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Indonesia’s First EITI Report Released

TEMPO.CO, Jakarta – The First Extractive Industries Transparency Initiative (EITI) Report by Indonesia, which compares revenues reported to have been paid to the government by nearly all oil, gas, mineral and coal companies operating in the country with those received by the government, shows that in 2009, after certain deductions, the government collected US$24.2 billion (Rp251 trillion at Rp10,400 per US$), said a report released by the EITI Indonesia Office.

Although the overall contribution of the oil and gas sector to public revenues has long been public information, the EITI report shows the exact contribution of each oil and gas company. Even more extraordinary, it does the same for each large and medium sized mining company, including those that are locally licensed. Emy Perdanahari, EITI Indonesia Secretariat chairperson,  commented, “The Indonesian extractives sector and the amount of revenues it generates have long been source of contention, simply because detailed information was not available to the general public. With the release of this report, the public will finally know how much, officially speaking, each resource company paid to each government agency. This is a huge milestone in government transparency.”

The report provides what may be the first ever figure on the overall income tax and royalty contribution of the mineral and coal sectors. Before the implementation of EITI, the only number that was public was a single figure for all royalties paid by mining firms. The EITI Indonesia report determines that the nation’s mineral (copper, gold, nickel, tin and bauxite) companies contributed about US$1.2 billion (Rp12.5 trillion) in income tax and US$1.2 billion (Rp12.5 trillion) in royalties, while its coal companies contributed about US$1 billion (Rp10.4 trillion) in income taxes and US$1.3 billion (Rp13.5 trillion) in royalties.

The real figures are larger, because the EITI numbers exclude smaller mining companies, as well as a handful of large and medium sized companies whose taxes the DG of Tax declined to report, due to lack of supporting documentation related to the adherence to the Tax Laws stipulations’ on disclosure.

Supriatna Suhala, Executive Director of the Indonesian Coal Mining Association, stated, “The EITI report provides the public with the clearest understanding so far of the coal mining sector’s contribution to state revenue. We also have to keep in mind that there would be multiplier effect which may be higher than the recorded contribution.”

However, The EITI Indonesia Report showed a weakness of information management at the Directorate General of Minerals and Coal. This was shown through discrepancies in the area of coal royalties. Differences between what companies paid and what the government received started out at US$727 million, but were narrowed down to US$54 million, due to EITI Indonesia conducting a review of physical records maintained by the Directorate General of Minerals and Coal. Specific to non-tax revenue, a total of 376 adjustments were made in this way, more than 60 percent of all adjustments in the entire report.

The report also helps local people understand how much of the official payments of individual companies should, in theory, have arrived in local treasuries. The Indonesian government decreed over ten years ago that about 15 percent of the value of oil and 30 percent of the value of gas surrendered by producers to the state, as well as 80 percent of mineral and coal royalties, would be redistributed to the districts, surrounding districts, and provinces within which they operate.

In practice, the implementation of this policy is rarely noticed by the Indonesian public simply because detailed information on the amount of resource revenues intended to flow to the local governments, and from which company in a given year, has never been compiled into a detailed report. Now, the information has been made available by EITI Indonesia.

“With the publication of the EITI Indonesia report, citizens in resource rich districts will finally begin to receive answers to their questions not only about the amount of revenues from oil, gas and mining companies paid to the central government, but perhaps more importantly from a local perspective, how much of the revenues from each company should have made its way to their province and district. This is a tool for the people to force accountability from their government,” said Faisal Basri, a Civil Society Representative on the Indonesian EITI Implementation Team.