Extractives Data Management (ID0092)

January 2019 - December 2020
Commitment Description
Lead implementing
agency/actor
1. Ministry of Law and Human Rights
2. Ministry of Finance
3. Indonesian Financial Transaction Reports and
Analysis Center
4. Ministry of Agriculture
5. Ministry of Energy and Mineral Resources
What is the public problem that
the commitment will address?
10
What is the commitment?
Indonesia Open Government Partnership National Action Plan 2018-2020
After Panama Papers went public in 2016 mentioning
1.038 taxpayers of Indonesian businessmen that had
shell companies overseas and were expected to inflict
the national income as well as undetected terrorism
funding. In this case, the public also put their attention
to the importance of Beneficial Ownership Disclosure.
Therefore, following the situation previously,
Indonesian Government initiating the Presidential
Regulation No. 13/2018 on Application of Principles
Introduces Beneficial Ownership of Corporation in the
Framework of Prevention and Eradication of Criminal
Act Money Laundering and Criminal Funding
Terrorism and Presidential Regulation No. 54/2018 on
National Strategy of Corruption Eradication. These
Regulations, especially No. 13/2018, is one of the
Indonesian milestones because it encourages
corporation (such as limited liability companies,
commanding companies, firms, unions,
associations, foundations, and other corporate forms)
to establish, report, and update their Beneficial
Ownership (BO) data. Moreover, the regulation also
stipulated about beneficial ownership data request by
the public. However, as a newly issued regulation, it
has not widely known yet and needs to develop
guidance to implement.
Beneficial Ownership in the 2018-2020 commitment
will be focusing on the provision and utilization of BO
database. BO registration will be carried out in
extractive, forestry, and plantation sectors.
Furthermore, the use of BO database will be focusing
on the permit applications in the extractive and palm oil
industries as well as on the misuse of funding for
money laundering and terrorism. The implementation of BO in Indonesia is
collaboratively managed by related ministries and
institutions. Additionally, the coordinator role is
technically carried out by National Strategy of
Corruption Prevention Team. The commitment of BO in
the Open Government Indonesia National Action Plan
2018-2020 will precisely adopt the same commitment
in National Strategy of Corruption Prevention released
by Presidential Regulation No. 54/2018 which
operationalize further through National Action Plan on
2019-2020.
The commitment of BO will resolve corruption and tax
evasion in Indonesia. Moreover, this commitment
encourages BO database integration through
Corporate Administration Management System. So the
data can further be requested by public.
How will the commitment
contribute to solve the public
problem?
The commitment is aligned with one of Open
Government Partnership (OGP) values which is
transparency. Transparency is related to the openness
quality of public information and people accessibility to
the information.
Why is this commitment relevant
to OGP values?
The commitment is also aligned with achievement
effort of Sustainable Development Goals (SDGs) No.
17: “Strengthen the means of implementation and
revitalize the global partnership for sustainable
development”, especially on target 17.1: “strengthen
domestic resource mobilization, including through
international support to developing countries, to
improve domestic capacity for tax and other revenue
collection”, because not only to publish BO publicly, but
this commitment also indirectly improves national
income by BO collection and integration.
In addition, this commitment is mentioned in EITI
Indonesia's roadmap on how it intends to disclose the
beneficial owners of the companies active in the
extractives sector.
Additional information
Milestone Activity with a verifiable
deliverable
Start Date: End Date:
1. The implementation of Corporate
Administration Management
System
January 2019 December 2020
2. The use of Beneficial Ownership
database to prevent the misuse
legal persons/arrangements for Anti
Money Laundering/Prevention of
Terrorism Funding, and the
Prevention of Tax Evasion
January 2019 December 2020
11
3. The utilization of Beneficial
Ownership database as a
January 2019 December 2020 requirement for submission of
permission in the extractive and
palm oil industries
Other Actors
Involved
State actors
involved
1. Bank Indonesia
2. Financial Services Authority (FSA)
3. Ministry of Cooperatives and Small and Medium
Enterprises
4. Coordinating Ministry for Political, Legal, and
Security Affairs
5. Ministry of Environment and Forestry
6. Ministry of Agrarian Affairs and Spatial
Planning/National Land Agency
7. Coordinating Ministry for Economic Affairs
8. Ministry of Trade
9. Government Goods/Services Procurement
Policy Agency
CSOs, private
sector, multilaterals,
working groups
1. Publish What You Pay (PWYP) Indonesia
2. The EITI Indonesia Secretariat
12
10. Commission for the Supervision of Business
Competition
11. National Secretariat of Corruption Prevention

1. Improvement in Data Management and Compliance of Extractive, Forestry, and Plantation Sectors

Language of the commitment as it appears in the action plan:

Beneficial Ownership in the 2018–2020 commitment will be focusing on the provision and utilization of BO database. BO registration will be carried out in extractive, forestry, and plantation sectors. Furthermore, the use of BO database will be focusing on the permit applications in the extractive and palm oil industries as well as on the misuse of funding for money laundering and terrorism.

The implementation of BO in Indonesia is collaboratively managed by related ministries and institutions. Additionally, the coordinator role is technically carried out by National Strategy of Corruption Prevention Team. The commitment of BO in the Open Government Indonesia National Action Plan 2018–2020 will precisely adopt the same commitment in National Strategy of Corruption Prevention released by Presidential Regulation No. 54/2018 which operationalize further through National Action Plan on 2019–2020.

Milestones:

1. The implementation of Corporate Administration Management System.
2. The use of Beneficial Ownership database to prevent the misuse legal persons/arrangements for Anti-Money Laundering/Prevention of Terrorism Funding, and the Prevention of Tax Evasion.
3. The utilization of Beneficial Ownership database as a requirement for submission of permission in the extractive and palm oil industries.

Start Date: January 2019                                                               End Date: December 2020

Context and Objectives

In November 2018, following years of an extensive probe, a group of investigative journalists from Tempo, Malaysiakini, Mongabay, and Earthsight’s The Gecko Project released “The Secret Deal to Destroy Paradise.” ^[1] The report details a complex chain of investment headed by Malaysia-based Menara Group who claimed to hold the rights to 4,000 square kilometres of land for oil palm plantations in the island of New Guinea, ^[2] including the Indonesian territory of Papua. The report found that the company acquired rights to this land through a maze of shell companies ^[3] with unclear actual beneficiaries.

The report estimates that sales of the land rights generated at least 80 million USD for Menara Group. ^[4] It involved a complex web of actors that included a former Chief of the National Police, a secretive Yemeni family, a notorious Borneo logging firm, and a conglomerate connected to the 1 Malaysia Development Berhad (1MDB) mega-corruption scandal into the project. ^[5]

On top of the financial irregularities and potential damage to Papuan native forests, the project brought multiple problems to the indigenous communities in the area. Pusaka, an indigenous rights advocacy group, reported incidents such as unresolved dispute over indigenous land rights, intimidation tactics in land acquisition processes, and discrimination against local workers on the project. ^[6] Beyond these damages, the report outlines how a lack of transparency in the extractive sector allows corruption to persist.

Meanwhile, in April 2016, the International Consortium of Investigative Journalists (ICIJ) ^[7] published an exhaustive list of suspected money launderers, tax evaders, and criminal funders in a series of document leaks dubbed the “Panama Papers.” A total of 2,961 names on that list are associated with Indonesia, ^[8] many of whom are politicians and business figures with strong ties to the extractive sector. The report generated strong pressure for the government to act and spurred the creation of regulation of beneficial ownership transparency that was already being drafted before the scandal broke. [9]

In March 2018, the government issued the Presidential Regulation No. 13/2018 on the Application of Principles to Identify Beneficial Ownership of Corporations to Prevent and Eradicate the Criminal Acts of Money-Laundering and Terrorism Funding. ^[10] A few months later, in July 2018, the government issued the Presidential Regulation on the National Strategy of Corruption Prevention. ^[11] These regulations provide the legal framework for the government to further the implementation of beneficial ownership transparency.

During the development of Indonesia’s fifth OGP action plan, the government committed to including a commitment on beneficial ownership transparency. This was in conjunction with one of the key recommendations included in the IRM progress report ^[12] for Indonesia’s fourth action plan published in 2018. The government and civil society studied beneficial ownership commitments from countries such as the United Kingdom (UK) and Ukraine while designing the commitment. Civil society groups involved in the process included the Indonesian chapter of Publish What You Pay (PWYP) as well as the Extractive Industries Transparency Initiative (EITI) Indonesia Secretariat.

The Ministry of Law and Human Rights, through its Directorate General of Public Law Administration, is the authority managing the Corporate Administration Management System, the database for beneficial ownership information. Therefore, the development of the beneficial ownership online registry also falls under the jurisdiction of the Ministry.

Given its voluntary nature, the government does not believe corporations will proactively disclose their data on a publicly available registry. Therefore, the government seeks to restrict registry access to law enforcement agencies and other relevant government institutions. The public, meanwhile, can access this data by filing an information request to the Public Law Administration Directorate General at a cost of 500 thousand rupiah (35 USD) as of March 2018.

The commitment, clearly, is different than other countries where the beneficial ownership registry is made public by default. The KPK explained that this is because Indonesia’s civil law system recognizes legal owners and beneficiaries of corporations as the same entity, ^[13] unlike in a common law system. However, it remains unclear how the government aims to measure the success of this commitment in utilizing the registry to prevent money-laundering, terrorism funding, and tax evasion. Meanwhile, the aim of requiring beneficiary information disclosure for corporations in the extractive, forestry, and plantation sectors would require extensive ministry cooperation and revisions of several laws, such as Law No. 4/2009 on Mineral and Coal Mining, [14] Law No. 39/2014 on Plantations, [15] and Law No. 41/1999 on Forestry. [16]

Following the issuance of the beneficial ownership regulations, any new corporations that seek to acquire permits to operate in Indonesia must disclose their beneficiaries’ information. However, it does not apply to corporations established prior to the regulations coming into effect, therefore leaving a gap in the government’s concerted efforts to combat financial crimes such as corruption, money-laundering, tax evasion, and terrorism funding.

According to the KPK, ^[17] beneficial ownership transparency is one of the key priorities in the National Strategy of Corruption Prevention. As a law enforcement agency, the KPK has faced challenges in tracing the flow of funds involving corporations operating in Indonesia due to the complex and overlapping layers of corporation structures. ^[18]

Presently, in order to update and maintain their registration, corporations must go through a complex and costly legal procedure. To remove these barriers, the commitment aims to establish an online beneficial ownership registry where a corporation can submit, update, and maintain their beneficiary information as outlined and mandated by the Presidential Regulation No. 13/2018 on Beneficial Ownership Implementation. [19] By doing so, the government hopes to facilitate  corporations of any types to disclose their beneficiary information. By removing the complex and costly legal procedures, the online registry could help the government ensure that corporations disclose their data more proactively and regularly.

In a correspondence with the IRM researcher, a representative from Publish What You Pay (PWYP) Indonesia [20] noted that this commitment could “trigger” the government to implement the Presidential Regulation as an umbrella law to enhance beneficial ownership transparency not only in the extractive sector, but also across other industries. The potential for this commitment to result in a greater impact, according to them, is also supported by the simultaneous implementation of the Beneficial Ownership Roadmap [21] led by the Extractive Industries Transparency Initiative (EITI) and the Coordinating Ministry for Economic Affairs. [22]

PWYP also emphasized on the long-term impact of this commitment; during the co-creation process, the Ministry of National Development Planning pledged to take beneficial ownership transparency beyond the current action plan. [23] This is reflected in the commitment’s focus on establishing framework and infrastructure to support the creation of a beneficial ownership registry to support law enforcement and, as confirmed by both government and civil society stakeholders, the future plan of making the registry open for public access. [24] In other words, given the recent introduction of beneficial ownership discourse in Indonesia, with proper implementation and multistakeholder collaboration, this commitment carries the potential to transform how and to what extent its implementation could enhance transparency In Indonesia.

Next Steps

Since the government only recently started regulating beneficial ownership transparency, it is important to establish a clear mechanism for intragovernmental coordination. To achieve the desired outcome, it is crucial for the following government institutions to be actively involved in the process along with the Law and Human Rights Ministry:

• Coordinating Ministry for Political, Legal, and Security Affairs,
• Coordinating Ministry for Economic Affairs,
• Ministry of Finance,
• Ministry of Trade,
• Ministry of Cooperative and Small-and-Medium Enterprises,
• Ministry of Land and Spatial Planning,
• Ministry of Agriculture,
• Ministry of Energy and Mineral Resources,
• Ministry of Environment and Forestry,
• Financial Transaction Analysis and Reporting Center (PPATK),
• Corruption Eradication Commission (KPK),
• Anti-Trust Commission (KPPU),
• Central Bank of Indonesia (BI), and
• Financial Services Authority (OJK).

The KPK ^[25] expressed some concern over different levels of understanding within the government that may hamper the implementation of beneficial ownership transparency. This stems from the OGP community’s focus on the extractive industries and making registries public by default in contrast to the KPK’s priority of establishing an online registry for use in law enforcement. [26] From the government’s view, making the registry open by default at this stage will discourage corporations from voluntarily disclosing their beneficiaries information. Therefore, the parties involved in this commitment compromised to making the registry accessible only for legal enforcement purposes. However, the KPK specified that the goal is to eventually make the registry open by default. [27] Strong collaboration with civil society groups is an important element to overcome this issue by ensuring that the government remains committed to an open registry after the initial stages of implementation.

The IRM researcher urges the government to consider the following recommendations in implementing this commitment:

• Engage civil society and other stakeholders to capture insight from those affected by extractive, forestry, and plantation industries. Some of these stakeholders include corruption watchdogs, indigenous rights advocacy groups, miners, farmers, environmental advocacy groups, and industry associations.
• Provide clarity on the consequences and punishment for corporations that fail to comply with the Presidential Regulation on Beneficial Ownership Implementation by not disclosing their beneficial owners’ information.
• Take measures to raise awareness and educate the public about the importance of disclosing beneficiaries' information.
• Assess how the government can facilitate public participation in improving transparency in these sectors, such as by filing public complaints and whistle-blowing against corporations that do not comply with the beneficial ownership transparency regulations.

[1] The Gecko Project, “The Secret Deal to Destroy Paradise” (2018), https://thegeckoproject.org/the-secret-deal-to-destroy-paradise-715b1ffc0a65.

[2] Ibid.

[3] Ibid.

[4] Ibid.

[5] Ibid.

[6] Pusaka, “Perusahaan Menara Group Tidak Melaksanakan Kewajibannya” (10 Nov. 2016), https://pusaka.or.id/2016/11/perusahaan-menara-group-tidak-melaksanakan-kewajibannya.

[7] International Consortium of Investigative Journalists, “The Panama Papers: Exposing the Rogue Offshore Finance Industry” (accessed Mar. 2019), https://www.icij.org/investigations/panama-papers.

[8] Kompas, “Ada 2,961 Nama dari Indonesia di Bocoran ‘Panama Papers’” (4 Apr. 2016), https://internasional.kompas.com/read/2016/04/04/19113441/Ada.2.961.Nama.dari.Indonesia.di.Bocoran.Panama.Papers.

[9] Publish What You Pay Indonesia, “Memahami dan Mendorong Keterbukaan Data Beneficial Ownership di Sektor Ekstraktif” (2019), https://pwypindonesia.org/id/memahami-dan-mendorong-keterbukaan-data-beneficial-ownership-di-sektor-ekstraktif/.

[10] Government of Indonesia, “Peraturan Presiden No. 13/2018 tentang Penerapan Prinsip Mengenali Pemilik Manfaat dari Korporasi dalam Rangka Pencegahan dan Pemberantasan Tindak Pidana Pencucian Uang dan Tindak Pidana Pendanaan Terorisme” (2018), https://sipuu.setkab.go.id/PUUdoc/175456/Perpres%20Nomor%2013%20Tahun%202018.pdf.

[11] Government of Indonesia, “Peraturan Presiden No. 54/2018 tentang Strategi Nasional Pencegahan Korupsi” (2018), https://sipuu.setkab.go.id/PUUdoc/175551/Perpres%20Nomor%2054%20Tahun%202018.pdf.

[12] Open Government Partnership, “Independent Reporting Mechanism (IRM) Indonesia Progress Report 2016–2017” (Open Government Partnership, 2018), 115–116, https://www.opengovpartnership.org/wp-content/uploads/2001/01/Indonesia_Mid-Term_Report_2016-2017_EN.pdf.

[13] Putri Rahayu (Corruption Eradication Commission), interview by IRM researcher, 11 Mar. 2019.

[14] Government of Indonesia, “Undang-Undang No. 4/2009 tentang Pertambangan Mineral dan Batubara” (2009), http://eiti.ekon.go.id/v2/wp-content/uploads/2017/07/UU-4-TAHUN-2009.pdf.

[15] Government of Indonesia, “Undang-Undang No. 39/2014 tentang Perkebunan” (2014), http://www.jdih.kemenkeu.go.id/fullText/2014/39TAHUN2014UU.pdf.

[16] Government of Indonesia, “Undang-Undang No. 41/1999 tentang Kehutanan” (1999), https://peraturan.bpk.go.id/Home/Details/45373/uu-no-41-tahun-1999.

[17] Ibid.

[18] Ibid.

[19] Government of Indonesia, “Peraturan Presiden No. 13/2018.”

[20] Maryati Abdullah (Publish What You Pay Indonesia), interview by IRM researcher, 29 Nov. 2019.

[21] Rimawan Pradiptyo, Putu Sanjiwacika Wibisana, & Rafiazka Milanida Hilman, “A Roadmap of Beneficiary Ownership Transparency in the Extractive Industries in Indonesia” (Extractive Industries Transparency Initiative, 2016), https://eiti.org/sites/default/files/documents/final-bo_roadmap_eiti_indonesia.pdf.

[22] Abdullah, interview.

[23] Ibid.

[24] Ibid.

[25] Freddy Reynaldo Hutagaol (Corruption Eradication Commission), interview by IRM researcher, 11 Mar. 2019.

[26] Ibid.

[27] Putri Rahayu (Corruption Eradication Commission), interview by IRM researcher, 11 Mar. 2019.

1. Improvement in Data Management and Compliance of Extractive, Forestry, and Plantation Sectors

Substantial:

Did it open government?

Major

The Ministry of Law and Human Rights launched an online national beneficial ownership registry on the Corporate Administration Management System (AHU Online) in 2019. [1] This registry was the first in Southeast Asia. It covers all domestic and international corporations operating in Indonesia, including limited liability companies, foundations, associations, cooperatives, and limited and unlimited partnerships. [2] It builds on a 2018 Presidential Regulation [3] and a 2018 Ministry of Energy and Mineral Resources Decree, [4] and is bolstered by several 2019 Ministry of Law and Human Rights Regulations that instituted sanctions for late submission of data and noncompliance with the requirements of disclosure. [5] To further encourage disclosures, the Ministry of Agriculture and the Ministry of Energy and Mineral Resources required companies to submit their beneficial ownership as a prerequisite to licensing. [6] This progress drew on high-level government commitment to beneficial ownership reform and strong inter-ministry cooperation. [7]

In terms of companies’ compliance, in 2019, 3.86% of registered corporations (63,153 of 1,634,082 corporations) disclosed beneficial ownership information. By 2020, 15% of corporations (318,061 of 2,053,844 corporations) had disclosed this information, [8] including 22% of plantation companies (375 of 1,739 plantation companies). [9] As of June 2021, the registry included 21% of registered corporations (478,022 of 2,262,080 corporations). [10]

During its initial phase, the beneficial ownership database faced several shortcomings. As illustrated, it included information on less than a quarter of registered corporations. Meanwhile, although the Financial Services Authority reportedly verified information, [11] there was no systematic process in place for verification of this information across government agencies. [12] Additionally, the database was freely accessible only to law enforcement agencies and other relevant government institutions. Public access required filing an information request to the Public Law Administration Directorate General at a cost of Rp 500,000 ($35). [13] However, by 2022, as part of its sixth OGP action plan, Indonesia plans to open access to the public and to increase the percentage of corporations that disclose beneficial ownership information. [14] According to Open Government Indonesia, further efforts are needed to ensure that corporations publish beneficial ownership information, regulations protect data from misuse, a roadmap is further developed, and international best practices are incorporated. [15]

Despite these shortcomings, according to the United Nations Office on Drugs and Crime, the registry’s introduction represents significant progress toward providing public access to information on beneficial ownership in Indonesia. [16] The Corruption Eradication Commission (KPK) notes that law enforcement agencies, including itself and the Attorney General’s Office, have utilized this beneficial ownership information. The Indonesian Financial Transaction Report and Analysis Center, a government agency, has referenced this information to analyze suspicious transactions. However, media and watchdog organizations have not drawn on the registry due to lack of free public access. [17] Publish What You Pay reports that this registry has not yet had an impact on corruption, but anticipates that when the registry becomes freely publicly available and the portion of corporations disclosing beneficial ownership increases, there could be corresponding reductions in corruption and increases in state tax revenue. [18]