Comval BK: State of EI Transparency in ASEAN


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State of Extractive Industries Transparency In ASEAN:
Challenges and Opportunities for Sub-National
Fabby Tumiwa
Institute For Essential Services Reform

Compostela Valley - Bantay Kita - Article 33 Indonesia
Davao City, The Philippines, August 22-23, 2013

Published in: Education, Technology, Business
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  • In November 2012, FoE UK launched a new report that reveal how smartphones producers like Apple and Samsung used tin from Bangka and Belitung. Indonesia is the world largest exporter of tin, and about 70% of Indonesia’s tin comes from Bangka and Belitung islands.
  • Bangka and Belitung islands are located in south coast of Sumatra island. Bangka soil is rich with tin ore called Cassiterite. It has been mined for century.
  • It’s not only Apple, other electronic manufactures such as LG Electronics, Nokia, Sony, Blackberry and Motorola have released statements reaffirming their commitments to tackling illegal tin mining in Indonesia.
  • East Asia and Pacific produces 70% of raw mineral globally and consumes/use 60% of them. As important part of global value chain, demand for metallic and non-metallic mineral increase rapidly, as well as demand for investment.
  • Most ASEAN member countries performs poorly in the index. However, management of these resources in ASEAN are still weak and poor (RGI, 2013) where law and regulation are not coherent and integrated, regulatory body is not working independently and access of information for resources management are quite limited,  revenues from these resources are not managed transparently and accountable, and most importantly there is no a grand strategy for energy and minerals sovereignty managed by leaders of ASEAN countries, including investing plan for the future generation. As the results of this poor governance, several challenges are facing as such corruption and illegal mining which do not pay attention on sustainability of mining development. These challenges will only give benefits to certain people especially the miners (not people living on mining areas), drive consumptive behavior (not for saving or investment) and surely create environmental degradation. Poor governance also will lead ASEAN countries into phenomena of “resource curse” as revenues or mining activities will not be enough support for long term development, source of minerals only leads to conflicts (between governments, companies and civil society) poverty and environmental degradation. While in same time, the world keeps working on developing standards of good governance of mining practices to improve competitive advantages in mining sectors and ensuring that these non-renewable resource will give more benefits to many people, as such Kimberly Principles, Equator Principles, Dodd Frank Act, EITI etc.
  • VAP signed in 29 November 2004 on the 10th ASEAN Summit in Vientiane Lao PDR. The VPA is a six-year plan (2004-2010) which is the successor of the Hanoi Plan of Action to realize the end goal of the ASEAN Vision and the Declaration of ASEAN Concord II.  It focuses on deepening regional integration and narrowing the development gap within ASEAN, particularly the least developed member countries. Summit leaders call it a “vehicle to building an ASEAN community through realizing comprehensive integration.”
  • These policy direction reaffirmed by ASEAN ministers on the Hanoi Declaration on Sustainable ASEAN Connectivity in Mineral, December 2011.
  • Sub-National: State, provincial and/or district level. Combine mineral and petroleum and natural gas producers.
  • Comval BK: State of EI Transparency in ASEAN

    2. 2. Source: Bloomberg, 23 August 2012
    3. 3. International Initiatives on Mineral commodities Transparency • Transparency of origin of mineral and supply chain – Dodd-Frank Act section 1502 – SEC Rules on Conflict Mineral – Conflict-Free Smelter Program by Conflict Free-Sourcing Initiative • Companies disclose and communicate about smelters of their supply chain • 120 companies participates globally • APEC Ministers Responsible for Mining (APRM), • APEC Anti-Corruption and Transparency Working Group (ACTWG) looking at the illicit trade (forest products and minerals) • Extractive Industries Transparency Initiative
    4. 4. South East Asia: a Mineral Rich Region
    5. 5. Investment and Extraction Hot Spot • Indonesia (cooper, gold, nickel, tin, coal) and Philippines (gold, cooper, nickel) are leading mineral producer countries in Southeast Asia and Pacific. • Exploration budget for SEA and Pacific (excluding Australia) in 2011 was about $1 billion, increased 39% compared to 2010 – China maintained 4% of total exploration budget (excluded government-owned mining co) – Indonesia, Philippines, PNG together are accounted 80% of total exploration budget, 68% of all exploration sites in the region. • Southeast Asia/East Asia is important player in the global supply chain, both as producer and consumer.
    6. 6. Resource Governance Index of Asia & Pacific Countries (2013) RGI measured: •Institutional and legal setting • Reporting practice • Safeguard and quality control • Enabling environment.
    7. 7. Energy and Mineral Cooperation in ASEAN • Energy and Mineral cooperation are key cooperation under Economic Community of ASEAN • Key Cooperation: – Vientiane Action Programme (2004 – 2010) • ASEAN Minerals Cooperation Action Plan (AMCAP 2005-2010, 2011-2015) • ASEAN Plan of Action for Energy Cooperation (1999-2004, 2004-2009, 2010-2015) – Ministerial Bodies: • ASEAN Ministerial Meeting on Minerals (AMMin) • ASEAN Ministerial Energy Meeting (AMEM)
    8. 8. ASEAN Minerals Cooperation: Six Policy Direction Manila Declaration on Intensifying ASEAN Minerals Cooperation Manila, 16 October 2008: 1. ENSURE continuous development and utilisation of the mineral resources of the ASEAN Member States to enhance the sustainability of the resources and maximise the benefits to the community and the national economy, providing the necessary safety net and shield from global financial and economic turmoil; 2. ACCELERATE cooperation to work towards the facilitation and enhancement of trade and investments in minerals through harmonisation of mineral policies, incentives and taxation, standardisation of mineral resource information, and systematised flow and exchange of resource and trade information; 3. ENCOURAGE cooperation to develop policy guidelines and standards for ASEAN Best Mining Practices to promote environmentally and socially sustainable mineral development in the ASEAN region; 4. STRENGTHEN the development of institutional and human capacity building in the geological and minerals sector to ensure and adequately address the current needs and future demands of the ASEAN minerals industry and economy; 5. PROMOTE a platform for dialogue in which the private sector and ASEAN Dialogue Partners can more effectively and efficiently collaborate in mutually beneficial minerals cooperation activities in support of the building up of the ASEAN Community; 6. FOSTER concerted cooperation and joint approaches in international and regional fora in minerals such as in Asia Pacific Economic Cooperation (APEC) activities and the forthcoming United Nations Committee on Sustainable Development’s Meeting in 2010, among others;
    9. 9. Promoting Good Governance in Extractive Industries in ASEAN EITI was firstly introduced by Indonesia in the ASEAN Senior Official Meeting on Energy in Brunei on May 2011. In August 2011: First Government of Indonesia sponsored Regional Workshop linking energy security and governance standard such as EITI, attended by reps from ASEAN countries, and ASEAN energy cooperation bodies (ASCOPE). Outcome of the Regional Workshop was reported to the ASEAN Ministerial Meeting on Energy in Brunei, Sept 2011. EITI was introduced to ASOMM and has been agreed by ASEAN Ministerial Meeting on Mineral to be part of Capacity Building Program of ASEAN Mineral Cooperation Action Plan 2011-2015, in Hanoi Dec 2011.
    10. 10. EITI under the ASEAN Energy & Mineral Cooperation ASEAN Ministerial Energy Meeting (AMEM, Brunei Sept 2011) • “Indonesia proposed to include the Extractive Industry Transparency Initiative (EITI) in the mainstream work of EAS energy cooperation to promote transparency in the extractive industries, building on the excellent foundations of the EITI works. While concurring on the importance of promoting transparency, the Meeting tasked the ASEAN SOME and EAS ECTF to discuss this proposal and submit appropriate recommendations for consideration at the next EAS EMM meeting.“ ASEAN Mineral Cooperation (Hanoi, Dec 2011) • “The Ministers noted the Extractive Industries Transparency Initiative (EITI) that is knows as international quality standard on revenue collection in mineral sector and agreed to the proposal to include capacity building on revenue collection in mineral sector, and agreed to the proposal to include capacity building on EITI in ASEAN Mineral Cooperation Action Plan (AMCAP) 2011-2015.”
    11. 11. State of EITI in ASEAN Countries Philippines: Candidate country to implement EITI Indonesia: EITI Implementing country Myanmar: Candidate country to implement EITI Vietnam: Gov Study and study the adoption of EITI Cambodia: Considered to implement EITI principles
    12. 12. The case for Sub-National Extractive Industries Transparency Initiative • Decision to implement EITI in national level is usually complex – both political and process wise. • National process usually involve less participation from local government and local communities. • Sub-national EITI could be seen as “pilot” or “exercise” process for country to adopt full EITI implementation. • Sub-national EITI could capture local dynamics and adopt more measures beyond “transparency” indicators.
    13. 13. Sub-National EIT Sub-National EIT Sub-National EIT Sub-National EIT Sub-National EIT ASEAN Sub-National Extractive Industries Transparency (EIT) Network Sub-National EIT
    14. 14. • Irreversibility: how to make non-renewable resources an asset that benefits all. • Legacy: how to overcome the enclave nature of industry. • Creating wealth with equity: avoid “Race to the Bottom” – investing and distributing fairly • Diversifying economy: escape from “Dutch Disease” • Governance deficits: corruption, rent-seeking, poor participation
    15. 15. Thinking Beyond Transparency • Transforming the way ASEAN countries do mining • New Mining Framework: – RESPECT Human Rights – PROTECT Environment, Land and Water – MAXIMIZE Local economy and benefits for local communities – TRANSPARENT Revenues Collection and Management – ENSURE Sustainable Mining Practices (Artisanal, Small Scale and Large Mining)
    16. 16. THANK YOU Email: Website: