Indonesia


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Indonesia has significant natural gas reserves and is a major producer of liquefied natural gas, but declining production and rising domestic consumption have made it a net importer of oil. At the same time, the country's mining industry has expanded. Indonesia supplies 20 percent of the world's tin and has considerable copper, nickel, gold, and coal resources. Petroleum and minerals together made up 42 percent of exports in 2011. The petroleum sector, which is measured in this assessment, accounted for 18 percent of government revenues in 2011.


Indonesia's Performance on the Resource Governance Index

Indonesia received a "partial" score of 66, ranking 14th out of 58 countries. Relatively high scores on the Institutional & Legal Setting and Safeguards & Quality Controls components were offset by a low Enabling Environment score.

Rank
(out of 58)
Score
(out of 100)
14 Composite Score 66
16 Institutional & Legal Setting 76
Freedom of information law 67
Comprehensive sector legislation 100
EITI participation 33
Independent licensing process 100
Environmental and social impact assessments required 50
Clarity in revenue collection 83
Comprehensive public sector balance 50
SOC financial reports required 100
Fund rules defined in law N/A
Subnational transfer rules defined in law 100
15 Reporting Practices 66
Licensing process 50
Contracts 0
Environmental and social impact assessments 33
Exploration data 100
Production volumes 50
Production value 100
Primary sources of revenue 100
Secondary sources of revenue 33
Subsidies 100
Operating company names 100
Comprehensive SOC reports 100
SOC production data 76
SOC revenue data 93
SOC quasi fiscal activities N/A
SOC board of directors 50
Fund rules N/A
Comprehensive fund reports N/A
Subnational transfer rules 100
Comprehensive subnational transfer reports 33
Subnational reporting of transfers 0
11 Safeguards & Quality Controls 75
Checks on licensing process 100
Checks on budgetary process 100
Quality of government reports 50
Government disclosure of conflicts of interest 0
Quality of SOC reports 50
SOC reports audited 100
SOC use of international accounting standards 100
SOC disclosure of conflicts of interest 100
Quality of fund reports N/A
Fund reports audited N/A
Government follows fund rules N/A
Checks on fund spending N/A
Fund disclosure of conflicts of interest N/A
Quality of subnational transfer reports 50
Government follows subnational transfer rules 100
21 Enabling Environment 46
Corruption (TI Corruption Perceptions Index & WGI control of corruption) 37
Open Budget (IBP Index) 59
Accountability & democracy (EIU Democracy Index & WGI voice and accountability) 57
Government effectiveness (WGI) 48
Rule of law (WGI) 31
Satisfactory Weak
Partial Failing
To explore all data and compare
scores, use the RGI Data Tool.

Institutional & Legal Setting (Rank: 16th/58, Score: 76/100) learn more

Indonesia's "satisfactory" score of 76 is due to comprehensive legislation and a competitive licensing process.

Most oil and gas companies sign production-sharing contracts; mining companies receive licenses in exchange for royalties and taxes. The 2009 Mining Law requires open bidding for mining licenses, but has yet to be implemented.

The Finance Ministry collects payments from oil companies and deposits the funds in the national treasury. The director general of mining collects most non-tax mining payments; the director general of taxation collects mining taxes.

Government agencies publish all legislation related to natural resource extraction online. However, these laws do not include detailed regulations on fiscal terms. Indonesia requires environmental impact assessments, but only makes them public for a brief comment period after licenses are granted. Indonesia is an Extractive Industries Transparency Initiative candidate; its first report is due in 2013.

Reporting Practices (Rank: 15th/58, Score: 66/100) learn more

Indonesia's "partial" score of 66 reflects comprehensive reporting on a number of indicators, but a lack of contract transparency and insufficient disclosure of subnational transfers of resource revenues.

Some information on petroleum auction rounds is published, but contract terms are not. The 2009 Mining Law reduced transparency in the mining sector; only contracts that predate the law are available, and only by request.

The Finance Ministry publishes some information on oil companies' operations and disaggregated revenue streams. The Energy and Mineral Resources Ministry provides data on reserves, production volumes, and prices, but does not include information on extractive revenues. The annual report of BPMIGAS, the former regulator, contains information on reserves, production, and social initiatives, but only limited data on company payments.

Safeguards & Quality Controls (Rank: 11th/58, Score: 75/100) learn more

With significant audit requirements and government monitoring, but uneven quality of government reports, Indonesia earned a "satisfactory" score of 75.

While government regulators have been reluctant to comply with freedom of information laws, Indonesia's parliament actively oversees the extractive sector. The legislature has passed a number of laws aimed at limiting corruption, but there is no specific requirement that officials responsible for overseeing petroleum and mining companies disclose their financial interests in the sector. National law limits the discretion of licensing agencies, but there is no mechanism to appeal their decisions.

An independent auditor conducts a semiannual audit of state accounts; its findings are reported to parliament and published online. An internal auditing agency reviews petroleum and mining company payments but does not make its reports public.

Enabling Environment (Rank: 21st/58, Score: 46/100) learn more

Indonesia received a "weak" score of 66, the product of especially low rankings for the rule of law and corruption control.


State-Owned Companies (Rank: 9th/45, Score: 86/100) learn more

PT Pertamina, an entirely state-owned company, is involved in the upstream and downstream oil and gas sectors. There are also three partially privatized state mining companies: PT Aneka Tambang, PT Timah, and PT Bukit Asam. The government subsidizes some of the companies' activities; expenditures are not included in the national budget despite legal requirements to do so. All four companies publish somewhat technical audited annual reports that include information on production and revenue generation.

Subnational Transfers (Rank: 13th/30, Score: 64/100) learn more

The central government transfers revenue to local authorities based on regional petroleum extraction. The Finance Ministry publishes information on these allocations, but the reports are very technical and lack narrative explanations. Local authorities rarely disclose information about the transfers. Rules for transfers are defined by law and followed in practice.

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