Indonesia

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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

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.

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.

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.

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.

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

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.

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.

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

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.

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

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.

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

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.

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.

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.

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.

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

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.

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

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.

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.