Tag Archives: Indonesia

The EITI Journey in Indonesia – Part 2: Challenges to Subnational Reporting

Justin Kwan, MAAPPS // Feb 23, 2015

Despite the fact Indonesia only recently achieved EITI compliant status in October 2014, the country has actually implemented since 2010, laws which regulate the transparency of national and local extractive industry revenues.Subnational reporting in the case of Indonesia has been met with positive responses but has experienced difficulty in its practical implementation. ThePresidential Regulation Republic of Indonesia, Number 26, Year 2010guarantees the need for establishing the Transparency of National/Local Extractive Industry Revenues. For instance, it regulates the the creation of an Implementation Team (Tim Pelaksana), which is comprised of three seats for subnational government officials on the EITI Indonesia multi-stakeholder working group as well as three regional secretaries. The produced framework here shows strong a commitment to EITI transparency principles and the appropriate context for subnational reporting to operate.

Despite this, the practical implementation of subnational reporting has been met with unexpected results. One of the largest issues that has surfaced is the topic of district-licenced mining permits. Indonesia’s 2000 decentralization law allows for local districts to issue licence permits. Regional autonomy was seen as the next logical reform in Indonesia, which came about during the increasing democratic reforms that were being put into place after the end of the Suharto regime. While the Ministry of Energy and Minerals was aware that 10,500 district licences were issued in 2011, the government only had adequate levels of information for only 4000 of them. Given Indonesia’s population size and the geographical area of the archipelago, the decision to decentralize is logical, as more individualized attention could be given by local governments. The unintended consequence is that tracking at the national level is extremely difficult.

In conversation with Indonesian civil society organizations, I received responses from different groups which were located across the country. What appears to be evident is the increasingly strong push for civil society engagement in Jakarta, in which detailed plans for subnational reporting and beta testing are already occurring. Meanwhile, in the province of Riau, discussions of subnational reporting had been made at the local level, but were not being discussed at the national level, according to my correspondence with their civil society groups. With EITI compliance stronger in some areas more than others, there must become a way to identify which regions are priorities for subnational reporting. Then, EITI can have a strong impact on improving the transparency of the extractive industry.

So what are the next steps for Indonesia? The EITI Implementation Team Meeting on September 9, 2014 agreed upon the upcoming working plan for the 2014-2015 year. In regards to subnational reporting, the team is looking at three important areas: (1) regularly publishing the Revenue Sharing Fund (DBH) per District Per Company/Unit Production (2) involving Regional Governments in the extractive industries transparency process and (3) having Regional governments push companies to open up their tax data. The two largest obstacles cited in this implementation plan include the fact there are limited human resources needed to handle the revenue calculations as well as a lack of understanding by regional governments of the importance of EITI.

Clearly, Indonesian stakeholders and EITI must work together to identify the most lucrative extractive resource industry areas of the country and create a targeted plan to ensure that subnational reporting is operating in these target areas. While the “One Map Policy” appears to be one response to the problem, the government must also find a way to engage with local governments in a meaningful way to further the transparency process. In a large country like Indonesia, a targeted and refined plan is needed in priority areas before focusing on widespread implementation across the country.

 

The EITI Journey in Indonesia – Part 1: Resource Extraction in the Jokowi Era

Justin Kwan, MAAPPS // Feb 20, 2015

On October 15, 2014, Indonesia completed a landmark achievement and became the first country within ASEAN to become an EITI compliant country. A mere five days later another landmark achievement was made when President Jokowi was sworn into office, one of the first leaders to originate from neither a military or political elite background. As part of his platform, Jokowi promised tomaximize the benefits that natural resource extraction has for Indonesian citizens, hoping to reduce some of the negative aspects associated with the oil and mining sectors. While these are extremely important milestones in the country’s journey to openness and transparency, the process of reform however has not been nearly as simple.

Prior to its EITI compliant status, the country nearly risked being delisted as an EITI candidate country for its inability to resolve many problems in its reporting which included: “accounting standards, access [to] corporate tax information, or in some cases document[ing] financial transactions” (Tantri and Bria, 2014). In the country’s second report, “40 percent of reporting companies (more than 100) missed the [reporting] deadline, delaying the coal and mineral section of the report and again calling into question the level of commitment from government and stakeholders” (Ibid). However, in October 2013, the EITI Board had granted the country an extension to reach compliance after stating it had made “meaningful progress.”

In the year 2015, Indonesia has much to accomplish now that it has become an EITI compliant country. The Natural Resource Governance Institute has called for stricter mechanisms to ensure that Indonesia maintains its EITI standard. They, along with other critics have cited the need for more transparency in the mining sector, especially in the licence approval process as well as in the way national and subnational governments coordinate resource management.

Despite this, the country has made great strides in transparency and open communication, especially after the dictatorship era of President Suharto from 1967 to 1998. Accordingly, the country has made an important transformation from a nation, which used to limit the free flow of information into a new era of reform and openness. This means that “a large amount of information on how Indonesia is benefitting from, and managing its resources is now in the public domain” (Bria and Heller, 2014). Slowly but surely, improvements are being made.

Resource management is a serious problem in Indonesia, and the country has put its hopes into its newest President. Many believe that Jokowi’s pragmatic style of governance will bring about reform in Indonesia, by “bringing change to a stagnating industry and breath[ing] fresh life into stalled negotiations with foreign mining companies” (Warburton, 2014). His message is simple: Reduce corruption! Raise up the people! Repair the economy! Since taking office nearly four months ago, Jokowi’s government has implemented a “One Map Policy”, a central map of Indonesia, which will be used by government agencies across the country to help track duplicate licences, resolve land disputes and unify the local government systems. Although it is too soon to tell whether or not this policy will be effective, or whether it will be subverted by the same local authorities and businesses that are making subnational tracking more difficult, the clear willingness towards reform by Jokowi represents a positive direction for the country.

Extracting Transparency in Mongolia and Beyond

Justin Kwan, MAAPPS // Jan 26, 2015

Asia’s rise in the 21st century has been commonly characterized by the dominance of the region’s major powers such as China, Japan, South Korea and India. Far too often overlooked however is the important presence of Mongolia. Situated between both Russia to the north and China to the south, Mongolia has been overshadowed by two of its neighbouring superpowers. While Mongolia may go unnoticed to many countries across the world, China recognizes Mongolia’s strategic importance for its natural resources, primarily copper, coal, gold and uranium.

As an aspiring China scholar, the Middle Kingdom’s interest in Mongolian natural resources also sparked my curiosity for the country, its growing importance to the Asia Pacific Region and my participation here in this year’s policy project.  Roland Nash of Renaissance Capital described Mongolia as “a blue-sky opportunity” and as “a country on the point of transformation” (Business New Europe, 2009). His assertion six years ago has been extremely forth telling of the economic development that has been occurring.

This year’s policy project continues with the work produced by last year’s cohort who examined the policy mechanisms for discouraging corruption and improving human development in Mongolia. As part of our investigation, our research this year will look at EITI’s important move to push transparency reporting down from the national to the local level. My initial thoughts immediately gravitate towards a series of questions: Who within EITI is encouraging the reporting to be pushed down to the local level? What are the motivations behind this? In what ways will this benefit and/or complicate the way reporting is completed?

To answer these questions, one important aspect that must be investigated is how actors both at the domestic and national levels impact the policy making process. EITI is a coalition of governments, companies and civil society groups – all who play important roles in shaping the organization. As our research continues, I am particularly interested in investigating how these actors engage with each other to formulate policy as well as the regional variations between how EITI member countries implement them.

I hope from this experience to future my knowledge not only in the field of policy work and transparency initiatives but also to expand my knowledge of the Asia Pacific Region. My current research looks at EITI Compliant Country Indonesia in order to create a comparative framework which will allow us to assess how different member countries are adapting to local level reporting. While much work lies ahead of us, I am most definitely excited for the journey to come.