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Jakarta, Indonesia

Indonesia

Status
Meaningful progress
Joined
24 November 2010
Latest validation
2019
Latest data from
2015
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Overview and role of the EITI

Indonesia is a producer of minerals, oil and gas. Its mineral and coal sector accounted for 5% of the country’s GDP in 2019, while petroleum accounted for 7% of total exports. While the extractive sector has been an important source of revenue for both the central and provincial governments, the COVID-19 outbreak and ensuing oil price collapse caused a considerable decline in income.

Public debates about Indonesia’s extractive sector have centred around the environmental impacts of mining, cost recovery in oil and gas production-sharing contracts (PSCs), crude oil trading, subnational transfers and social expenditures. There have also been issues around overlapping licenses, as well as gaps in tax administration and systems for corporate registration which have led to losses of potential revenues.

Given Indonesia’s highly decentralised governance systems, EITI implementation is helping to improve coordination between various government agencies, enabling better and more disaggregated disclosures on areas such as on licensing, social expenditures and subnational transfers. It is also serving as a platform for dialogue between industry, government and civil society. 

Economic contribution of the extractive industries

9.29%
to government revenues
8.08%
to GDP
22%
to exports
1.2%
to employment
  • Step 1
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  • Step 3

Download country data

Download open data on government and company revenues, revenues by revenue stream and indicator, summary data and more.


Innovations and policy reforms

  • Indonesia has taken steps to make sector information accessible through routine disclosures on online platforms such as a license portal, an e-tender portal, ESDM One Map, a corporate register and a geospatial portal.
  • In 2018, EITI Indonesia published its first commodity trading report which examined the entire value chain from production to trading as well as crude oil pricing, tendering processes for traders and policy gaps.
  • Indonesia’s EITI Reports have helped clarify financial flows between companies and central and subnational governments.
  • EITI reporting has helped identify opportunities for reforms in government oversight of state-owned enterprises and their accountability to the broader public, at a time when the government is restructuring its interest in the mining sector.

We want to inform our citizens on the impact of the pandemic on the sector as well as policies introduced by our government in handling COVID-19 and restoring the national economy. It is our hope that the experience with flexible reporting will support our broader efforts to transition towards systematic disclosure in line with our e-governance reforms.

Arifin Tasrif Minister of Energy and Mineral Resources, Indonesia

Extractive sector data

Revenue collection

Level of detail 2

Revenue distribution

2015
Standardised revenue types

Revenue disbursement

2015

Extractive sector management

License and contracts

Oil and gas production sharing contracts (PSCs) are awarded through an open and competitive bidding process administered by the Ministry of Energy and Mineral Resources. Up until 2014, mining licenses were awarded on a first come first served basis for Mining Business Permit Areas (IUPs). Since 2020, the responsibility for awarding IUPs has been transferred from provincial governments to the central government. Currently, mining licenses are offered first to state-owned enterprises which, if refused, subsequently undergo a competitive tender process. 

Extractive contracts are not disclosed, however some extractive contracts can be accessed on the Resource Contracts portal. The government is making efforts to publish a list of active mining licenses (through Minerba One Data Indonesia) and oil and gas contracts (through Energy and Mineral Resources One Map). 

Beneficial ownership

In 2018, the government issued a presidential regulation and decree requiring companies to report their beneficial owners to the Ministry of Law, through the company register and in connection with their license application procedures. Beneficial ownership disclosure is also part of the 2018 National Strategy to Prevent Corruption.

EITI Indonesia, under the Coordinating Ministry of Economic Affairs, leads outreach activities with extractive companies and piloted data collection for the 2018 EITI Report. The Ministry of Law and Human Rights revised its Legal Entity Administration System to include beneficial ownership information in accordance with the presidential decree. Nonetheless, the register has certain restrictions on public access to beneficial ownership information.

In 2017, the Indonesian government hosted the EITI Beneficial Ownership Global Conference.

Revenue distribution

Regional governments in Indonesia are entitled to a 15% of petroleum and 30% share of natural gas revenues, as well as 16% of mining royalties and fees. The allocations are structured according to formulas of the Natural Resource Profit-Sharing Funds (DBH SDA), which are earmarked for specific uses.

Due to the significant decrease in extractive revenues flowing to the central government during the COVID-19 pandemic, subnational governments saw a sharp decline in their share of revenues, amounting to or 54% of the initial oil and gas allocation target and 81% of the initial mineral and coal allocation target. According to the 2018 EITI Report, disbursements for the second and third quarters were allocated under the condition that regional governments document how resource revenues are used to tackle the COVID-19 crisis.


EITI implementation

Governance

EITI Indonesia is administered by the Indonesia Multi-Stakeholder Group (MSG), which is hosted by the Ministry of Energy and Mineral Resources (ESDM). The MSG is currently chaired by Mr Sampe Purba, Natural Resource Economics Advisor to the Minister of Energy and Mineral Resources, and consists of representatives from government, industry and civil society.

Timeline

Validation

Indonesia was found to have made meaningful progress in implementing the 2016 EITI Standard in December 2019, following its first Validation. The Validation identified 22 corrective actions to be addressed by the country’s next Validation, expected to commence in April 2023.

Scorecard

Latest Validation: 13 December 2019
Year

Assessment of EITI requirements

  • Not met
  • Partly met
  • Mostly met
  • Fully met
  • Exceeded
Scorecard by requirement View more Assessment View more

Overall Progress

MSG oversight

1.1Government engagement

While active participation can be seen from some government agencies, particularly those engaged in commodity trading and implementing beneficial ownership reforms, other ministries have not shown sufficient engagement. The limited level of high-level government commitment and engagement does not seem sufficient to ensure effective oversight in the EITI process nor ensuring the linkage of the process with other national reforms.

1.2Industry engagement

Recent steps have been taken by industry constituency on the MSG to improve engagement and participation, including efforts to address tax confidentiality. Overall, however, participation still needs to improve specifically in terms of ensuring that they are able to fully engage in the design of the EITI process in Indonesia.

1.3Civil society engagement

There are no restrictions on civic space, and there is evidence that civil society is active in outreach and dissemination activities. However, evidence suggests that there is insufficient engagement in the EITI process in terms of contributing to the scope of the EITI Report to address the relevant issues in the extractive sector in Indonesia. It also appears that engagement by the broader civil society constituency is lacking.

1.4MSG governance

The MSG has taken steps to revise their Terms of Reference and liaise with their respective constituencies. However, there are still major challenges with respect to the MSG’s overall oversight of the EITI process. There are also concerns about the efficiency of the current structure of the MSG which limits their ability to follow up on recommendations to improve extractive sector governance.

1.5Work plan

While the MSG has revised their work plan to include details on capacity building. the current work plan does not contain objectives and activities that reflect the results of consultations with key stakeholders. There is evidence to suggest that not all MSG members contributed to the finalization of the work plan.

Licenses and contracts

2.1Legal framework

The 2015 EITI Report provides an overview of relevant laws and regulations, government entities and fiscal terms, including the degree of fiscal devolution, in the mining, oil and gas sectors as well as a brief commentary on current reforms.

2.2License allocations

Indonesia EITI Reports describes the general statutory procedures for awarding licenses, including technical and financial criteria assessed, and the general process for transferring participating interests in oil and gas working areas. However, important information, including the technical and financial criteria assessed and comments on the non-trivial deviations in the transfer process, is not always fully provided.

2.3License register

The Ministry of Energy and Natural Resources’ ERM One Map portal and disclosures on Indonesia EITI’s EI Data Portal provide most of the information on all active mining, oil and gas licenses. However, there is evidence of contradictory and/or missing information in the 2015 EITI Report, including partner names, participating interests and dates of application for licenses.

2.4Policy on contract disclosure

The 2015 EITI Report describes the legal provisions relevant to contract disclosure, although the explanation of the government’s policy on contract disclosure in the minerals and coal mining sector is confusing. A systematic review of published contracts does not yet seem to have been undertaken, despite significant public demand for information on extractives contracts.

2.5Beneficial ownership

Not assessed

Indonesia has made some progress in implementing its three-year beneficial ownership roadmap, even if public disclosures of beneficial ownership information has yet to begin. While the Ministry of Justice’s register provides information on legal owners of all companies, access to this information remains restricted.

2.6State participation

The 2015 EITI Report provides a comprehensive list of companies in which the government holds equity and clarifies the rules, practices and financial relations between the 4 extractives SOEs and the government. However, important information is not provided, including the terms associated with state equity, particularly in the four SOEs’ subsidiaries and joint ventures.

Monitoring production

3.1Exploration data

The 2015 EITI Report provides an overview of the mining, oil and gas sectors, including significant exploration activities.

3.2Production data

The 2015 EITI Report provides volumes of 2015 production for oil, gas and six minerals produced that year, but does not provide other important information, including production values for some of the extractive commodities produced.

3.3Export data

The 2015 EITI Report provides 2015 export volumes and values for four mineral commodities marked as exported in the year under review (2015) but provides aggregate export data for “other minerals exported”, without disaggregating volumes and values by mineral commodity.

Revenue collection

4.1Comprehensiveness

The 2015 EITI Report lists all material companies and describes all material revenue streams based on the MSG’s agreed upon materiality threshold. However, important information is missing, including full government disclosure, the value of payments from non-material companies and an assessment of the materiality of tax payments from non-reporting companies due to tax confidentiality.

4.2In-kind revenues

While confirming the lack of in-kind revenues in mining, the 2015 EITI Report and a 2017 pilot commodity trading report present important data on in-kind volumes of oil and gas and the values of proceeds. However, there is lack of clarity on whether sales data includes Domestic Market Obligation (DMO) oil and it only covers sales of crude oil, not natural gas.

4.3Barter agreements

Not applicable

The 2015 EITI Report states that there were no barters or infrastructure arrangements in Indonesia in 2015.

4.4Transportation revenues

The 2015 EITI Report presents the results of reconciliation of coal transport revenues. While the lack of material transport revenues in oil and gas is confirmed, the report nonetheless presents Pertamina’s unilateral disclosure of revenues from the transportation of oil and gas for third parties through the SOE’s pipeline network.

4.5SOE transactions

The 2015 EITI Report and SOEs’ annual reports and audited financial statements provide a reconciliation of SOE payments of dividends to government, aside from Pertamina for whom dividends are only unilaterally disclosed. Mining, oil and gas company payments to the four SOEs have not been comprehensively disclosed and reconciled, given the exclusion of payments to SOEs from the scope of reporting.

4.6Direct subnational payments

Not applicable

The 2015 EITI Report describes direct subnational payments in both oil and gas and mining, provides the value of direct subnational payments in 2015 and justifies the exclusion of direct subnational payments from the scope of reconciliation on quantitative materiality grounds

4.7Disaggregation

The reconciled financial data in the 2015 EITI Report is disaggregated by individual company, government entity and revenue stream for all revenue streams aside from Corporate Tax and Dividend Tax as well as First Tranche Petroleum (FTP) and Equity Oil by oil and gas companies. However, there is an attempt to disaggregate FTP and Equity Oil based on calculations for tax purposes.

4.8Data timeliness

In accordance with Requirement 4.8, Indonesia has published EITI Reports on an annual basis with data no older than the second to the last complete accounting period. There is evidence the MSG approved the reporting period as part of the 2015 scoping study

4.9Data quality

The reconciliation of payments and revenues has been undertaken by an Independent Administrator (IA), appointed by the MSG, and applying international professional standards. However, the report does not include a clear statement from the IA on the comprehensiveness and reliability of the (financial) data presented.

Revenue allocation

5.1Distribution of revenues

The 2015 EITI Report confirms that all government revenues from the extractive industries are recorded in the central government’s budget.

5.2Subnational transfers

The 2015 EITI Report describes statutory subnational transfers of mining, oil and gas revenues under the DBH transfer scheme and provides the general revenue-sharing formula. The value of allocated and executed DBH subnational transfers is provided per local government, albeit without an assessment of discrepancies with calculations based on the revenue-sharing formula.

5.3Revenue management and expenditures

Not assessed

It is encouraging that the MSG has made some attempt at including information on extractives revenues earmarks, the budget-making and government audit processes in the 2015 EITI Report.

Socio-economic contribution

6.1Mandatory social expenditures

Information on social expenditures in the mining, oil and gas sectors is disclosed in the EITI Reports and EITI website with details on beneficiaries, nature and value, although the comprehensiveness of information remains unclear. While all social expenditures disclosed on the Indonesia EITI website are described as voluntary, it is clear that the laws of Indonesia mandate social expenditures in the mining, oil and gas sectors.

6.2Quasi-fiscal expenditures

The 2015 EITI Report provides a definition of quasi-fiscal expenditures. It is unclear whether the narrow definition of quasi-fiscal expenditures is comprehensive of all extractives SOEs’ expenditures that could be categorised as quasi-fiscal. There is little evidence of the MSG having considered the existence of quasi-fiscal expenditures in any depth, although there is evidence that the MSG has started discussing QFEs in more detail after the Validator’s report was issued.

6.3Economic contribution

The 2015 EITI Report provides, in absolute and relative terms, estimates of the extractive industries’ contribution to GDP, government revenues, exports and employment, identifying the location of production

Outcomes and impact

7.1Public debate

Indonesia EITI has carried out dissemination activities and attempted to make data more accessible through the use of infographics. However, evidence of informing public debate and policy discussions was limited, particularly at the national level and areas of intense resource extraction.

7.2Data accessibility

Not assessed

Data from Indonesia’s EITI Reports is available through the Indonesia EITI website and data portal.

7.3Follow up on recommendations

While some recommendations with respect to beneficial ownership has been implemented, there is limited evidence that the multi-stakeholder group is taking steps to act upon lessons learnt and recommendations resulting from EITI reporting in general. The annual progress reports, minutes of MSG meetings and stakeholder views confirm that the MSG has not actively pushed for reforms and in cases where reforms were implemented, the MSG’s contributions to such reforms are uncertain.

7.4Outcomes and impact of implementation

The MSG has commissioned an impact study that evaluates the status of EITI implementation in Indonesia and what could be done to create more impact. However, the annual progress report does not review the outcomes and impact of the EITI on natural resource governance. There is no evidence that each constituency on the MSG sought feedback from their broader constituencies regarding the EITI process or provided the opportunity for stakeholders to have their views reflected in the annual progress report.


Key documents


Contacts