Jakarta – The Extractive Industries Transparency Initiatives (EITI) International Board Meeting on May 17, 2023, resulted in an important decision in the history of transparency in extractive industry management. Said history marks the approval of EITI Standard changes1 launched at the EITI Global Conference held on June 13-14, 2023, in Senegal, attended by representatives of EITI implementing countries worldwide, including Indonesia. The International EITI Board represents the Government, Business Actors, and Civil Society of more than 50 EITI implementing members worldwide.
The EITI Standard was developed to promote good governance by increasing transparency, strengthening accountability, and facilitating public debate on natural resource management. Since it was first launched ten years ago, the EITI Standard has evolved and established a common set of rules governing what information and when should be disclosed by governments and companies.
Significant changes in the 2023 EITI Standard include several new and enhanced provisions in four thematic areas: Anti-corruption; Energy Transition; Gender, Social, and Environment; and Extractive Sector Revenue Collection.
Aryanto Nugroho, National Coordinator, Publish What You Pay (PWYP) Indonesia, revealed, “As a civil society coalition that has been guarding the birth of EITI and at the same time its implementation, of course, we welcome the decision of the International EITI Board. This decision not only shows the progress of civil society advocacy to promote transparency and accountability in the extractive sector. However, it also shows that the EITI initiative does not stop at one stage but continues to develop along the times.”
The initial presence of EITI, which only transparency of state revenues, has now moved far to encourage transparency in almost all extractive industry business chains, including integrating anti-corruption initiatives, gender equality and justice, and attention to social and environmental issues. Also, EITI demands efforts to encourage real improvements in extractive industry governance reform in strengthening the issue of energy transition.
Indonesia, as an EITI implementing country since 2010 with the legal umbrella of Presidential Regulation (Perpres) Number 26 of 2010 concerning Transparency of State and Regional Revenues Obtained from Extractive Industries, which was later amended through Perpres Number 82 of 2020 concerning the Committee for Handling Corona Virus Disease 2019 (COVID-19) and National Economic Recovery, is expected to be a pioneer country that progressively encourages transparency and accountability in this sector.
“This is also very relevant to Indonesia, which is currently aggressively pushing for the acceleration of an equitable energy transition. On the one hand, Indonesia, as a country rich in oil and gas and mineral and coal mining products, is also faced with the challenge of how to anticipate the impact of the energy transition, especially for people living around oil and gas, coal and mineral mines such as nickel, bauxite, and others,” said Aryanto.
Anti-Corruption
Regarding the Anti-Corruption aspect, the EITI Standard 2023 requires efforts to mainstream anti-corruption policies in the objectives and work programs of the EITI multi-stakeholders group (MSG) (Requirements 1.4, 1.5, 2.1 and 2.7), disclosure of company anti-corruption policies and practices (Requirements 1.2 and 2.6); share ownership threshold in the identification of beneficial ownership to 10% or below (2.5).
Such is aligned with efforts in eradicating corruption in Indonesia, which currently faces the challenge of preventing corruption synonymous with conflict of interest practices and the number of politically exposed persons (PEPs) identified in the extractive sector.
The momentum must be realized by encouraging the implementation of beneficial ownership disclosure, which is currently being encouraged in Indonesia, and including, if necessary, revising Presidential Regulation Number 13 of 2018 concerning the Implementation of the Principles of Recognizing Beneficial Owners of Corporations in the Context of Preventing and Eradicating the Criminal Acts of Money Laundering and the Criminal Acts of Financing Terrorism. Mainly related to articles regarding the definition and recognizing beneficial ownership.
Energy Transition
The 2023 EITI Standard also introduces requirements that EITI-implementing countries increase public knowledge related to the impact of energy transition policies in the extractive sector, including encouraging the disclosure of information related to carbon pricing or carbon tax policies (requirement 2.1). The 2023 EITI Standard also requires the disclosure of data and rationalization if there are efforts to provide easy business licensing for the mineral sector, including social and environmental obligations (requirement 2.2). Encourage the disclosure of proven oil and gas and mineral and coal reserves data that will be used to accelerate the energy transition, including analysis of the potential carbon emissions generated (requirement 3.1). Furthermore, it also encourages companies to disclose greenhouse gas (GHG) emission data (requirement 3.4).
In addition to the energy transition aspect, the 2023 EITI Standard also requires the disclosure of data and information related to the Government’s efforts to anticipate the impact of the energy transition on state revenues and the country’s economy (requirement 5.3).
The standard also aligns with Indonesia’s ongoing commitments related to energy transition, such as through the Energy Transition Mechanism (ETM) Country Platform and the Just Energy Transition Partnership (JETP).
Astrid D. Meliala, Civil Society Representative for EITI, said, “We still have a lot of homework related to the energy transition. Opportunities for cooperation with various platforms will greatly support the implementation of various policies related to the energy transition. Of course, this can be achieved if each existing platform opens information and provides sufficient space for the public to participate.”
One of the energy transition policies currently being pushed is the early retirement of coal-fired power plants, which JETP is expected to fully support. However, there are many financial issues that the government must consider, along with environmental issues and social justice. It requires in-depth discussions between interested parties to resolve differing views and priorities.
“In Indonesia, one of the things still being debated today is the transparency of power purchase contracts. From the public side, for example, people want to know about the term of the power purchase agreement, especially those sourced from fossil energy, so that there is certainty about the termination period. However, power purchase agreements are still considered the same as civil contracts. , Of course, needs to be further discussed in comparison between the public’s interest in the information and the level of confidentiality in the discussion rooms. Information disclosure can also help the public oversee the government’s efforts to achieve the renewable energy mix per the target,” Astrid stated.
“Therefore, the implementation of the EITI transparency initiative is increasingly relevant to collaborate with the implementation of ETM, JETP, and other initiatives in Indonesia,” said Astrid.
Gender, Social, and Environment
Yusnita Ike Christanti, another Civil Society Representative in EITI Indonesia, argues that gender equality and justice should be the mainstream throughout the extractive industry business chain, whether or not there is an EITI initiative. It is not just about disaggregated data or employment.
“Gender justice and equality must go beyond that!” Yusnita emphasized.
In the 2023 EITI Standard, companies must disclose information on wage gaps and policies that consider gender aspects of their business activities (requirement 6.3).
Companies must also disclose information about the public consultation process when applying for licenses (requirement 2.2). In addition, governments and companies must be able to explain how state revenues from the extractive sector are managed and benefit communities at the local level, including women, indigenous peoples, and other vulnerable groups.
Companies are also expected to prepare, publish and explain to the public the environmental, social, and gender impact assessments that have been conducted (requirement 6.4).
Collection of State Revenue from the Extractive Sector
Civil society also fully supports the affirmation of transparency aspects of state revenues under the 2023 EITI Standard. These include more detailed, comprehensive, and higher quality disclosure of production and export data (requirements 3.2 and 3.3), disclosure of sales agreements; infrastructure provision and barter; and contracts requiring social and environmental payments (requirements 4.2, 4.3, and 6. 1), clarification of disclosure requirements for resource-backed loans, including collateralized sovereign debt (requirement 4.3), introducing a more streamlined process for revenue disclosure, disclosing effective corporate tax rates, incentives and deductions (requirements 4.1 and 4.9); and clarification of company costs and government systems for conducting audits (requirement 4.10).
In addition to ensuring a match between state revenues and company payments, this aspect also collects more detailed information on state revenues from the extractive sector.
“We urge the Government that the requirements in the 2023 EITI Standard can also be integrated into several regulations and policies in Indonesia, especially in the extractive sector. It is to provide more assurance to improve the quality of transparency, participation, and accountability, especially in the extractive sector. This sector poses the most risks to the environment,” Yusnita concluded.
Contact Person:
Astrid D. Meliala (astrid.dmeliala@gmail.com)
Civil Society Representative in EITI Indonesia 2022-2025
Yusnita Ike Christanti (heningmaiyah@gmail.com)
Civil Society Representative in EITI Indonesia 2022-2025
Aryanto Nugroho (aryanto@pwypindonesia.org)
National Coordinator of Publish What You Pay (PWYP) Indonesia
- The EITI Standard is a standard outlining the requirements applicable to countries implementing EITI (including Indonesia) as well as the Articles of Association governing the implementation of EITI.
The New EITI Standard 2023 can be downloaded at:
https://eiti.org/sites/default/files/2023-06/2023%20EITI%20Standard.pdf