Tackling mining sector mismanagement in Indonesia The General Elections Commission (KPU) has announced Joko “Jokowi” Widodo as the president-elect who will take over in October. This is a total break from tradition, whereby one either had to have a military background or be a leader of a political party to run for president. But now, Indonesians can expect that as long as you have a good record in politics, you have a chance to lead the nation. There are lots of expectations placed upon the incoming president and his future government. One of them is reform of the mining sector. Examples of corruption and mismanagement in this sector are widely recorded. A recent study by the Corruption Eradication Commission (KPK) on non-tax revenue from the coal and mineral sector found that during 2010-2012, there were more than 21 coal companies that did not pay royalties. Emanuel Bria, Jakarta | Opinion | Thu, August 07 2014, Similar cases occurred in the nickel, bauxite and manganese mining areas. The study concludes that the potential loss from royalties and land rent payments in 2002-2011 was nearly US$600 million. It is also widely known that the licensing process of the mining sector in Indonesia has become a huge concern. The proliferation of mining permits issued by district chiefs has caused a host of natural resource governance problems, such as a weak investment climate, pollution, a higher incidence of corruption and illegal mining. This also has resulted in the conflict of authority among different levels of government, overlapping concessions and widespread social and environmental problems. This does not mean that the decentralization of mining permits is a bad policy in itself. In fact, there are at least 60 countries around the world that have to some extent transferred their power to subnational governments to manage natural resources, including the mining sector. Developed countries such as Canada, Australia and the US also have decentralized mineral licensing systems. Therefore, the main challenge for developing countries such as Indonesia is in the governance of this sector. The transfer of power to subnational governments in mineral licensing does not go hand in hand with the improvement of transparency and accountability in this sector and the institutional capacity of regional governments. As one of the main global suppliers for thermal coal and minerals such as nickel and copper, the extractive industry in Indonesia has significantly contributed to the country’s economic growth. The mining sector accounted for $41.68 billion of total gross domestic product (GDP) in 2013. The government can manage the mining sector well by establishing a clean and clear licensing process, standardizing the accounting system to better capture the resource rents and enforcing the disclosure of corporate tax information through the Extractive Industry Transparency Initiative (EITI). The Indonesian government has endorsed the EITI through Presidential Decree No. 26/2010, which also includes the disclosure of concession coordinates, transparent revenue sharing between national and subnational governments and the disclosure of beneficial ownership to prevent transfer pricing. The current government policy to increase the value added of these resources through the development of the downstream industry will need to be continued, taking into consideration the social and environmental impacts of the industry. Although Indonesia is one among two countries in the Asia-Pacific region that has access to public information, the public disclosure of the environmental impact assessment is very limited. Public participation through better access to information on fiscal and environmental data particularly related to the mining sector will further enhance the agenda for effective, responsible and accountable government. This is strongly in line with the reform agenda of the elected president, a government that serves the people. As we all know, minerals are a finite resource. Therefore, the management of these resources will need to be put into a long-term perspective. Mother Nature has provided us with this natural wealth and we owe it to our future generation to sustainably manage these resources. It is the task of all Indonesians to ensure that the new president is able to govern well, tackling mismanagement and corruption in the mining sector and using the revenues to invest sustainably for the present and most importantly the future generation of this country. _________________ The writer is senior associate for the Asia-Pacific region at the Natural Resource Governance Institute (NRGI). This is his personal opinion.
Posted on: Thu, 07 Aug 2014 16:15:56 +0000
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