immediately carry out institutional and regulatory arrangements that provide legal certainty, not only for industry players, but also for laws that protect community rights.