Opportunities and Challenges of Contract Transparancy in the Implementation of EITI Standards

2. 2 A. Introduction 1) Article 33 of the 1945 Constitution 2) Extractive Industries Transparency Initiative, EITI Standard 2019, https://eiti.org/news/eitilaunches-2019-eiti-standard 3) xtractive Industries transparency Initiative, EITI Standard 2016 2.4, see also EITI 2013 2013 point 1.5 In Indonesia, natural resources including oil and gas, mineral and coal mining are controlled by the state and managed for the greatest prosperity of the people1 . This means that the country and its citizens are the true owners of the natural resource wealth. While, the utilization is represented by the government so that it is managed as well as possible for the purpose of people’s welfare in accordance with the stipulated provisions. In re- alizing the benefits of welfare, transparency and accountability in the management of natural resources are absolutely essential. Extractive Industries Transparency Initiatives (EITI) is a global initiative that promotes transparency and accountability in extractive industry governance, especially for EITI Compliance Coun- try and Indonesia is one of them. Until 2020, there are 52 countries that are incorporated as EITI implementing countries. EITI Implementing countries recognize the importance of better governance2 although not all implementing countries comply with the provisions of the EITI standard. Transparency and accountability that are encouraged and agreed upon by EITI implementing countries include aspects: (1) Multi-stakeholder supervision, (2) Legal and institutional frameworks including licensing and contract transparency, (3) Transparency in exploration and production aspects, (4) Transparency of sources of income and taxes, (5) Transparency of allocation / use of income, (6) Transparency of social and economic expenditure from extractive industries, and (7) EITI results and impacts. One of the global norms that is getting stronger and agreed upon in the 2019 EITI standard is the publication of contract documents or licensing documents in the extractive industry sector. EITI standards have encouraged contract and permit disclosure since the 2013 and 2016 EITI standards were agreed by implementing countries. However, the disclosure of contracts and permits meant in the 2013 and 2016 EITI standards is still option- al3 or not required. Only in 2019, at the EITI Global conference in Paris, it was agreed that extractive sector contracts and permits must be opened. This means, all EITI implementing countries including Indonesia are required to carry out this mandate, and will be taken into account in evalu- ating the progress of implementing EITI in the next global forum. Therefore this EITI instrument is an opportunity to encourage the acceleration of the implementation of contract and permit disclosure policies in Indonesia.

3. 3 Graph 1: Progress of Contract and Permit Disclosure Practices in EITI Implementing Countries in 2020 Source: https://eiti.org/blog/taking-stock-of-contract-transparency 4) EITI Indonesia Annual Report 2017 5) Robert Pitman and Rani Febrianti, Why Mining Agreements in Indonesia Must Be Opened to the Public, Natural Resource Gover- nace Institute, 2019. See also Contract of Work between the Government of the Republic of Indonesia and PT Freeport Indonesia, www.sec.gov/Archives/edgar/data/831259/ 000083125901500022 / exh101.txt Although it has become an EITI implementing country, the Government of Indonesia has not yet opened the contracts and permits to the public for various reasons4 . In fact, the encouragement of contract disclosure policies is not new. The practice of contract and permits disclosure in extractive industry has been carried out by many countries and continues to experience development. According to Natural Resource Goverment Initia- tive (NRGI) 2020 data, as of June 2020, as many as 47 countries in the world have opened part of extractive industry contracts, of which 31 are EITI implementing countries. In addition, there are 27 countries that have included contract disclosure in their country’s laws and regulations. In fact, there are not a few companies that support contract disclosure, one of which is the Freeport company which has opened contracts in full (full document) for their companies operating in Indonesia5 .

4. 4 B. Contract Transparency in 2019 EITI Standard 1. Development of Contract Transparency in EITI Standards 6) Hubert, Don and Rob Pitman. Past the Tipping Point? Contract Disclosure within EITI, 11. Natural Resource Governance Institute, 2017. 7) See the 2013 EITI Indonesia civil society representative letter (Faisal Bashri, Maryati Abdullah, Wasingatu Zakiyah) https://pwypindonesia.org/id/rekomend-OPE-share- repair- standard-improvement-eiti-global-related-transparency-contract-contract/ 8) 2013 EITI Standards section 12. 9) EITI Standard 2016, section 2.4 The publication of contract documents in EITI began to be initiated in 2012 and began to be consult- ed with multi-stakeholder groups (MSG) in EITI implementing countries starting in early 2013. Initially, not all implementing countries supported contract transparency initiatives included in the EITI stand- ard6 . In contract transparency consultations, three options were produced, namely: (1) requiring the opening of the contract to the public, (2) requiring the contract transparency with the exception and (3) encouraging the contract transparency to the public (not requiring). Based on the three options, of the 20 countries involved in this consultation, 11 countries supported that contracts transparency must be implemented and 6 other countries chose the option to require the contract transparency with some exceptions. Meanwhile, representatives of civil society who sit on EITI Indonesia and on the global EITI council firmly support options that require contract transparency to the public.7 The variety of arguments from the MSG against the perspective of disclosed or closed the contracts both from companies and some governments, in the end, aspect of contract transparency is included in the EITI standard 20138 . However, the option chosen is only to “encourage” the contract transparency , which means that the fulfillment of this standard is optional (not required). Whereas, for changes in the EITI standard 2016, the prereq- uisites in the scope of contract information publication have also not changed. In the EITI standard 2016 point 2.4, EITI implementing countries are still encouraged to open any contracts and permits they have, which are relevant to extractive industries9 . Referring to the dynamics at the global level, efforts to contracts and permits transparency develop more rapidly. As described in the previous section, more than half of the EITI implementing countries have begun to open their contracts and permits to public. Contract transparency practices is also carried out in countries that are not implementing EITI. Even quoted from various lit- eracy shows that many countries and companies feel the benefits by opening contracts. From the company aspect, for example Total company in Myanmar, the contract holder in the Yadana gas project, which is the most productive gas field in

5. 5 Myanmar to date. Total said that opening contract documents did not have a direct impact on oper- ations in Myanmar and instead assisted the company in building confidence10 . These conditions become one of the strengthens of EITI to increase 10) Sebastian Sahla, Hosana Chay and Rob Pitman, How and Why the Myanmar Government Should Publish Oil and Mining Con- tracts, Natural Resource Governance Institute, 2019, p. 5, see also Sebastian Sahla, “Contract Transparency is Good for Business in Myanmar, Total Said,” The Myanmar Times, standards for member countries in contract transparancy. In the EITI standard 2019, the contracts transparency becomes an obligation for the implementing countries, including Indonesia. Diagram 1: Progress of Arrangement of Opening Contracts in EITI StandardsI Source: EITI Standard Documents 2013,2016 & 2019, processed by author 2. Contracts Transparency in EITI Standards 2019 In 2019 EITI has issued a new standard, which is a prerequisite for contracts and permits transparency to become one of the updated standards. EITI Standard 2019 requires implementing countries to publish contracts and permits granted or amended after January 1, 2021. EITI also encourages implementing countries to publish contract and permit documents that are given or amended before Jan- uary 1, 2019. Publication of contracts and permits covering exploration and exploitation activities oil and gas and minerals must also be included in the EITI work plan from 2020 onwards. The contract and licensing publication policies governing the exploration and exploitation of oil, gas and mineral which must be documented by the implementing country of the EITI include: (1) an explanation of whether there are policies and regulations (Laws) that mandate opening or pro- hibiting contracts and permits, (2) explain the policy of publication of contracts and permits issued, (3) Document the MSG EITI discussion process relating to contract transparency, (4) document changes that are relevant to the contracts and permits transparency both planned and ongoing, ( 5) submit a list of all contracts and permits that are EITI STANDAR 2013 1. To encourage 2. All contracts and permits 3. Full text with supporting document and transfor- mation EITI STANDARD 2016 1. To encourage 2. All contracts and permits 3. Full text with supporting document and EITI STANDAR 2019 1. Requiring/obligate for open contracting on Janu- ary 1, 2021 2. To encourage open contracting before 2021 3. Full text with supporting document and transfor- mation 4. Requirement integrated into EITI’s work plan

6. 6 still active and provide an explanation of which is available to the public and which is not, (6) Explain the published contracts and permits complete with references where the documents are published, (7) Provide an explanation related to what obstacles (legal or technical) if the contract and permit documents are not published. Contracts and permits are important part of the legal framework that contains provisions on the rights and obligations of the parties. In general, matters that are regulated include work obligations, fiscal requirements, social and environmental provisions, safety standards, local content 11) Source: ESDM accessed from https://modi.minerba.esdm.go.id/p leaders/perizinan?t=2020 requirements and others. In Indonesia, there are several types of contracts or permits in the oil and gas and mineral mining sectors in accordance with applicable laws and regulations. In the upstream oil and gas sector, the management contract is through a Production Sharing Contract (PSC). The PSC regulates the production sharing scheme between the government as the owner and right holder of oil and gas resources and the implementing contractor (KKKS). Besides PSC, other schemes that are put in place are the Joint Oper- ation Body (JOB) and Gross Split which are based on the division of calculations on gross production results and there is no cost recovery mechanism. Graph 2: Classification of Oil and Gas Management Permits in Indonesia Source: Ministry of Energy and Mineral Resources RI 2020, processed by the author In the mineral and coal mining sector also ap- plies several types of contracts / permits. At least, there are 7 types of mining licenses and contracts that apply in Indonesia, namely: Contract of Work (KK), Mining Business License (IUP), Coal Mining Business Work Agreement (PKP2B), Special Min- ing Business License (IUPK), Community Mining License (IPR), Mining Services Business License (IUJP),Special IUP-OP for processing and refining and special IUP-OP for transportation and sales11 .

7. 7 Graph 3: Classification of Mineral and Coal Mining Licenses in Indonesia Source: Ministry of Energy and Mineral Resources RI 2020, processed by the author Based on the EITI Standards 2019, the Govern- ment of Indonesia is obliged to publish all contract and licensing information issued after January 1, 2021, and encourage all licenses or contracts that are still in effect today to be made public. In the EITI Indonesia Report 2017, the Government stated that basically the general provisions of extractive sector contracts have been published through the Ministry of Energy and Mineral Re- sources website, which includes company profiles, company owners, work areas, and others. Howev- er, this does not meet the provisions of the EITI standard 2019 section 2.4. The definition of contract and licensing publications referred to in the 2019 EITI standard 2.4, especially points D and E clearly states that the contract transparancy includes the full text of the concession contract which includes production sharing contracts and other agreements given or made by the government governing oil and gas exploitation and mineral resources, including the full text of the attachments, as well as the full text of any changes to the contract documents. Mean- while, permits that must be published are full text of permits, lease agreements, ownership information or permits granted by the government to companies / individuals in managing oil and gas and mineral resources, complete text of attachments, as well as full text of any changes to documents permission.

8. 8 3. The Role of EITI in Facilitating Contract Transparency Experience in several implementing countries, EITI has an important role in facilitating the contract transparency in the extractive sector. The Natural Resource Governance Institute (NRGI) study men- tions some of the roles of EITI in each implementing country in conducting or facilitating contract disclosure, namely: (1) Discussion and Debate Forums. In some EITI implementing countries, discussion forums, dia- logues and debates at the national EITI MSG forum have succeeded in encouraging the implementation of contract transparency. As in Mongolia, the EITI working group succeeded in removing the confidentiality clause of contract documents. Other countries such as Myanmar, through the EITI discussion forum have succeeded in including contract transparency as one of the recommenda- tions in their first EITI report. (2) Facilitating the Opening of Contract Docu- ments, in some countries contract transparency is carried out through the EITI process. As in the Philippines, stakeholders use EITI as a forum to encourage National Commission for Indigenous Peoples to disclose company contracts to indigenous people / communities around the mine in order to monitor company compliance with commit- ments agreed in the form of social programs and royalty payments. In Azerbaijan, the national EITI secretariat is involved in encouraging companies to agree to disclose contracts. The same practice also occurs in several other countries such as in Timor-Leste and Malawi. (3) Contract Publication Room, in other countries, the EITI forum has a role in publishing contract documents on their EITI website. As Azer- baijan, Chad, Republic of the Congo, Democratic Republic of the Congo (DRC), Liberia, Philippines and Senegal. Even Philippines created an EITI contract portal specifically in collaboration with resourcecontracts.org. In 2015, Philippines launch- es national website to issue contracts in the open data format. There are 87 extractive sector contracts, 44 main contracts and 43 supporting documents that have been opened by the Philippines. (4) Regulatory Encouragement. EITI principles and standards related to contract transparency can be used as an accelerator in encouraging and harmonizing the implementation of contract transparency policies so as not to conflict with the laws and regulations of each implementing country. As a result, in Liberia, in the LEITI Law 2019, it was stated that contract and licensing information in the extractive industry sector was open to the public. Furthermore, Tanzania also has an Extrac- tive Industries Transparency Act issued in 2015, which requires that all new concessions, contracts and licenses must be made public.

9. 9 How about Indonesia? The EITI Indonesia Secre- tariat has also played a role in encouraging the government to open contracts and permits in the extractive sector. Several things have been done related to contract transparency12 , such as: opening the main provisions of extractive sector contracts in the EITI report 2015 Oil and gas Produc- tion Sharing Contracts can be accessed at: http:// eiti.ekon.go.id/draft-kontrak-psc/ and for Contract of work and PKP2B contained in appendix 2 of the EITI Indonesia Report 2015. In addition, the EITI In- donesia Secretariat has also facilitated a forum for discussion related to contract transpaerncy with relevant stakeholders including the Central Infor- mation Commission, in which the Decision of the Central Information Commission has stated that information on oil and gas and mineral and coal contracts is open. However, to date this has not been followed up by the agencies that controlled the document, namely the Ministry of Energy and Mineral Resources (ESDM). Civil society in Indonesia has also made a number of efforts in encouraging the government to open contracts. One effort is to intensify discussion / debate forums about opening contract documents in MSG forums13 . In addition, in order to prove the government’s commitment in disclosure of contract information, Yayasan The Center for 12) EITI Secretariat material, accessed from https://pwypindonesia.org/eiti-dan-from-contract-in-industri-extraction/ 13) https://eiti-indonesia.id/secretariat/mendorong-key-kontrak-dan-perizinan-di-industri-ekstraktif/ Public Information Development (YP2IP) has also accessed PT Freeport Indonesia, PT Kalimantan Timur Prima Coal and PT Newmont Mining Cor- poration work contract information. Not only that, YP2PI also accessed PT Chevron Indonesia’s PSC contract documents which are controlled by BP Oil and gas (now SKK Oil and gas). Information Com- mission through KIP Decree No. 197 / VI / KIP-PS- MA / 2011 concerning Public Information Disputes between the Public Information Development Center Foundation and the Ministry of Energy and Mineral Resources regarding contract documents are declared open and inkrach. Likewise with the information that is controlled by BP Oil and gas, KIP through KIP ruling No. 356 / IX / KIP-PS-MA / 2011, which states that PSC contracts are partly open information. However, this encouragement has not yet succeeded in building awareness of the Indonesian government to proactively open information as practiced by other countries. Therefore, better collaboration is needed between the government, companies and civil society, by maximizing the role of the EITI Indonesia secretariat in bridging the implementation of extractive industry transparency, including in the aspects of contractual openness and licensing.

10. 10 4. EITI Guidelines for Implementing Contract Transparency EITI has provided guidance containing steps that can be carried out by implementing countries in implementing contract transparency and integrating in the EITI work plan14 . The steps that can be done are as follows: 14) EITI International Secretariat, Checklist for integrating plans for contracts transparency in work plans, 2020 ⁘⁘ Build Intensive Discourse Objectives for Contract Transparency. MSG forum needs to intensify discussions related to the purpose of contract and permit disclosure as well as various issues in the management of the extractive industries which emphasize contract transparency as one of the solutions in improv- ing the management of natural resources. This is a step to equalize stakeholder perceptions (government, companies, civil society). ⁘⁘ Stakeholder Engagement. it aims to build the seriousness of the commitment of the actors in contract transparency such as the Government and the Company. Civil society needs to con- tinue to push for stronger and more effective advocacy such as access to more massive information and proving the benefits of contract transparency for governments and companies. In this case, experts are also needed as expert judgment. ⁘⁘ Identification of all extractive industry contracts. In planning the contract transparency, it is necessary to carry out an inventory of contracts and permits, including potential licensing contracts that will be issued after January 1, 2021. In Indonesia, there are at least 189 PSC contracts and 6,932 mineral and coal sector permits that must be identified, including the existence and acquisition of all these documents. ⁘⁘ Mapping the Conditions of Contact Trans- parency and Conducting a Legal Review. The legal review is important to be seen as an effort to contracts and permits transparency in EITI implementing countries. Including mapping whether there are government and company initiatives that currently have voluntarily opened contracts and permits they have. This process has actually also been carried out in Indonesia, discussions around the legal review of contract transparency including the decisions of the Informastion Commission, PN, Su- preme Court. Openness in Indonesia is familiar with the terms of the consequence test and public interest test as regulated in Law Number 14 of 2008 on Public Information Disclosure. This public consequence test can be used as a way to ascertain whether there is information except in the contract/permit document. ⁘⁘ Establish the Contract Transparency Meth- od. Many countries practice contracts transparency with different methods. Some of them opened it via the resourcecontracts.org plat- form as done by Sierra Leone, Philippines. Or

11. 11 specifically through a government website as done by Ghana, Mexico, Timor Leste, or through a company website. ⁘⁘ Increased Capacity in Utilizing Contracts Transparency. The EITI Secretariat needs to increase capacity for contract and licensing information users. Because, opening the contracts is not enough and is not the main goal but rather how stakeholders can use the contract documents and permits to encourage improvements in the governance of extractive industries. ⁘⁘ Carry out Contract Publications and Permits. In accordance with the EITI standard 2019, point 2.4, the disclosure of the contract and permit referred to includes all the contents (full text) including attachments, changes in the contracts and permits relevant to exploitation and exploration activities. For this reason, the publication step that can be done is to identify and make a list of contracts published in the agreed publication method. The things that must be done are: identify what units or agencies will carry out the publication of the contract, as well as the preparation of regulations or SOPs in the process of contract publication. ⁘⁘ Set Target Time and Resources. In preparation of EITI work plans including aspects of contract transparency need to set time targets in the implementation process. In addition, hu- man resources and funding are also needed in facilitating or financing contract transparency. For this reason, MSG needs to build agreements and develop timelines that are not sep- arate in the EITI 2020 work plan document and so on.

12. 12 C. Implementation Opportunities & Challenges in Indonesia Transparency and accountability in the management of extractive industries absolutely must be realized, to overcome the problems that arise in the management of natural resources such as corruption, conflict and environmental damage. Implementation of contract and permit disclosure policies is a must, in order to provide symmetrical information between stakeholders, in this case the government, companies, communities regarding the exploration and exploitation activities of natural resources. Implementation Opportunities There are number of things that are likely to be driving factors the implementation of contract and licensing transparency can be implemented in Indonesia, namely: ⁘⁘ First: Publication of contracts and licensing “Being Necessary / Required” in the EITI Standards 2019. Indonesia as an EITI member country, of course, must carry out the man- dates that become the EITI agreements and standards. The necessity on contracts transparency in the EITI standard 2019 should be able to increase the impetus for the Indonesian government to implement a policy on contract transparency. There have been many good examples of how EITI in several countries has succeeded in encouraging contract transparency. ⁘⁘ Second: Publication of contracts and permits is mandated by statutory regulations. In Ar- ticle 11 paragraph (1) letter e of Law No. 14 of 2008 concerning Public Information Disclosure (UU KIP) stipulates that public bodies are required to provide public agency agreement documents with third parties. Then, in its de- rivative regulation, namely Information Com- mission Regulation No. 1 of 2010 concerning Public Information Service Standards, in Article 13 paragraph (1) letter e emphasizes the obligation to publish the agreement documents as regulated in UU KIP. The agreement document certainly also includes contracts in the extractive sector, contracts for procurement of goods and services. Although, there are regulations governing the closure of PSC contract document information on oil and gas as stipulated in Government Regulation No. 35 of 2004 concerning Upstream Oil and Gas Business Activities, but these rules are very likely to be reviewed. ⁘⁘ Third: Contracts and Licensing Disclosure has been Declared as Open Information based on the Decision of the Central and Re- gional Information Commission. Refer to the

13. 13 results of the PYWP study15 that contract and permit documents have been declared open through the decision of the Central Informa- tion Commission and the regional Information Commission. In addition to the decision of the information dispute between YP2IP that has been mentioned in the previous section, Infor- mation Commission of Riau Province has also decided a dispute between Novrizon Burman vs SKK Oil and gas in the Sumbagut region, that the PSC contract document operating in Riau is open information. Although finally the decision of Information Commission of Riau Province was annulled by the South Jakarta District Court when SKK Oil and gas filed an appeal. In addition, the community group Peo- ple’s Coalition for the Right to Water (KRUHA) vs. The DKI Jakarta Province PDAM is linked to a copy of the Cooperation Agreement Contract between PAM Jaya with PT Palyja and PT TPJ / Aetra. Then also, the Institute for Research and Application of Discourse vs. PT Blora Patragas Hulu related to the agreement document between PT Blora Patragas Hulu and PT Anugrah Bangun Sarana Jaya as a financial partner in managing 2.1% of the Cepu Block participating interest in shares owned by the Blora Regency Government. The disclosure of licensing documents is also mandated by the East Kalimantan Provincial Information Commission in the decision of the JATAM Kaltim dispute related to the IUP document in Kutai Kartanegara Regency. The decision of the East Kalimantan Provincial Information Commission was strengthened by the Supreme Court decision No. 614K / TUN / 15) Dessy Eko, Sulastio, Contract Transparency and Licensing in the Extractive Industries, PWYP Indonesia, 2018. 2015 which stated the IUP document was open information. JATAM Kaltim only got a copy after three years. In addition to the information dispute process, Information Commission of Riau has also issued a breakthrough encouraging the disclosure of pro-active information in the extractive industry sector. The breakthrough was issued in the form of an Information Com- mission Decision without going through an information dispute process, which was intended to encourage the Government in Riau Province to open information without having to be asked by the applicant (proactive disclosure). ⁘⁘ Fourth: Best Practices in Several Countries that has been Open the Contracts and Li- censing to Public. Until now, there have been at least 47 countries that have opened contracts, either in part or in full, of all contracts and permits they have. Not only that, practices in several countries that open contract and licensing documents have also been carried out at the initiative of the company. These practices can be argued that opening a contract does not have a negative impact on industrial management. Conversely, in some countries, opening contracts has a positive impact on extractive industries in their countries. As in Peru, publication of contract documents for mining exploration and exploitation contributes to increasing royalty revenues from an average of 5% to 25%. Other good practices in Liberia, transparency policy in mining governance help the country to attract investment.

14. 14 Graph 3: Countries that have opened extractive sector contracts Afganista Both, Nearly all Albania Both, Nearly all Armenia Mining, Nearly all Burkina Faso Mining, Some Cambodia Mining, Some Chad Both, Nearly all Democratic of Congo (DRC) Mining, Some Germany Both, Some Ghana Oil and gas, Nearly all Guatemala Oil and gas, Nearly all Guinea Both, Nearly all Guyana Oil and gas, Nearly all Honduras Oil and gas, Nearly all Kyrgyz Republic Mining, Some Liberia Both, Some, Mining: Some Malawi Oil and gas, All Mali Mining, Some Mauritania Both, Some Mexico Oil and gas, Nearly all Mongolia Keduaya, Some Mozambique Both, Nearly all Niger Mining, Some, Mining, Some Peru Oil and gas, Nearly all Republic of Congo Both, Some São Tomé and Prínc- ipe Oil and gas, Some Senegal Both, Nearly all Sierra Leone Mining, Nearly all Timor Leste Oil and gas, Nearly all Togo Mining, Some Ukraina Both, Some United Kingdom Oil and gas Nearly all Australia Both, Some Azerbaijan Both, Some Bolivia Oil and gas, Some Colombia Both, Some Dominican Republic Mining, Nearly all Equatorial Guinea Oil and gas, Some Greece Oil and gas, Some Iceland Oil and gas, Nearly all Iraq (kurdistan) Oil and gas, Some Lebanon Oil and gas, Nearly all New Zealand Both, Nearly all Philippines Mining, Some, Mining Some Tunisia Oil and gas, Nearly all United States Both, Some Venezuela Oil and gas, Some Source: NRGI 2020, processed by the author

15. 15 The study o PWYP identified a policy of contracts and permits transparency16 can provide benefits namely; (1) helping the government to get better contract agreements in the management of natural resources, as happened in Peru and Liberia. 16) Ibid, 17) EITI Indonesia Report 2017, page 7. 18) See https://eiti-indonesia.id/secretariat/risalah-rapat-tim-pelaksana-eiti-25-november-2019/ (2) Optimizing policy supervision through strong public participation (3) Increasing public trust in managing natural resources both to the government and companies. Implementation Challenges Although there are various opportunities that are driving factors to encourage the Indonesian government to implement EITI standards 2019 on contracts and permits transparency, there are still some challenges and obstacles that have caused the Government of Indonesia (Ministry of Energy and Mineral Resources) to date not be willing to pro-actively open the contract and permits documents and easily accessible to the public. The challenges include: ⁘⁘ Lack of strong will from policy makers (the government) and weak awareness of the importance of public information disclosure in the management of natural resources, including contract and licensing documents. The developments regarding efforts to open contracts and permits in the Indonesian EITI discourse, show that the Ministry of Energy and Mineral Resources17 remains to the argu- ment that the PSC contract document is a document that is not opened to the public based on the decision of the Supreme Court (MA). ⁘⁘ Opening is still limited to documents declared open by the Information Commission. Mean- while, for the mining sector the government will only open three work contract documents (KK) which have been decided to be open by the Central Information Commission with pre-req- uisite conditions for certain sections. The CoW documents are Freeport, Newmont, and Kaltim Prima Coal based on KIP Decree No: 197 / VI / KIP-PS-M-A / 2011. Meanwhile, the contract documents or other permits will not be opened. The latest EITI mandate has not yet affected the government’s position on this issue. In the EITI MSG forum held on November 25, 2019, there was no agreement between the parties. The Ministry of Energy and Mineral Resources and SKK Oil and gas remain in a position not to open pro-actively except in documents that have been declared open upon the decision of Information Commission. Even though the MSG forum was held after the EITI standard 2019 agreement was published18 . ⁘⁘ Licensing is problematic. The management of natural resources in Indonesia faces the prob- lem of corruption that occurs when the mechanism and process of granting permits is carried out. The KPK since 2009 has handled 27 cases of corruption in the natural resource sector, in-

16. 16 cluding plantations, forestry and mining19 . This issue has the potential to be an implicit reason why the government does not open contract and licensing documents. The government ignored the order of Information Commission and MA decisions related to the order to open the Right to Business (HGU) document. Even the Ministry of Economy actually issued a Cir- cular Letter No.AN.03.01 / 265 / D.II.M.EKON / 05/2019 which states that the HGU document is an exempt document. At the same time, various findings were made regarding corrupt practices, as well as unlicensed land tenure in natural resource management both in the plantation and mining sector. Coordination and Supervision by KPK in 2014 also found that many licenses overlapped with one another due to the weak due diligence process when granting permits, even there were IUPs that did not have NPWP and whose office address was unclear. As a result, out of approximately 11 thousand licenses, less that 50% are eligible for clean and clear.20 ⁘⁘ Information on Contract Documents Has Been Decided Closed by the Supreme Court. Two cases of information dispute on PSC contract documents that have occurred in Indone- sia have been terminated as information that is not required to be made public by the District Court and the Supreme Court (MA). Although previously it has been stated as open informa- 19) https://nasional.tempo.co/read/1341909/kpk-as-handling-27-kasus-korupsi-di-sector-sumber-daya-alam 20) ee the KPK Korsup report on the Mineral and Coal Mining sector: https://acch.kpk.go.id/id/berkas/litbang/l report-korsup- min- ing-mineral-and-batubara-dalam-gn-psda 21) South Jakarta District Court, Decision Number 109 / Pdt.Sus-KIP / 2019 / PN.Jkt.Sel, p. 33. tion by the Information Commission. The two cases are the completion of the PSC information of PT. Chevron Pacific Indonesia, which was carried out by YP2IP in 2011 and recently a PSC dispute occurred throughout the oil and gas companies operating in Riau Provinve by Noprizon Burman in 2019. The South Jakarta District Court (PN Jaksel), over the Noprizon information dispute through 109 / Pdt.Sus decision. -KIP / 2019 / PN.Jkt.Sel, states that information related to PSC is information that is not required to be disclosed to the public because it contains confidentiality in it21 . The South Ja- karta District Court’s decision did not explain what part of the PSC document was deemed confidential. While according to the author, the panel of judges only used the consideration of expert statements presented by SKK Oil and gas. In fact, the decision was strengthened by the Supreme Court with decision number 211 K / Pdt.Sus-KIP / 2020. ⁘⁘ The difference in the views of the judges of the judiciary on the perspective of information disclosure is a challenge itself, especially in encouraging contract disclosure in Indonesia. The lack of knowledge and under- standing of the substance of public information known by the judges will potentially ham- per information disclosure. The use of court instruments in openness including contracts cannot be denied, because Law No. 14 of

17. 17 2008 concerning Public Information Dislosure regulates the mechanism of information dispute resolution which is resolved through the Information Commission at both the central and regional levels. Do not stop at that stage, if the disputing parties object to the Informa- tion Commission’s decision then the next stage the parties may sue to the State Administra- 22) Law 14 of 2008, article 47 (paragraph 1.2) 23) Ibid, article 50 tive Court (TUN) for state / government public bodies and the District Court (PN) for non-government public bodies22 . The next stage, if ob- jected to the TUN / PN verdict, then the parties can bring a lawsuit back to the Supreme Court (MA) as an instrument for resolving the final dispute (Cassation)23 .

18. 18 D. Recommendation Contract and licensing documents transpaency is a mechanism that must be carried out by the government as a step to create better natural resource governance. The EITI instrument is a strategic opportunity to achieve this. For this reason, alternative and recommended policy steps that need to be taken include: Strengthening EITI principles in implementing Government policies, specifically related to contract/permit transparency, as well as strengthening the MSG model to strengthen awareness of the importance of contract transparency in avoiding social conflicts with the community and strengthen oversight of contract compliance for payment of state revenues/taxes, as well as other rights and obligations stated in the extractive industry contract/permit. Relevant ministries/institutions (ESDM, SKK Oil and gas, BPH Oil and gas, BKPM, DPR) can develop an openness portal that gradually open oil and gas and mineral mining contracts/permits which is currently actively carrying out exploration and exploitation activities in Indonesia. This portal can be developed collaboratively with industry players (as contracting parties/permit holders) and also with other parties such as civil society. The portal can also refer to several global portals which have also opened mining contracts /permits. Policies and regulations review under the law that are not in line with transparency of contracts and permits to the public that are in conflict with the FOI Law; It is necessary to strengthen the capacity of public information dispute settlement instruments, such as the Courts (TUN / PN) and the Supreme Court in resolving public information disputes. Conduct a consequence test and test the public interest on the substance of the information contained in contracts and permits, to obtain certainty of the reasons for the confidentiality of the contract, as well as gain consideration of the advantages and disad- vantages if opening a contract / permit the mining sector. Intensifying discourse with stakeholders and building public awareness on the benefits and best practice of countries that have implemented contract/permit transparency, as well as the benefits obtained for the industrial sector and the economy in Indonesia on a macro scale if contract transparency is carried out. 1 2 3 4 5

19. 19 Reference: Dessy Eko Prayitno, Sulastio, Elizabeth Napitupulu, Contract Transparency and Licensing in the Extractive Industries, Publish What You Pay (PWYP) Indonesia, February 2018 Don Hubert and Rob Pitman, Past the Tipping Point? Contract Disclosure within EITI, Natural Resource Governance Institute, March 2017. EITI International Secretariat, The EITI Standard 2019, October 2019. ________, The EITI Standard 2016, 15 February 2016. ________ , Checklist for integrating plans for contracts transparency in work plans, January, 2020 ________, Contract Transparency In Oil, Gas And Mining Opportunities For Eiti Countries, June 2018 EITI Indonesia Secretariat, EITI Indonesia Annual Progress Report, January-December 2017. EITI Indonesia Secretariat, EITI Indonesia Report 2015. Corruption Eradication Commission, Mineral and Coal Mining and Coordination and Supervision Report: Findings, Follow-Ups and Achievements, 2018. Natural Resource Governance Institute, Contract Transparency, Creating Conditions To Improve Contract Quality, 2018 Robert Pitman and Rani Febrianti, Why Mining Agreements in Indonesia Must Be Open to the Public, Nat- ural Resource Governance Institute, 2020 Sebastian Sahla, Hosana Chay and Rob Pitman, How and Why the Myanmar Government Should Publish Petroleum and Mining Contracts, , Natural Resource Governance Institute, May 2019 Laws & Regulations: Law Number 14 of 2008 concerning Openness of Public Information Supreme Court, Supreme Court Decision No. 211 K / Pdt.Sus-KIP / 2020. South Jakarta District Court, VerdictNumber 109 / Pdt.Sus-KIP / 2019 / PN.Jkt.Sel,

20. 20 PWYP Indonesia is a coalition of civil societies for transparency and accountability of extractive resource governance in Indonesia. PWYP Indonesia was established in 2007, legalized under Indo- nesia’s law in 2012 as Yayasan Transparansi Sumberdaya Ekstraktif, and affiliates to the network of PWYP global campaign. PWYP Indonesia works in transparency and accountability along the chain of extractive resource, from development phase of contract and mining operation (publish what you pay and how you extract), production phase and revenue from industries (publish what you pay), to the spending phase of revenue for sustainable development and social welfare (publish what you earn and how you spent). Address Jl. Tebet Timur Dalam VIII K No. 12, RT 001/009, Tebet Timur, Tebet, Kota Jakarta Selatan, DKI Jakarta 12820 Social Media pwypindonesia — Instagram pwyp_indonesia — Twitter Publish What You Pay Indonesia — Facebook Publish What You Pay Indonesia — Linkedin Contact sekretariat@pwypindonesia.org — Email www.pwypindonesia.org — Website Publish What You Pay Indonesia [Yayasan Transparasi Sumberdaya Ekstraktif] This Brief was prepared by team of national secretariat office of Publish What You Pay Indonesia. The publication of this report is made possible with the support of Hivos’ Open Contracting Pro- gram. The contents expressed in this report are the responsibility of Publish What You Pay Indo- nesia and do not reflect the opinions and views of Hivos.

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