Jakarta, January 31, 2024. Indonesia’s admission as a member of the Financial Action Task Force (FATF) at the end of 2023 is part of the Indonesian government’s necessary policy effort to require corporations to report their beneficial owners so that the public can access them. After a year of disclosure, the public is beginning to see how far this policy can be effective and what needs further strengthening.
A brief analysis by Transformasi untuk Keadilan (TuK) Indonesia, Woods & Wayside International (WWI), Publish What You Pay (PWYP) Indonesia, and Transparency International Indonesia (TII) of 284 legal entities holding timber concessions and owning pulp mills found that industry compliance in the pulp sector was at least 80%. In contrast, 16% did not report, and 4% were not found in searches of the beneficial owner registration system managed by the Ministry of Law and Human Rights.
Linda Rosalina, Director of TuK Indonesia, noted that “Compared to the 35% compliance rate of all legal entities in Indonesia, the pulp sector’s 80% compliance rate is an important achievement in the implementation of beneficial ownership identification policies in one of Indonesia’s strategic natural resource sectors.”
Noting from the analysis, the beneficial owner reports that can be accessed through the national registry system are then juxtaposed with information on the ownership and control of certain companies through financial reports, reports from the media, publications of civil society organizations, and company profile data accessed through the system at the Ministry of Law and Human Rights.
Linda added, “Examination of the data shows that the reported beneficial ownership data does not reflect the publicly known dynamics of business ownership in the pulp sector.”
These accuracy issues underscore concerns that regulating and concealing data on beneficial owners – the people who control and benefit from company operations – continues in the pulp sector. The brief notes that the two dominant producers in the industry, Sinar Mas and Royal Golden Eagle, are known to use complex and layered corporate structures in various overseas jurisdictions, which may obscure beneficial owner information.
Then Ferdian Yazid from TII also responded, “This finding should be an indication of the next steps to be taken by the government, be it the Ministry of Law and Human Rights, or the sector ministry, in this case, the Ministry of Environment and Forestry, to verify the reports that various companies have submitted.”
According to Aryanto Nugroho, PWYP Indonesia’s National Coordinator, “Challenges in verification can be addressed by strengthening the information exchange function between ministries and agencies and providing space for the public to provide input on the data of beneficial owners reported by companies.”
Contact Person:
Linda Rosalina (linda@tuk.or.id)