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Transparancy of Extractive Industry in Indonesia

Transparancy of Extractive Industry in Indonesia. Ridaya Laodengkowe Coordinator, National Coalition Publish What You Pay Indonesia. Republic of Indonesia. Capital: Jakarta Provinces: 33  490 regencies/municipalities

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Transparancy of Extractive Industry in Indonesia

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  1. Transparancy of Extractive Industry in Indonesia Ridaya Laodengkowe Coordinator, National Coalition Publish What You Pay Indonesia

  2. Republic of Indonesia Capital: Jakarta Provinces: 33 490 regencies/municipalities Total Area: 1,919,440.00 sq km (741,099.93 sq mi, almost three times the size of Texas) Population237.556.363(PS 2010), Estimated Population in 2050:337,807,011 Languages Bahasa Indonesia (official, modified form of Malay) GDP (2010) $ 672,450 million, Tax Ratio 11,9 % (2010) Natural Resources petroleum, coal, copper, gold, tin, nickel, bauxit

  3. Extractive industries in Indonesia • National Revenue 2011 (estimate): US $ 1.100 billion • GDP composition by sector: • Agriculture: 14,4% • Industry: 48,1% (including petroleum and mining) • Services: 37,5% • Oil production: 970,000 bbl/day (2011 estimated), last year (2011) targeted 965 but only 947 in realisation • Natural gas production: 56 billion cum (2007 estimate) • Indonesia is a former member of OPEC (until 2008) • Currently Indonesia is a net oil importer (consumes around 1,2 million bopd), but oil and gas is still one of the major export commodity

  4. Indonesia energi & mineralresources Source: MENR, February2009

  5. State revenue from extractive industries2004-2008(sourse: MEMR 2008)

  6. Extractive industriesproblem(1) • Resource rich areas tend to have history of vertical conflict (Aceh, Papua) • Unsatifaction with revenue sharing ---- Greater autonomy status  receive more natural resources revenue transfer from central government • Resource rich areas tend to have high poverty rate • Excess of decentralisation (since 2000): irresponsible concession awarding by local governments (KP; 7.000): no competitive bidding process, no appropriate regulatory institutions, unclear revenue stream • History of violence and human rights violation in resource rich areas • “Local resource curse”: social-economic problems surrounding mining projects, environmental damages, public facilities disturbances (road, bridges), air pollution

  7. Extractive industryproblems (2) Weak environmental standard applied Tax evasion politico business connection, corruption in tax institutions Lack of transparency Revenue data available in aggregated, difficult even to reconcile sub-data in National Budget Contracts of mining are available by request, not PSC documents (including POD, WP and Budget) Different view among Ministries: Energy and Mineral Resources versus Ministry of Finance and Ministry of Environment

  8. ..... Some progress

  9. Main features Public financial management reform Access to public information Law Extractive Industry Transparency Initiative (EITI) adoption (2010) Mining Law Number 4/2009 --- put some transparency measures Environment Protection and Management Law Preparation of Petroleum Law Revision

  10. Public financial management reform Put more transparency in budget process and management There is space for public engagement, but very limited Audit of government financial statements (agency by agency) are disclouse Information of extractive revenue transfer are available, though questions remain Limited disclousure on (country) revenue from extractive industry

  11. Access to Public Information Law Initiated by the House of Representative (DPR) Government agencies mostly do n ot realize the significant of the law CSOs have been using this for demanding document related to extractive industry Become the legal basis for adopting EITI

  12. Adopting EITI • Government of Indonesia took 2,5 years to come up with Presidential Decree to adopt EITI ---- extensive coordinating works inside government • Become candidate country on December 20, 2010 ------ 2 years to achieve compliance country • Bring uniqueness in EITI implementing countries: • Oil and gas • Mining • Sub-national • Promote EITI in regional level ---- ASEAN (Association of South East Asia Nations, 10 countries)

  13. Openess of the House of Representative toward NGOs Growing demand for specific laws Limited capacity of the House’s members and their staff Tendency to ‘compete’ with government whose staff are more experienced, or more chance to hire independent experts

  14. Why the Government takes reform action toward transparency • Awareness of the important to draw reform agenda in public finance management (MoF): efficiency, uplift Indonesia position in global arena • Awareness of the important toresponse to new investment challenges (MoF, MENR) • There are growing concern internationally on the important of transparency and accountability • Need to balance decentralisation with ‘ACCOUNTABILITY’ (MoF, MOHA)

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