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FEATURE STORY

Indonesia is First ASEAN country to Achieve EITI Compliance

November 19, 2014


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STORY HIGHLIGHTS
  • Indonesia was formally recognized as an EITI compliant country
  • The country's EITI report captures over 90% of payments and revenues from oil, gas and mining in the country
  • World Bank administered EITI Multi-Donor Trust Fund supports EITI implementation

Indonesia was formally recognized as an Extractive Industries Transparency Initiative (EITI) Compliant country at the International Board meeting of the EITI, held in Nay Pyi Taw, Myanmar in October 2014.  Indonesia is the first country that is member of the Association of Southeast Asian Nations (ASEAN) to achieve compliance with EITI after joining the initiative in 2010.  Other countries from the region, such as the Philippines and Myanmar, are also pursuing the implementation of EITI standards in their countries to deepen transparency in the extractives and improve governance in this sector so that revenues from oil, gas and mining can contribute more to reducing poverty in their countries.

“This achievement marks an historic moment for our country, given the importance of extractive industries to our economy and our effort to ensure that the revenues generated are directed to benefit the people,” said Dr. Montty Girianna, Head of the Indonesian EITI Multi Stakeholder Group (MSG) and Deputy Coordinating Minister of the Ministry of Economic Affairs.

Bringing transparency to the extractive industries in Indonesia is a top priority for the country given that the sector represented 16 percent of GDP (7 percent from mining and 8.5 percent from oil and gas) and more than 40 percent of exports (22 percent from mining and 20 percent from oil and gas) in 2011.  Indonesia is also the world’s top exporter of tin, bauxite, nickel and thermal coal. Moreover, oil, gas, minerals and coal revenues account for about one-third of Indonesia’s national budget. 



" The World Bank congratulates Indonesia on achieving EITI Compliant status and we look forward to continuing to work with the country to harness the wealth from extractive industries to benefit the Indonesian people. "

Rodrigo Chaves

Country Director for Indonesia at the World Bank


The EITI is an international coalition of governments, private sector companies and civil society that promotes standards for transparency in extractive industries. It requires the reporting of all payments made by companies, the corresponding revenues received by government and an independent reconciliation of the two. The findings of the process are subsequently publicly released and a significant effort is made to engage members of the public, including communities affected by the resource projects. This exercise not only traces the flow of revenues from resource to company to government, but it also brings together these diverse stakeholders to build confidence and dialogue in a sector that can be fraught with conflict if it is not managed well.

“EITI has helped build bridges in Indonesia between civil society, the government and private industry at national and subnational level so we can work together to ensure that extractive industries revenues are benefiting the poor,” said Joko Purwanto, representative from civil society on the Indonesian EITI MSG and member of the Bojonegoro Institute, an NGO from the East Java province.

Given the scale and complex nature of Indonesia´s extractives sector, compiling information on all payments and revenues from the oil, gas and mining sectors has been exceptionally challenging.  One factor that added to the complexity of the process is that mining licenses in Indonesia are issued by both national and local governments. According to the EITI report, there are 11,037 active mining licenses in Indonesia, for which there is no central registry or recording system to determine their owners.  This issue, coupled with Indonesia’s strict taxpayer confidentiality laws made the process of identifying the major mining companies very difficult, but after close analysis of royalties and other payments the Indonesia’s EITI report captured 67.8% of payments and revenues from mining.  The overall coverage of the 2011 EITI report including oil, gas and mining captures 91.38% of payments and revenues from these sectors. 

To support Indonesia in its efforts to implement the EITI, the World Bank has provided training, technical assistance and financial support:  over the period of EITI implementation in Indonesia the World Bank administered Multi Donor Trust Fund (EITI MDTF*) has provided over US $2 million to the government to establish a secretariat, train stakeholders involved in the process, conduct communications and outreach and pay for the financial reconciliations. 

*The EITI MDTF is supported by 15 donor countries: Australia, Belgium, Canada, Denmark, the European Union, Finland, France, Germany, Japan, the Netherlands, Norway, Spain, Switzerland, the UK, and the United Sates of America.


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