NGOs Question Indonesia’s Commitment to Extractive Industries’ Transparency

Source: Jakarta Globe
Date: 19 Apr 2022

An antigraft group on Wednesday questioned Indonesia’s commitment to join an international initiative designed to combat corruption in the oil, gas, mining and logging sectors.

On Oct. 19, 2010, Indonesia was named as a candidate country by the Extractive Industries Transparency Initiative.

The Norway-based initiative, sponsored by the World Bank, would put Indonesia on close international watch, ensuring that all state revenue generated by the extractive industries is open to public scrutiny.

But Publish What You Pay Indonesia, a coalition of 40 nongovernmental organizations across the country, said that with less than a year before EITI is due to validate Indonesia’s candidacy, the country has done little to improve transparency in the energy and mining sectors.

“The situation is worrying,” PWYP said in a statement. “The response of private companies has been slow and some even didn’t respond at all, threatening Indonesia’s status inside EITI.”

The group noted that out of the 71 companies in the mining sector obligated to disclose their revenues, only 20 complied. Of the 57 companies in the oil and gas sector, only 39 agreed to divulge their production outputs and earnings to the initiative.

“Indonesia was given two and a half years to complete two stages of reporting, which will be validated according to EITI regulations,” the group said.

Indonesia, the group added, failed to meet the March deadline to complete the first stage of adopting the transparency initiative despite a presidential decree enacted in 2010 that requires all companies in the extractive sectors to comply.

The group said the government should take firm actions to ensure that the requirements set by EITI are met in order for Indonesia to be validated as a compliant country.

EITI requires resources companies to declare their revenue and allow an independent team of experts to compare information provided from the companies with those supplied by the government.

“A compliant country status will strengthen the domestic and international community’s perception on the transparency of the oil, gas and mining sectors’ management,” PWYP said.

“If [Indonesia] is kicked out of the EITI, it would be a great blow for Indonesia because it will have failed to prove its own commitment to ensure better transparency in state revenue received from these sectors.”

Failing to gain a compliant country status would deter future investment from foreign companies, which already show reluctance to establish a presence in a country with little transparency in the industries.

In its Global Petroleum Survey 2011, Canadian think tank the Fraser Institute listed Indonesia as one of the least attractive countries for energy investment in the region.

The institute listed lack of transparency and fairness of the legal system as major investment deterrents. “Clearly, investors are confronted with serious regulatory and legal obstacles [in Indonesia],” the report said.

The institute also cited complicated bureaucratic procedures, overlapping taxes, lack of inter-ministerial coordination and corruption as contributing factors to Indonesia’s investment unattractiveness.

Jakarta Globe