Indonesia releases first Extractive Industries Transparency Initiative report | Regulation data
(Insider Stories) - Indonesia has taken a significant step forward in introducing transparency into governance of its extractive resources industry, a sector that is the economy’s mainstay and provides a third of the national budget but where a lack of transparency has led to corruption and conflict, with the Coordinating Ministry for Economic Affairs releasing the country’s first Extractive Industries Transparency Initiative report Wednesday.
The report showed that in 2009, after certain deductions, the government received US$24.2 billion from the extractive resources sector.
“The Indonesian extractives sector and the amount of revenues it generates have long been source of contention, simply because detailed information was not available to the general public. With the release of this report, the public will finally know how much, officially speaking, each resource company paid to each government agency. This is a huge milestone in government transparency.”
Under EITI, companies that produce oil, gas, minerals and coal report revenues that they have paid to the government while the government reports what it has received, with the reports compared by an independent auditor. The process is overseen by government, representatives of the companies and members of civil society such as NGOs active in promoting transparency in the mining sector.
“The [extractive resources] sector is the backbone of Indonesia’s economy, the world’s most populous resource-rich nation. One-third of the national budget originates from extractive industry revenues and yet, this sector’s lack of transparency and accountability brings negative consequences, including corruption, poverty and conflict,” EITI board member and former Corruption Eradication Commission (KPK) chairman Erry Riyana Hardjapamekas wrote in an editorial in The Jakarta Post last year. “Indonesia has seen that more and more countries realize that transparency is essential in increasing prosperity and economic development. More than that, it is a cornerstone of democracy.”
The full text of EITI Indonesia’s statement in English is below, while attached are statements in English and Bahasa Indonesia, including links to the organization’s full 2009 report, as well as fact boxes on the initative in both languages.
20130421 - Comms - Fact Sheet - First Report - Bahasa Indonesia
20130421 - Comms - Fact Sheet - First Report - English
COORDINATING MINISTRY FOR ECONOMIC AFFAIRS
THE REPUBLIC OF INDONESIA
EXTRACTIVE INDUSTRIES TRANSPARENCY INITIATIVE SECRETARIAT
Indonesia’s First EITI Report Provides a Look inside the Black Box
Jakarta, 8 May 2013 – The First Extractive Industries Transparency Initiative (EITI) Report by
Indonesia, which compares revenues reported to have been paid to the government by nearly
all oil, gas, mineral and coal companies operating in the country with those received by the
government, shows that in 2009, after certain deductions, the government collected US$24.2
billion (Rp251 trillion at Rp10,400 per US$).
Although the overall contribution of the oil and gas sector to public revenues has long been
public information, the EITI report shows the exact contribution of each oil and gas company.
Even more extraordinarily, it does the same for each large and medium sized mining company,
including those that are locally licensed.
Emy Perdanahari, Chairwoman of EITI Indonesia Secretariat, commented, “The Indonesian
extractives sector and the amount of revenues it generates have long been source of
contention, simply because detailed information was not available to the general public. With
the release of this report, the public will finally know how much, officially speaking, each
resource company paid to each government agency. This is a huge milestone in government
transparency.”
The report provides what may be the first ever figure on the overall income tax and royalty
contribution of the mineral and coal sectors. Before the implementation of EITI, the only number
that was public was a single figure for all royalties paid by mining firms. The EITI Indonesia
report determines that the nation’s mineral (copper, gold, nickel, tin and bauxite) companies
contributed about US$1.2 billion (Rp12.5 trillion) in income tax and US$1.2 billion (Rp12.5
trillion) in royalties, while its coal companies contributed about US$1 billion (Rp10.4 trillion) in
income taxes and US$1.3 billion (Rp13.5 trillion) in royalties. The real figures are larger,
because the EITI numbers exclude smaller mining companies, as well as a handful of large and
medium sized companies whose taxes the DG of Tax declined to report, due to lack of
supporting documentation related to the adherence to the Tax Laws stipulations’ on disclosure.
Supriatna Suhala, Executive Director of the Indonesian Coal Mining Association, stated, “The
EITI report provides the public with the clearest understanding so far of the coal mining sector’s
contribution to state revenue. We also have to keep in mind that there would be multiplier effect
which may be higher than the recorded contribution.”
Although the report helps illuminate the official contribution of the coal sector to national
development, it also highlights possible shortcomings in how this information is managed. The
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report found that the Government recorded receiving US$282 million more in income tax than
coal companies said they paid. This was mostly due to the two biggest coal producing units of
Indonesia’s biggest coal mining group, Bumi Resources, not reporting to EITI Indonesia what
are believed to be its back taxes from 2007 and 2008 that were paid in 2009.
The EITI Indonesia Report also showed a weakness of information management at the
Directorate General of Minerals and Coal. This was shown through discrepancies in the area of
coal royalties. Differences between what companies paid and what the government received
started out at US$727 million, but were narrowed down to US$54 million, due to EITI Indonesia
conducting a review of physical records maintained by the Directorate General of Minerals and
Coal. Specific to non-tax revenue, a total of 376 adjustments were made in this way, more than
60 percent of all adjustments in the entire report.
The report also helps local people understand how much of the official payments of individual
companies should, in theory, have arrived in local treasuries. The Indonesian government
decreed over ten years ago that about 15 percent of the value of oil and 30 percent of the value
of gas surrendered by producers to the state, as well as 80 percent of mineral and coal
royalties, would be redistributed to the districts, surrounding districts, and provinces within which
they operate.
In practice, the implementation of this policy is rarely noticed by the Indonesian public simply
because detailed information on the amount of resource revenues intended to flow to the local
governments, and from which company in a given year, has never been compiled into a detailed
report. Now, the information has been made available by EITI Indonesia.
“With the publication of the EITI Indonesia report, citizens in resource rich districts will finally
begin to receive answers to their questions not only about the amount of revenues from oil, gas
and mining companies paid to the central government, but perhaps more importantly from a
local perspective, how much of the revenues from each company should have made its way to
their province and district. This is a tool for the people to force accountability from their
government,” said Faisal Basri, a Civil Society Representative on the Indonesian EITI
Implementation Team.
