Executive Summary Eiti Indonesia Report 2015
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1 EXECUTIVE SUMMARY EITI INDONESIA REPORT 2015 COORDINATING MINISTRY FOR ECONOMIC AFFAIRS REPUBLIC OF INDONESIA COORDINATING MINISTRY FOR ECONOMIC AFFAIRS OF REPUBLIC OF INDONESIA EITI INDONESIA REPORT 2015 EXECUTIVE SUMMARY VOLUME ONE KAP HELIANTONO & REKAN 4 Executive Summary EITI INDONESIA REPORT 2015 EXECUTIVE SUMMARY Executive Summary 2015 5 EXECUTIVE SUMMARY The Indonesia EITI Report 2015 is developed reconciliation report also covers the findings to demonstrate Indonesia’s commitment to of discrepancy between total revenue of Extractive Industries Transparency Initiative government and total payment from the (EITI) program as well as to the principles extractive companies to government. The of transparency and accountability in report also includes recommendations to Indonesian extractive industry. prevent future discrepancies. This report intends to encourage the The fourth volume, contains the appendices participation of the Indonesian extractive from reconciliation process that verify and industry stakeholders in providing better support the total and individual amount stated understanding to the Indonesian society of in reconciliation report. In the appendices, the how the Government of Indonesia (GOI) reconciliation result is presented in detail by manage the natural resources specifically in two main sectors, which are oil and gas sector this context; oil, gas, mineral and coal, that the and mineral and coal mining sector. society has entrusted by law to the GOI. The Multi Stakeholder (MSG) or the EITI EITI Indonesia Report 2015 consists off our Indonesia Implementing Team and EITI volumes: Indonesia Secretariat has facilitated the The first volume, contains executive production of this report by appointing summary encapsulating the overall content Public Accountant’s Office Heliantono dan of the EITI Indonesia Report 2015. Rekanas Independent Administrator (IA) to conduct study and to compose contextual The second volume, contains contextual report and to compile reconciliation report. information from extractive industry sector EITI Indonesia Report 2015 can be accessed in Indonesia. The contextual information on EITI Indonesia web page: provides a comprehensive illustration on Bahasa --> http://eiti.ekon.go.id/laporan-eiti- the sector’s legal framework as well as indonesia-2015 governance mechanism, types of contract/ English --> http://eiti.ekon.go.id/en/laporan- license, current licensing process, payments eiti-indonesia-2015 of companies to central and local government, and share mechanism between central and The EITI Indonesia Report 2015 is local government. This volume also explains Indonesia EITI’s fifth report. It briefly the participation of State-Owned Enterprises explains EITI project background, benefits (SOEs) in Indonesian extractive industry. of implementating EITI for government, The contextual information comply with companies in extractive industries and the latest reporting standard issued by EITI organizations in the society. The report also International in order to provide better elaborates the EITI reporting process in clarity to report readers when perusing the compliance with EITI International Standard. reconciliation content provided in the third In short, the report comprises the following volume of this report. sections: The third volume, contains the reconciliation FIRST PART, EXECUTIVE SUMMARY ON report in which we reconcile total payment CONTEXTUAL INFORMATION: by companies in the upstream sector of oil The discussion topics in this Contextual and gas, mineral and coal (mining) and the Report are written based on the EITI standard total annual revenue received by GOI and 2016 and inputs from the Implementation SOEs. The revenue and payment include Team. The discussion includes the fiscal revenues and non-fiscal revenues. The governance, licenses and contracts, the 6 Executive Summary extractive industry contribution, the role of state owned and shall be made use of for the people”, which in its enterprises, corporate social responsibility and the development has been applied in the Law which has management of state revenues derived from extractive undergone several amendments. Currently, the applicable industry. law in the extractive industry is Law No. 22/2001 regarding Oil and Gas and Law No. 4/2009 regarding Mineral and In terms of compliance with the EITI standard 2016, this Coal Mining. This section exhibits list of regulations as year there are at least two significant breakthroughs well as the hierarchy of fiscal policy and law applicable in regarding the transparency of the extractive industry of the extractive industry. the Government of Indonesia. First, the availability of cadastral information for oil and gas sector and mineral The discussion about the governance includes the and coal accessible at http://geoportal.esdm.go.id. discussion about related regulations, such as Forestry Second, the preparation of the Presidential Regulation Law, national energy policy, contract transparency and plan on Beneficial Ownership which is led by the Financial Beneficial Ownership transparency. Transaction Reports and Analysis Center (PPATK) together with other related ministries. This section also discusses the current government efforts in improving the governance of the extractive Contextual report 2015 is presented in 8 (eight) sections industry. The Government has applied an Indonesia that can be an important reference for the public to National Single Window Program (PTSP) to simplify understand the extractive industry in Indonesia. the licensing process, including the license related to the extractive industry. In mineral and coal mining sector, the First section of this report explain the definition of the Government has established policies to accelerate full extractive industry. Extractive industry is all activities that implementation of the Law No 4/2009 and the Law No. take natural resources directly from the earth in the form 23/2014 in order to improve the governance of mineral of mineral, coal, oil and gas. As a country with abundant and coal mining in Indonesia. Several actions taken by the natural resources, extractive industry becomes one of the Government among others are reconciliation of National main industries in Indonesia. Hence, the governance of IUP since 2011 and the establishment of coordination & extractive industry is worthy of attention. One of the efforts supervision conducted by KPK in mineral and coal mining made by Indonesian government to manage extractive sector since 2014. industry well is an EITI Standard implementation. EITI, which stands for the Extractive Industries Transparency Current issues and challenges related to the governance of Initiative is a global standard covering provision that the extractive industry are also discussed in this section. enhances transparency and accountability of resources They are the declining of exploration activities in oil and management by requiring oil, gas and mining companies gas sector as well as mineral and coal sector, issues related to disclose theirs payment to the government, and the to regulations of the gross split scheme, current status of government to disclose its revenue from the companies. the revision of Oil and Gas Law and Mineral and Coal Law, The implementation of the EITI standard in Indonesia debates and the development of regulations related to the is expected to benefit the government, companies and value added enhancing of minerals, the implementation the society. of divestment regulation, the conversion of contracts to license regime and the accuracy of non-tax state revenue The legal basis of EITI implementation in Indonesia payment and reporting. These topics are prepared based is Presidential Regulation Number 26 Year 2010. The on the guidance of the Implementation Team and Scope regulation orders the establishment of Transparency Team of EITI Report 2015 of Indonesia. that consist of Steering Team and Implementation Team. The team is tasked with the carrying out of transparency Third section of contextual report discusses about of national and local extractive industry revenues by the process of licenses and contracts of oil and gas in collecting revenue data related to extractive industry Indonesia, including types of license/contract and tenders from both government and companies, conducting the in 2015. In Indonesia’s oil and gas mining, there are three reconciliation and publishing the data to the public. types of contracts: (1) Production Sharing Contract (PSC); (2) Joint Operation Body (JOB); and (3) Production Second section of contextual report discusses about Sharing Contract with Gross Split Scheme. The process of the governance of the extractive industry related to determination and auction procedures of the working area legal provision of the extractive industry, permit system (Wilayah Kerja/WK) in oil and gas mining is described in through licenses and contracts and changes as well as this section along with the information of WK’s offering in improvements of the governance of the extractive industry 2015 and the discussion about compulsary offering of 10% that are underway at the time of writing of this report. This Participating Interest (PI) to Local Owned Enterprises and section assists the society to understand the regulation local companies. The current issue that has also become and management system of the extractive industry in a challenge for the Government of Indonesia (Ministry Indonesia. of Energy and Mineral Resources) related to licensing