GPSA projects

Country: Indonesia
Sector:Extractives
Executing Agency: Yayasan Transparasi Sumber Daya Ekstraktif (Publish What You Pay Indonesia)
Open Society Foundations Parallel Grant: $475,000
Implementation dates: Approval date – 15 Nov 2020, Closing Date – 31 Mar 2022

The extractive sector plays an important role as an engine of growth in Indonesia. Government revenues from the extractive sector have grown to encompass 28% of total government receipts. It represents more than 50% of total exports, out of which 22% constitutes mining. With vast reserves of coal, gold, tin, and nickel, Indonesia is one of the major players in the global mining industry.

Despite government efforts of enhancing transparency and good governance in the mining sector and improving the disclosure of natural resources revenues illustrated by Indonesia becoming in 2014 the first country in ASEAN to achieve compliance with the EITI by implementing EITI standards to achieve transparency and improve governance in its extractives sector, the mining sector, particularly the process of awarding and enforcing mineral licenses, is characterized by weak transparency, accountability and public participation. Some of the main factors behind this situation include: a plethora of regulatory regimes, competing institutional arrangements, and limited capacity at the subnational level. Provinces have different, and often contradictory, mining rules and regulations, creating unnecessarily lengthy and complicated procedures that undermine the monitoring and enforcement of mineral licenses.

Institutional overlaps tend to create confusion and undermine efforts to uniformly implement mining regulations and common standards for collecting and sharing information related to mineral licenses. Furthermore, the weak national cadastral and central registry for mineral licenses limits the ability of government authorities and citizens to quantify the number and types of mineral licenses awarded, information that is necessary for effectively enforcing and monitoring mineral licenses.

Publish What You Pay Indonesia with its local partners in the 3 provinces of in 3 Provinces of Aceh, East Kalimantan and South East Sulawesi, contributed to improving the management and governance in the mining sector at the subnational level by developing a collaborative social accountability mechanism called multi-stakeholder forums (MSFs).

Initially the consortium of CSOs conducted a participatory diagnostic scoping study to describe existing mechanism and issues as well as challenges in implementation of regulations and processes in awarding and monitoring compliance mineral licenses in targeted provinces, as well as to identify procedures that may be vulnerable to capacity gaps, duplications, non-transparency and regulatory inconsistencies. The findings of this scoping study were used as baseline for the organizing of MSFs. The findings were responded to by the provincial authorities, however, concrete corrective actions are pending with regards to improving licensing procedures for better sector transparency and good governance, as there were changes in the legal hierarchy as an effect of the newly enacted Revision of the Law on Mining Management (UU Minerba). The Law now revokes Authority from Provincial to national level and concrete implementation of the clear areas of responsibilities is yet to be clearly defined.

The MSFs were attended by representation from provincial government authorities (ESDM, Ombudsman KIP, Bappeda, etc), citizens, CSOs, and private sector. The MSFs agreed and supported PWYP’s analysis that was conducted and presented five main issues in mineral licensing: 1) Inconsistent and weak regulation, 2) Limited institutional capacity, 3) Lack in Permit issuance Transparency, 4) Limited public participation, and 5) Weak Oversight Mechanism.

Another MSF conducted was related to revenues/transfers of state income to the local level budget post (Provinces (DBH From National to APBD), District (DBH from Provinces to APBD) and Village Level Fund (ADDD/APBDES). PWYP presented the Report that was made by the National Partner (SEKNAS Fitra) related to problems on budget transfers from National to Local Level. This paper was also discussed with local CSOs, District Government and Community on how to clarify the budget transferred to the village level. Part of the recommendations of the discussions was creating a budget tracking mechanism by using scorecards. From these MSFs, the following findings were generated; 1) Lack of transparency and openness relating to revenue management and its allocation from national level to regions 2) Lack of local community participation in planning and budgeting process 3) Little relevance of the impact of budget management on the quality of public service and social welfare.

These findings were discussed, and it was agreed that they should be addressed and improved by communities, local CSO’s, local government and also representation from Minister of Finance during the Interface Meeting/Training on Revenue Management. The latest revision on Law of Financial Relationship between Central and Local Government is expected to reflect better transparency in budget allocation in mining (as part of Natural Resources); the Law stipulates an environmental quality report to be prepared by the local government with regards to receiving any budget transfer from the central government. However, the respective implementing government or ministerial decree is still pending decision by Minister of Finance.

As with other projects, successful stakeholders’ engagement impacts the effectiveness of the program delivery. With this project, engaging community, local government and private actors were found to be challenging due to various different reasons. Certain social and cultural norms prevented some groups in the communities to be actively involved during MSFs. The centralization of licensing authority disrupted the already established relationships and works with the local government, except for the province of Aceh. Some local private actors were reluctant to become deeply involved in the MSFs, presumably due to the sensitive topic being discussed. Facing these problems, PWYP and local partners employed informal and more personal approaches to bring more stakeholders in this project. While this strategy succeeded in encouraging participation of the community and local government, this did not always work for the private actors.

Employing adaptive learning was proven to be effective in dealing with challenging issues during the project’s lifespan. Here, the role of Monitoring Evaluation and Learning (MEL) was critical. MEL was conducted by both internal and external evaluators. The MEL Workshop was organized for the external evaluator and local partners to discuss lessons learned from the project implementation and adjustments needed to be made based on the experiences. It was also essential for PWYP Indonesia and its partners in applying GPSA’s Theory of Action (TOA) as the basis for reflection and learning as the method is still very new to them. This project played a crucial role in testing the localized version of the generic TOA to Indonesia’s extractives sector.