Significant changes in the 2023 EITI Standard include several new and enhanced provisions in four thematic areas. Namely anti-corruption, energy transition, gender, social and environmental, and collection of state revenues from the extractive sector.

Illustration of a former mining excavation. Photo: MYS

By: Mochamad Januar Rizki

The Civil Society Coalition asks the government and extractive sector companies to implement the Extractive Industries Transparency Initiative (EITI) International standard decided by the EITI Board on May 17, 2023. The EITI standard was developed to promote good governance by increasing transparency, strengthening accountability, and facilitating public debate on natural resource management.

National Coordinator, Publish What You Pay (PWYP) Indonesia, Aryanto Nugroho, said as a civil society coalition overseeing the birth of EITI and, at the same time, its implementation, welcomed the decision of the International EITI Council. For him, this decision shows the progress of civil society advocacy to encourage transparency and accountability in the extractive sector.

“But also, it shows that the EITI initiative does not stop at one stage, but continues to develop along with the times,” he said in a written statement Monday (17/7/2023).

He explained that significant changes in the 2023 EITI Standard include several new and enhanced provisions in four thematic areas. Namely anti-corruption, energy transition, gender, social and environmental, and collection of state revenues from the extractive sector.

For information, 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, justice, and attention to social and environmental issues. Likewise, EITI demands efforts to encourage real improvements in extractive industry governance reform in strengthening the issue of energy transition.

Aryanto explained 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 the Extractive Industry. Then Perpres 26/2010 was amended through Perpres Number 82 of 2020 concerning the Committee for Handling Corona Virus Disease 2019 (COVID-19) and National Economic Recovery. Through this regulation, it is expected to become 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,” he said.

Meanwhile, related to the Anti-Corruption aspect, the 2023 EITI Standard requires efforts to mainstream anti-corruption policies in the objectives and work programs of the EITI multi-stakeholders group (MSG), disclosure of company anti-corruption policies and practices, share ownership thresholds in beneficial ownership identification to 10 percent or below.

It is in line with efforts to eradicate corruption in Indonesia, which is now facing challenges in the field of corruption prevention which is synonymous with conflict of interest practices. As well as the number of politically exposed persons (PEPs) identified in the extractive sector. It can also be a momentum to encourage the implementation of beneficial ownership disclosure, which is currently being encouraged in Indonesia.

Including, if necessary, revising Presidential Regulation Number 13 of 2018 concerning the Application of the Principle 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. In particular, related to articles regarding the definition and recognition of beneficial ownership.

EITI Standard 2023 also requires the disclosure of information and rationalization if there are efforts to provide ease of business licensing for the mineral sector, including social and environmental obligations. 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 it produces. Furthermore, it also encourages companies to disclose greenhouse gas (GHG) emission data.

In addition, the 2023 EITI standard also requires disclosing 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. This standard also aligns with various commitments that Indonesia is currently carrying out related to the energy transition, for example, through the Energy Transition Mechanism (ETM) Country Platform and the Just Energy Transition Partnership (JETP).

Astrid D. Meliala, Civil Society Representative for EITI, said that Indonesia still has a lot of homework related to energy transition. Opportunities for cooperation with various platforms will significantly support the implementation of multiple policies related to energy transition. “Of course, this can be achieved if each existing platform opens information and provides sufficient space for the community to participate,” she said.

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 stakeholders to resolve differing views and priorities.

“In Indonesia, one of the most contentious issues is the transparency of power purchase contracts. Information disclosure can also help the public oversee the government’s efforts to achieve the renewable energy mix per the target,” he added.

Revenue Transparency

Civil Society Representative in EITI Indonesia, Yusnita Ike Christanti, said civil society fully supports the affirmation of the transparency aspect of state revenue based on the EITI Standard 2023. It includes disclosing more detailed, comprehensive, and higher-quality production and export data.

Then disclosure of sales agreements, provision of infrastructure and barter and contracts that require social and environmental payments, and clarification of disclosure requirements for resource-backed loans. Including collateralized sovereign debt, it is introducing a more streamlined process for revenue disclosure, disclosing effective corporate tax rates, incentives, and deductions, and clarifying corporate costs and government systems for conducting audits.

In addition to ensuring a match between state revenues and company payments, this aspect also collects more detailed information about state revenues from the extractive sector. According to Yusnita, her party urges the government to integrate the requirements in the 2023 EITI Standard into several regulations and policies in Indonesia, especially in the extractive sector.

“This is to provide more assurance to improve the quality of transparency, participation, and accountability, especially in the extractive sector, the sector that poses the most risks to the environment,” she concluded.

Source: Hukum Online