Extractive industries, especially oil and gas, minerals, and coal are still the mainstay of state revenue. The latest State Revenue and Expenditure Budget (APBN) in 2013 recorded that revenues from the oil and gas, mineral and coal sectors obtained from tax payments and non-tax revenues from the upstream/extractive sector reached 23% of the total APBN-P 2013, or equal to Rp. 398.4 trillion, from a total of Rp. 1,726 trillion in the 2013 APBN-P.
The contribution of the mining and quarrying sector to the gross domestic product according to current prices was only 10.43% of the total national GDP with oil and gas in 2013 (BPS, 2014). This figure is actually still a question mark because extractive businesses that support the main income of the richest people in the country actually only contribute about one-tenth of the total national GDP.
On the other hand, the results of the coordination and supervision of the Corruption Eradication Commission (KPK) in 2014 noted the potential loss of trillions of rupiah in state revenues, due to leakage in state revenue.
One thing that is highlighted by the public is the aspects of transparency and accountability. The problem of transparency is mainly identified by the asynchronous (or lack of) adequate data and information between related agencies, asymmetric information, the unfolding of a process or mechanism, and the lack of supervision and law enforcement in almost all process chains of the mining industry. The problem occurred since the auction process, the signing of the contract, until after the mine.
The author, in this case, limits the discussion on transparency in mining governance, specifically on three main aspects, as outlined in the following section.
Mining Licensing Transparency
The mechanism for awarding contracts/permits, both through auctions and granting of permits, should be open and transparent. It is not only a matter of process, which is competitive and honest but also concerns community rights that must be considered. Especially if the area/area used as a mining concession is in residential areas, customary land rights, or concerns the interests of the wider local community.
Another thing that is essential in the transparency of contracts / permits is the right of citizens to information contained in the contracts/permits. Not only information about the area/boundaries of the licensing area contained in the contract that is important for citizens. Identification of ownership as well as all the rights and obligations stated in the contract help residents to be involved in monitoring mining activities to run according to good mining practices.
Transparency is needed, one of which is to prevent contract overlapping, contract forgery, or contract awarding that is not in accordance with the provisions. We can look in the mirror from the “clean and clear” certification process by the Director General of Mineral and Coal of the Ministry of Energy and Mineral Resources, since 2011. Of the total 10,922 total IUPs recorded at the Director General of Mineral and Coal, only 6,042 have been declared by CnC. That is, almost 50% of the total IUP is problematic.
A search by Publish What You Pay Indonesia in several mining areas, in this IUP case found a number of fundamental issues, namely:
1. The understanding/capacity of regional governments in granting licenses is not based on an adequate policy plan. There is no strategic planning and study either economically, socially or environmentally as the basis for granting mining permits;
2. There are still differences in data between the central and regional governments, due to unreported or invalid licenses;
3. In the process of granting permits, it is strongly suspected that bribery took place, the porting of the permit area information, invalid permit documents (copy-paste), procedures that are not appropriate, and tend not to pay attention to the principles of economic competitiveness and fairness;
4. Licensing data and information are difficult to access by the public, even though there are already regulations regarding public information disclosure (KIP).
In this regard, the authors recommend the following:
1. Standard procedures need to be made in the process of granting permits, with basic prerequisites for a strong and strategic policy, clear and open procedures, and taking into account the rights and participation of the community.
2. A mining permit data and information center must be made immediately, which allows access and tracking by the public, with adequate information, especially regarding ownership, licensing status, area of operation, and commitments regarding mining rights and obligations to the public.
3. Auctions and licensing mechanisms must be more open and transparent, and there are public control and participation, which prevents bribes, conflicts of interest, high-cost economies, and corruption.
Spatial Transparency and Land Use
Transparency in spatial planning and land use is a fundamental problem that often raises issues of overlapping licenses, confusion in the identification and monitoring of mining activities, as well as difficulties in identifying tax obligations, which results in suboptimal state revenue. This issue is also one of the results of the identification of the KPK in Mining Coordination and Supervision which was launched in February 2014.
The Open Government Partnership (OGP) initiative at the government leveled by the Presidential Work Unit for Development Monitoring and Control (UKP4) has also begun efforts to unify spatial maps in the form of one map. One aim is to curb the mining sector permit map in an integrated manner.
Research by Swandiri Institute together with Publish What You Pay Indonesia in one of the KPK monitoring areas in West Kalimantan found, as a result of non-compliance with spatial planning provisions, in 2012 there was an overlap between the mining industry and 367,224 ha of forest concessions, mining with HTI (industrial timber plantations) covering an area of 442,080 ha, and mining and oil palm plantations totaling 1,792,593 ha.
In terms of state revenue, the calculation of Publish What You Pay Indonesia together with Swandiri Institute stated, in 2012 there was a potential loss of state revenue of Rp.59,542,372,770, from all districts in West Kalimantan Province.
In this regard, the authors recommend the following:
1. Transparency of land and forest use is needed to ensure the allocation of spatial justice for all communities, and to avoid the practice of ‘buying and selling’ concessions without supervision and law enforcement.
2. Spatial information as public information must be easily accessed by the public so that the community is actively involved in monitoring and monitoring land and forest use.
3. The “One Map” initiative commanded by UKP4 must be continued by the government of the next period to provide certainty and control of concession permit maps, both in the mining, plantation and forestry sectors.
Transparency of State Revenue
In the upstream sector, the extractive industry of mineral and coal mining should still be able to provide greater revenue than the current condition. This is evident from the coordination and supervision in the 12 mineral-producing provinces by the KPK and the Director General of Mineral and Coal-ESDM, there is an increase in non-tax state revenue (PNBP).
Some issues related to the transparency of state revenue from the mining sector identified by Publish What You Pay Indonesia include:
1. Transparency of production information/data; The results of the PWYP Indonesia quotation test along with its members in Riau, for example, found differences in coal production data from one of the companies operating in Riau, between data held by the Riau Regional Government obtained from the company and data owned by the Director General of Mineral and Coal, Ministry of Energy and Mineral Resources, which was uploaded on the site http://www.minerba.esdm.go.id/public/38477/production-batubara/.production/. The difference in production data will certainly affect how much the deposit of state revenue (royalties, land rent, etc.) should be paid by the company to the state;
2. Tax and non-tax payment mechanisms to the state. The self-assessment and self-reporting mechanism in the payment of royalties and taxes in the mineral and coal sector is suspected to cause leakage gaps from payment of state revenues, resulting from the difference in underpayment or overpayment. This was demonstrated in part by the findings of the EITI reconciliation report conducted by an independent reconciler.
Indonesia has been an implementing country of the EITI (Extractive Industries Transparency Initiative) since four years ago through Presidential Regulation Number 256 of 2010 concerning Transparency of State and Regional Revenues from the Oil and Gas and Mining Sector.
However, there are still data mismatches between company reports and those submitted by the government. In general, the main differences in the first report are due to differences in reporting units and bases, there are obstacles in opening up some taxation data, to the problem of mining revenue information database at the Directorate General of Mineral and Coal and the Ministry of Energy and Mineral Resources.
Whereas in the second report released in June 2014, differences in data for the mineral and coal sector were generally caused by the still incorrect distribution of royalties and, the differences in the distribution of mining product sales (PHT) and royalties in company reports and government reports, Pph payments are identified as royalty payments, there are differences in account numbers in the payment system at the DG Tax, and so on.
This EITI Indonesia reconciliation report also notes the still weak participation of the mining industry players in translating payment of revenue deposits to the state. This is evidenced by the fact that there are still companies that have not submitted reports on their state revenue payments to EITI, namely one company for the 2010 fiscal year report and nine companies for the 2011 fiscal year.
In this regard, the authors recommend the following improvements:
1. We need integrated production resources that can be verified properly. This is also related to the supervision of production figures and includes sales volume.
2. The process of verifying the calculation and payment of state revenues needs to be strengthened by a strict oversight mechanism and followed by strict law enforcement.
3. An online oversight mechanism for state revenue monitoring needs to be developed, which allows access and oversight by the public.
*) National Coordinator of Publish What You Pay Indonesia, Member of the Open Government Partnership (OGP) Steering Committee at the International Level
*) PWYP Indonesia’s Coordinating Column, Maryati Abdullah in Mining Magazine, August 2014 Edition, pp. 48-49
*) This paper pdf version can be seen here
* This paper is the author’s personal view