Jakarta- Indonesia, An implementing country of Extractive Industries Transparency Initiatives (EITI)1, was declared a “Compliant Country” at the 28th EITI International Board Meeting on Wednesday, October 15, 2014, in Naypyidaw, Myanmar. Since September 1, 2018, until the end of this year, it has undergone a validation process, which determines the extent of Indonesia’s commitment to promoting transparency and accountability in the extractive sector, especially oil and gas and mining.

The validation process2 is carried out to provide an assessment of the progress of Indonesia’s EITI implementation and whether it complies with the provisions required in the 2016 EITI Standard?3 To what extent has EITI impacted improving extractive industry governance in Indonesia? Furthermore, some lessons can be learned at the global level. The results of this validation will also determine Indonesia’s status, whether it falls into the Satisfactory category; Meaningful Progress; Inadequate Progress; or No Progress.

Maryati Abdullah, National Coordinator of Publish What You Pay (PWYP) Indonesia, reminded the audience that the momentum of the EITI validation implementation is not just a ceremonial pursuit of Indonesia’s status as a country in the Satisfactory category.

“The EITI Validation process is momentum for all stakeholders in the extractive sector to reflect on whether there has been an improvement in governance in the extractive industry. Furthermore, does the extractive industry in Indonesia contribute to achieving public welfare, or is it a curse for Indonesia?”

PWYP Indonesia viewed the establishment of Indonesia as a candidate country for EITI implementation on October 19, 2010, as a transformation in extractive sector governance towards a better direction. It was marked by the issuance of the legal basis for implementing EITI through Presidential Regulation (Perpres) Number 26 of 2010 concerning Transparency of State and Regional Revenues Obtained from Extractive Industries. The EITI initiative has become a “trigger mechanism” for the emergence of various reform initiatives to improve governance in this sector.

Indonesia has published 5 (five) EITI reports, which include EITI Reports FY 2009, FY 2010-2011, FY 2012-2013, FY 2014, and FY 2015. The EITI Report contains reconciliation information on company payments and state revenues, both tax and non-tax state revenues (PNBP) from oil and gas and mineral and coal sectors. While the contextual report reveals the scope of the extractive industry; the legal framework of the extractive sector, taxation policy, duties and functions of government agencies related to the extractive industry; licensing process and mining contracts of oil and gas and mineral and coal; contribution of extractive industry to the economy; State-Owned Enterprises (BUMN) engaged in the extractive sector; environmental responsibility and social responsibility (Corporate Social Responsibility); state revenue management; and recommendations for improving transparency and governance in the extractive industry.

Looking at the first EITI Indonesia report published in 2013 for the period of Fiscal Year (FY) 20094, there are still problems with the data management of the Directorate General of Mineral and Coal (Minerba) of the Ministry of Energy and Mineral Resources. For example, EITI’s initial findings show that the difference between coal royalties paid by companies and those received in the state treasury amounted to US$ 727 million. However, after reconciliation (EITI mechanism) by checking the physical records at the Directorate General of Mineral and Coal, the difference is much smaller at US$ 54 million.

Along the way, many efforts have been made by the Directorate General of Mineral and Coal to follow up on the findings and recommendations of the EITI report to improve governance problems in the mineral and coal sector. For example, the establishment of the Directorate of Non-Tax State Revenue (PNBP) to enhance data and management of PNBP; the development of the E-PNBP platform integrated with the Ministry of Finance’s SIMPONI; the development of the Minerba One Data Indonesia (MODI) and Minerba Online Monitoring System (MOMS) platforms; and Minerba One Maps Indonesia (MoMI) which was scaled up to ESDM Geoportal. The Directorate General of Mineral and Coal of ESDM, together with the Corruption Eradication Commission (KPK) since 2014, has also continued to improve the sector through Coordination and Supervision (Korsup) of Minerba within the framework of the National Movement to Save Natural Resources (GNPSDA).

The oil and gas sector is also able to make various improvements. Since 2015, the Government has utilized the electronic auction method in the bidding process for oil and gas working areas (WK).

In 2016, a real-time online-based oil production monitoring system was built at the production facilities of upstream oil and gas business activities with the legal basis of Ministerial Regulation (Permen) of ESDM Number 39 of 2016. In 2018, an online licensing and reporting system was developed to speed up and simplify and improve the quality of service for the issuance of Downstream Oil and Gas Business License. In addition, data access for WK Migas auction participants is now free, although, for auction winners, data access fees still apply.

“Of course, we appreciate the improvement efforts made by the Ministry of Energy and Mineral Resources so far. One indicator, for example, the 2017 Resource Governance Index Report released by the Natural Resource Governance Institute (NRGI) places Indonesia’s mining governance at 11 out of 89 country-level assessments with a score of 68 out of 100, with a suitable category, “said Maryati.

EITI, as a multistakeholder groups (MSG) initiative consisting of government representatives, business actors, and civil society, encourages collaboration and co-action between stakeholders in improving extractive sector governance.

Maryati hopes that co-creation models between stakeholders like this can be applied to several initiatives such as the Open Government Partnership (OGP), Sustainable Development Goals (SDGs), and the implementation of Corruption Prevention Action (PK) as a mandate from Presidential Regulation Number 54 of 2018 concerning the National Strategy for Corruption Prevention.

The EITI initiative is also in line with and complements efforts to disclose Beneficial Ownership (BO) information in Indonesia. The EITI Standard requires EITI reporting mining companies to disclose their BO data as of January 1, 2020. Towards the opening of BO data in the extractive sector, a road map for telling BO in the extractive industry was prepared5. And at the beginning of 2018, Presidential Regulation Number 13 of 2018 concerning the Principles of Recognizing Beneficial Owners of Corporations in the Context of Preventing and Eradicating Money Laundering and Terrorism Crimes, which requires every corporation (such as limited liability companies, foundations, associations, cooperatives, limited liability partnerships, firm partnerships, and other forms of corporations) to determine, report, and update the ‘Beneficial Owners’ of the corporation.

In 2018, Indonesia became the first piloting country to publish a commodity trading transparency report, specifically for petroleum trading. The 2016 EITI standard requires transparency of government revenues, including SOE revenues from in-kind materials, including disclosure of volumes sold and payments received. The Indonesian Commodity Trading Report6 is a series of 1,909 transaction records provided by SKK Migas, with recorded transaction values, including shipments of 115 million barrels of crude oil and condensate amounting to $4.74 billion.

Aryanto Nugroho, Advocacy and Program Development Manager, PWYP Indonesia, provided several other notes. “Many initiatives to improve extractive industry governance developed by the Government (for example, E-PNBP, SIMPONI, MOMS), in general, restrict the public from accessing them. The desired transparency through EITI is transparency to the public, not only for the government and business actors. In addition, the data in the various platforms developed (for example, MODI, ESDM Geoportal) are not current.”

“In the context of EITI, there are still many non-operating oil and gas companies and mineral and coal companies that do not report EITI for various reasons. And for companies that do not report are not subject to any sanctions.”

“We see that improvements in extractive sector governance have not yet touched the aspects of supervision and law enforcement. Including not focusing on efforts to build a complaint handling mechanism for the public.” Explained Aryanto, who is also a Civil Society Representative in the EITI Indonesia Implementation Team.

  1. About EITI Indonesia can be read via the following link: https://eiti.esdm.go.id/
  2. About EITI Validation Process can be read via link: https://eiti.org/validation
  3. About the 2016 EITI Standard can be read via the following link: https://eiti.org/document/standard
  4. EITI Yearly Report 2009: http://eiti.ekon.go.id/laporan-eiti-indonesiatahun-2009/
  5. The Extractive Sector BO Disclosure Roadmap can be read via the following link:http://eiti.ekon.go.id/petajalan-transparansi-beneficial-ownership-industri-ekstraktif/