In Indonesia, the transparency of the extractive sectors—oil and gas (migas) and minerals and coal (Minerba)—remains low. Much still needs to be addressed in this regard, and it remains a significant challenge for the government to achieve good governance that ensures transparency and accountability.

The evaluation of the implementation of the Extractive Industries Transparency Initiative (EITI) in Indonesia can serve as a benchmark and a reflection to examine the transparency issues facing the country. Based on the validation of Indonesia’s EITI implementation, as the EITI International Board decided and released at the end of 2024, Indonesia scored only 67 out of 100. According to EITI standards, this score is considered relatively low. This marks a setback in efforts to improve governance in the extractive sector despite Indonesia’s participation in EITI for over a decade.

This validation is part of a mechanism to ensure quality assurance for each country implementing EITI in line with EITI Standards. The validation has three components: Transparency, Stakeholder Engagement, and Outcomes and Impacts. Among these three components, the Transparency score contributed the most to Indonesia’s low overall score—the weakest—at 63.5 out of 100. Meanwhile, the Stakeholder Engagement score was also concerning, at 64, and the Outcomes and Impacts component scored 73.

Factors Contributing to Low Transparency

The validation revealed several factors contributing to Indonesia’s low transparency. One of these factors is the lack of complete openness regarding contract and licensing documents. Although the Indonesian government claims to have opened information on contracts and permits through various web-based platforms, such as Minerba One Data Indonesia (MoDI) and the ESDM Geoportal, the information provided is still very limited and does not fully disclose contract and licensing details.

Transparency of contract and licensing documents has become increasingly necessary, as it helps the government secure better agreements for natural resources, encourages improvements in resource management, reduces corruption practices, builds public trust, promotes economic growth and development, and enhances citizen participation in natural resource management (PWYP Indonesia, 2020).

Additionally, the EITI Indonesia Secretariat had previously produced a report on the Simulation of Consequences Testing for Contract/License Information through Risk Impact Assessment, which concluded that the openness of contracts/licenses is an obligation under the Public Information Disclosure Law (UU KIP) and related to the “purity” of contracts, noting that none of the oil and gas contracts contain clauses stating that the contracts are classified as confidential. Unfortunately, the government has been reluctant to follow up on the suggestions and recommendations from this report.

In practice, obtaining contract and licensing documents has become a real challenge for the public in overseeing natural resource governance. Citizens must deal with complicated legal procedures and processes to obtain such records, not to mention the challenges in engaging with relevant state institutions. The lawsuits filed by JATAM Kaltim and Dairi residents over public information disputes serve as clear examples of this issue.

In 2022, JATAM Kaltim filed a lawsuit against the Minister of Energy and Mineral Resources (ESDM) over the lack of transparency from five companies holding Coal Contract of Work (PKP2B) agreements and other related documents. Similarly, a public information dispute was filed by Serly Siahaan, a resident of Dairi, North Sumatra, against the Minister of ESDM regarding the Contract of Work and the latest operational status of PT Dairi Prima Mineral’s (DPM) mining activities. The Information Commission Court ruled in separate hearings favoring JATAM and the Dairi residents in both cases.

The court also ruled to annul the Minister of EDM’s Decree No. 002 of 2019, which classified PKP2B and Contract of Work (KK) documents as confidential state information. This meant the Ministry of ESDM was supposed to release the requested documents to the public. However, the Ministry of ESDM has not complied with this ruling and even appealed the decision to the State Administrative Court (PTUN), a move that does not support information transparency.

Returning to the EITI validation results, Indonesia is encouraged to disclose all contracts and licenses, including appendices, amendments, and additional provisions, that have been granted, signed, or amended since January 1, 2021.

Regarding Contract and License Openness

Several national discussions on the energy and natural resource sectors have also raised the contract and license transparency issue. The outcomes of the National Energy and Natural Resources Governance Conference, organized by Publish What You Pay (PWYP) Indonesia, with the theme Direction and Strategy for Energy and Natural Resources Management in the New Government Era, emphasized that transparency is essential to creating democratic governance in these sectors. The government must ensure the openness of information by strengthening transparency and public participation. This was also highlighted during the National Critical Minerals Conference (KNMK) in Palu in October 2024, which advocated for transparency, including disclosing contracts and licenses.

Apart from contract transparency, Indonesia’s low transparency score is also linked to the management of beneficial ownership. Indonesia has yet to develop a comprehensive verification system, especially regarding beneficial owners’ political exposure and information’s completeness and accuracy. Another significant gap is the lack of sanctions to ensure compliance.

EITI validation findings highlight several issues related to regulating beneficial ownership in Indonesia. First, no provisions mandate the identification of politically exposed persons (PEPs) among beneficial owners. Second, the Minister of Law and Human Rights Regulation No. 15/2019 on the Procedures for Recognizing Beneficial Ownership of Corporations does not require listed companies or state-owned enterprises (SOEs) to disclose specific information. Third, data on beneficial ownership available through the Ministry of Law and Human Rights does not guarantee complete disclosure.

Fourth, on their beneficial ownership platform, the Ministry of Energy and Mineral Resources (ESDM) does not disclose information on the beneficial ownership of mining, coal, and oil license applicants. Fifth, Indonesia has not yet developed a comprehensive verification system to ensure the accuracy of beneficial ownership information. Lastly, no sanctions are in place to ensure company compliance, which would encourage transparency.
Indonesia is urged to ensure the collection of beneficial ownership information covers all potential control mechanisms, including nominees, and that Politically Exposed Persons (PEPs) are reported.

Social and Environmental Contributions in Extractive Industries

Social and environmental contributions in the extractive industry also remain an issue regarding transparency. The EITI validation found that not all companies provided comprehensive and systematic information on corporate social responsibility (CSR) expenditures. Compliance with reporting on social and environmental spending remains problematic, including whether payments are made to third parties or in kind.
Indonesia needs to push for improvements in CSR reporting and transparency. All non-governmental (third-party) beneficiaries of social spending should be required to disclose this information.

A report by Transparency International Indonesia (Transparency in Corporate Reporting: Assessment of Mining Companies in Indonesia, 2024) revealed that very few companies announce detailed CSR expenditures. Out of 121 mining companies in Indonesia, only three disclosed their CSR activities in detail.

The Challenge for Prabowo-Gibran

Transparency remains an unresolved issue. Ultimately, corruption in the natural resources sector persists, posing a potential risk of the resource curse becoming a reality. History has proven this. The emergence of the Publish What You Pay campaign by Global Witness and several NGOs in 2003 demonstrates how transparency is one of the main challenges in natural resource governance.

The low transparency score from the EITI validation presents a challenge for the Prabowo-Gibran administration. As the Asta Cita outlines, one of the administration’s goals is to strengthen democracy and combat corruption. Both democracy and anti-corruption efforts require transparency as a prerequisite. Without openness, all commitments are merely paper promises without real action.

In terms of leadership, political commitment to information openness is crucial to ensuring natural resources are managed for the people’s prosperity. As Terry Lynn Karl wrote in Escaping the Resource Curse, the resource curse is not an economic issue but a political one. The main problem is transparency. Though this view was expressed in the context of oil, it broadly applies to all natural resources.

So, what will the extractive sector transparency become under the Prabowo-Gibran administration? Can these issues be addressed, leading to better transparency, or will things worsen? Only time, commitment, and political will can answer that. So, let’s continue to monitor!

The article was also published on: Indonesiana


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