Indonesia Mining Sector Diagnostics (MSD) FINALdocuments1.worldbank.org/curated/en/704581575962514304/...BPMD Badan Pemberdayaan Masyarakat dan Desa (Rural Community Empowerment Agency)

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Report on

Indonesia Mining Sector Diagnostic

For:

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Contents

INTRODUCTION ................................................................................................................................................11

INDONESIA’S MINING SECTOR ..........................................................................................................................14

1. Mining Sector Importance .................................................................................................. 14

2. Mining Sector Management ................................................................................................ 18

3. Legal Framework ................................................................................................................ 20

OVERVIEW OF RESULTS ....................................................................................................................................24

PERFORMANCE ALONG THE EI VALUE CHAIN ....................................................................................................29

1. Value Chain Stage 1: Contracts, Licenses, and Exploration ..................................................... 29

2. Value Chain Stage 2: Operations ............................................................................................. 34

3. Value Chain Stage 3: Taxation and State Participation ........................................................... 38

4. Value Chain Stage 4: Revenue Distribution and Management ................................................ 42

5. Value Chain Stage 5: Local Impact .......................................................................................... 45

CONTEXT AND ENABLING ENVIRONMENT ........................................................................................................53

STAKEHOLDER PRIORITIES ................................................................................................................................57

CONCLUSIONS ..................................................................................................................................................60

Summary of Main Strengths ................................................................................................. 60

Towards a Reform Agenda .................................................................................................... 61

Annex 1: MSD Methodology—Brief Description .......................................................................................................62

Annex 2: Question Scores ....................................................................................................................................64

INDONESIA – MINING SECTOR DIAGNOSTIC (MSD)

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List of Figures

Figure 1 Indonesia’s mineral and coal potentials map (2018). ...........................................................................14

Figure 2 Mining sector contribution to GDP (based on 2010 constant price) for 2010 to 2017. .........................16

Figure 3 Mining contribution to tax state revenue 2018. ..................................................................................17

Figure 4 Mining contribution to nontax state revenue. .....................................................................................17

Figure 5 Employment in the mining sector........................................................................................................18

Figure 6 Dashboard of mining sector in Indonesia. ...........................................................................................24

Figure 7 Policy efficiency—implementation gap. ..............................................................................................25

Figure 8 Accountability and inclusiveness—implementation gap ......................................................................27

Figure 9 Value chain stage 1—indicators ..........................................................................................................29

Figure 10 Value chain stage 2—indicators ........................................................................................................34

Figure 11 Value Chain Stage 3—indicators ........................................................................................................38



Figure 14 Context and Enabling Environment ...................................................................................................53

Figure 15 Top Priorities of Stakeholder Groups .................................................................................................58

Figure 16 Shared Stakeholder Priorities ............................................................................................................59

List of Tables

Table 1 Resources and Reserves for Select Mineral Commodities of Indonesia for 2017 ...................................15

Table 2 Resources and Reserves for Coal of Indonesia for 2017 ........................................................................15

Table 3 Indonesia Historic Mine Production for Select Commodities ................................................................15

Table 4 Mining Sector Contribution to Total Exports .........................................................................................16

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List of Acronyms Term Definition

APBN Anggaran Pendapatan Belanja Negara (State Budget)

ASM Artisanal and Small-Scale Mining

Bappeda Badan Perencanaan dan Pembangunan Daerah (Development Planning Agency at Sub-National Level

Bappenas Badan Perencanaan Pembangunan Nasional (National Development Planning Agency)

BIG Badan Informasi Geospasial (Geospatial Information Agency)

BKF Badan Kebijakan Fiskal (Fiscal Policy Agency)

BKPM Badan Koordinasi Penanaman Modal (Investment Coordinating Board)

BPK RI Badan Pemeriksa Keuangan Republik Indonesia (Audit Board of the Republic of Indonesia)

BPMD Badan Pemberdayaan Masyarakat dan Desa (Rural Community Empowerment Agency)

BTI Bertelsmann Stiftung's Transformation Index

CCoW Perjanjian Karya Pengusahaan Pertambangan Batubara/”PKP2B” (Coal Contract of Work)

CDA Community Development Agreement

CnC Clean and Clear

CoW Kontrak Karya (Contract of Work)

CSO Civil Society Organization

CSR Corporate Social Responsibility

DG Taxes Directorate General of Taxes

DGMC Directorate General of Mineral and Coal

Dinas PU Dinas Pekerjaan Umum (Public Work Services)

DLH Dinas Lingkungan Hidup (Environmental Agency)

Dishut Dinas Kehutanan (Forestry Agency)

DPMPTSP Dinas Penanaman Modal dan Pelayanan Terpadu Satu Pintu (DPMPTSP)

EI Extractive Industry/Industries

EITI Extractive Industries Transparency Initiative

EMMP Environmental Management and Monitoring Plan

EPRP Emergency Preparedness and Response Program

ESIA Environmental and Social Impact Assessment

ESMMP Environmental and Social Management and Monitoring Plan

ESMP Environmental and Social Management Plan

GAAP Generally Accepted Accounting Principles

GCI Global Competitiveness Index

GDP Gross Domestic Product

GMS Rapat Umum Pemegang Saham (General Meeting of Shareholders)

GPS Global Positioning System

GR Peraturan Pemerintah (Government Regulation)


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HIV Human Immunodeficiency Virus

IASB International Accounting Standards Board

IFRS International Financial Reporting Standards

IMF WEO International Monetary Fund World Economic Outlook

IPPKH Izin Pinjam Pakai Kawasan Hutan (Borrow-to-Use Forestry Permit)

IPR Izin Pertambangan Rakyat (People mining License)

IUI Izin Usaha Industri (Industrial Business License)

IUP Izin Usaha Pertambangan (Mining Business Licence)

IUPK Izin Usaha Pertambangan Khusus (Special Mining Business License)

IUP-OP Izin Usaha Pertambangan Operasi Produksi (Operation Production Mining Business License)

IUP-OPK Izin Usaha Pertambangan Operasi Produksi Khusus (Special Operation Production Mining Business License)

Kanwil DJP Kantor Wilayah Direktorat Jenderal Pajak (Regional Directorate of Taxation)

Kemendagri Kementerian Dalam Negeri (Ministry of Home Affairs)

Kemenkeu Kementerian Keuangan (Ministry of Finance)

Kemenperin Kementerian Perindustrian (Ministry of Industry)

Kemnaker Kementerian Ketenagakerjaan (Ministry of Manpower)

KP Kuasa Pertambangan (Mining Right)

MCRP Mine Closure and Reclamation Plan

MEMR Kementerian Energi dan Sumber Daya Mineral (Ministry of Energy and Mineral Resources)

MoEF Kementerian Lingkungan Hidup dan Kehutanan (Ministry of Environment and Forestry)

MoF Kementerian Keuangan (Ministry of Finance)

MOMI Minerba One Map Indonesia

MSD Mining Sector Diagnostic

NR4D Natural Resources for Development

OECD Organization for Economic Co-operation and Development

OHS Kesehatan dan Keselamatan Kerja (Occupational Health and Safety)

PEFA Public Expenditure and Financial Accountability

PerMen Peraturan Menteri (Ministerial Regulation)

PETI Penambang Tanpa Izin (Illegal Miners)

PNBP Penghasilan Negara Bukan Pajak (Non-Tax State Revenue)

PT Perseroan Terbatas (Private Limited)

RKAB Rencana Kerja Anggaran dan Biaya (Work Plans and Budgets)

RPJM Rencana Pembangunan Jangka Menengah (Medium-Term Development Plan)

SIA Social Impact Assessment

SMMP Social Management and Monitoring Plan

SOE State-Owned Enterprise

Tbk Terbuka; Indonesian equivalent for incorporation or "Inc.", a legal ending appended after the corporation name.

UNESCO The United Nations Educational, Scientific and Cultural Organization

UNGP The United Nations Guiding Principles on Business and Human Rights

VAT Value-Added Tax


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VPSHR Voluntary Principles on Security and Human Rights

WDI World Development Indicators

WEF World Economic Forum

WEF GCI World Economic Forum Global Competitiveness Index

WIUP Wilayah Izin Usaha Pertambangan (Mining Business License Area)

WPR Wilayah Pertambangan Rakyat (People mining Area)

INDONESIA – MINING SECTOR DIAGNOSTIC (MSD) INTRODUCTION

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EXECUTIVE SUMMARY

With a substantial fuel and non-fuel mineral resource base, long history of mining and a leading

role as an exporter of coal, nickel and some other minerals Indonesia remains a key player in the

global mining industry. Moreover, Indonesia represents a significant market for mineral products

and government policies increasingly prioritize value addition and domestic use of minerals.

Although mining no longer contributes as large a share to exports, GDP, revenue and employment

as it once did, because of the growth and diversification of non-mining sectors, the sector

nonetheless continues to be viewed as of strategic national importance and plays a dominant role

in some areas of the country, such as in Kalimantan and Papua. Successive governments have,

moreover, favored greater participation of Indonesian capital, businesses and communities in

mining and mining-related benefits, as well as a more devolved form of mining sector management.

Planning and oversight of the sector presents numerous challenges, especially to achieve

sustainability and mitigate against environmental and social risks.

In this context, the Indonesian government has sought guidance in drawing lessons from around

the world. It agreed in 2016 to receive support from the World Bank to undertake policy analysis

and design reforms through the Natural Resources for Development (“NR4D”) program.

A key component in the World Bank’s support to the Indonesian government is the Mining Sector

Diagnostic (“MSD”) presented in this report. The MSD is a data-driven tool that the World Bank

has developed to comprehensively assess a country’s mining sector. Specifically, the tool clearly

identifies the mining sector’s strengths and weaknesses along the Extractive Industries Value Chain

(EI value chain). It also explores stakeholders’ views on the most key areas for sector reforms. The

MSD takes a detailed look at both the legal and regulatory framework of the sector (the “rules”) as

well as the implementation of these rules, including the capacity of the ministries and agencies

involved. In doing so, the MSD considers the views of three different stakeholders—government,

industry, and civil society. Due to its comprehensive and objective assessment methodology, the

MSD is different from other assessment tools. Importantly, it is not a ranking tool or perception-

based survey, but rather aims to provide policymakers with the detailed information necessary to

make informed policy choices.

The MSD was requested by the Ministry of Energy and Mineral Resources, specifically by the

Directorate General of Minerals and Coal, and the World Bank commissioned the Indonesian

Mining Institute to carry out this assessment. The work, consisting of desk research as well as

extensive interviews, was carried out during July 2017-September 2018. IMI interviewed 98

stakeholders from government, industry, and civil society in Jakarta and in three provinces—South

Sumatera, South East Sulawesi and West Kalimantan. Some of the key findings of the MSD follow:

• The performance of mining sector management in Indonesia is uneven, with most

weaknesses attributable to poor implementation of otherwise reasonable policies and

regulations; nevertheless, there are certain policies and regulatory gaps which will need to

be addressed to assure an overall improvement in sector management.

• In many respects Indonesia’s mining laws and regulations reflect modern approaches to

mining sector management and are well defined: for example, the rules for licensing provide


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the foundation for a largely open and transparent process and principles respecting sound

financial management, revenue sharing, health and safety, human rights and gender are in

place

• Along the EI value chain there are notable examples of de facto performance (i.e.

implementation) falling short of de jure performance (i.e. laws and rules), which highlights

the need for stronger institutional performance, coordination and administrative capacity.

Somewhat counter-intuitively, the findings also demonstrate that in some areas in which

the laws and rules are weak or poorly defined, administration is nonetheless perceived to

be effective – a notable case being administration of mining taxation.

• Those areas identified as in need of improvement at the first stage of the EI value chain

(“Contracts, Licenses, and Exploration”) include strengthening the operation of the mineral

rights cadastre, especially at provincial level, enriching available geological data and better

assurance of the technical and financial capability of mineral right holders.

• In the second stage of the EI value chain (“Operations”) areas of weaknesses include poor

performance in managing artisanal and small-scale mining, poor administration of

resettlement and compensation obligations and more generally poor coordination among

government agencies.

• Performance with respect to the third stage of the EI value chain (“Taxation and State

Participation”) is viewed overall, quite favorably. The areas of improvement should include

clearer definitions of tax rules, including more stakeholder consultation, and the

introduction of simplified tax procedures for artisanal miners.

• Revenue management and its allocation are generally assessed as performing relatively

strongly apart from quality of public investment management, which falls, however, outside

the purview of the mining sector.

• The area in which the room for improvement seems to be greatest is in managing local

impacts of mining. Performance needs to be strengthened especially with respect to

consultation with local communities, public disclosure and dissemination and the

monitoring of environmental and social impacts and mitigation measures, and grievance

mechanisms generally.

• In terms of factors affecting the investment climate (“Context and Enabling Environment”),

the MSD provides evidence of concern about the impact of the political environment on

investment. All four indicators of the political environment – expropriation risk, political

stability, predictability mining and tax policy, and control of corruption – still need to be

improved as they are rated low.

• Finally, a significant finding is that stakeholders have very different views on their priorities

for sector reform. Government and industry stakeholders agree on “Clarity and

Harmonization of Sector Rules” and “Sector Management and Intra-Governmental

Coordination” as key priorities. Government and civil society stakeholder both prioritized

“Environmental and Social Impact and Mine Closure Management” as a priority. There are

no areas that all three groups of stakeholders identified as key priorities.

Conduct of the MSD at the request of the Ministry of Energy and Mineral Resources was seen as a

critical input into a process of mining policy evaluation and reform, notably in assessing the

outcome of reforms introduced through the Mining Law of 2009. That legislation has been under


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review for some time and availability of the MSD findings can help identify shortcomings in the

design of the law and in the ability of institutions to implement the law. The next step in the World

Bank’s assistance through NR4D will therefore build on the MSD findings to assist the Government

to design a reform program for the Indonesian mining sector, including an update of the Mining

Law of 2009. The next phase of work funded by NR4D will bear the thematic “From MSD to Mining

Policy Transformation in Indonesia.” The design of this work is presently under discussion with

Government, through DG Minerba, and will be associated with socialization of the MSD and Focus

Group Discussions with stakeholders to support policy evaluation and formulation.


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INTRODUCTION

The Mining Sector Diagnostic (MSD) is a tool the World Bank has developed to (1) comprehensively

assess the laws, policies, and regulations in a country’s mining sector; and (2) identify the strengths

and weaknesses of the institutions that administer` the laws, policies, and regulations and monitor

and regulate the sector. The MSD addresses the “rules” in place (the so-called de jure performance)

as well as the extent to which the rules are implemented in practice (the so-called de facto

performance).

The MSD considers the views of the three main stakeholder groups—government, mining

investors, and civil society representatives—in a structured manner. It is a systematic and practical

diagnostic tool that informs objectively. Due to its comprehensive and objective assessment

methodology, the MSD is different from other assessment and ranking tools (e.g., Fraser Institute)

and does not attempt to rank a country’s performance relative to others. The detailed results of an

MSD are meant to inform policymakers and can form the basis for sector reforms that bring about

a more vibrant mining sector that contributes to growth and prosperity for the entire population.

The Indonesia MSD collects and shares information on the nation’s mining sector’s management

structure and governance. It analyzes the rules and policies that exist in the mining sector and the

gap between those rules and their implementation in practice. It not only reviews sector

performance from the perspective of the three main stakeholder groups but also provides their

priorities to improve mining sector performance.

Natural resources, such as mineral and coal mining, play a significant role in Indonesia; they contribute IDR 16,540 billion into the national revenue. 1 For the government to optimize the management of and benefits stream from its mining industry, it agrees to receive support from the World Bank to undertake policy analysis and design reforms through the Natural Resources for Development (NR4D) program.

NR4D was designed to address policy challenges and reform measures over several interrelated

pillars covering oil, gas, coal, and nonfuel mineral sectors and their interactions with other

resources, such as land and forests. The pillars are:

• Strengthening the overall natural resource sector policy coordination and management framework, including promoting inclusive policy dialogue;

• Promoting transparency and strengthening anticorruption efforts in the natural resource sector, including supporting the implementation, sustainability, and outreach of the Extractive Industries Transparency Initiative (EITI) Indonesia;

• Improving the natural resource sector investment climate;

• Strengthening the fiscal management of resource revenue;

1 “Statistik Indonesia 2017,” Badan Pusat Statistik (2017).

1


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• Supporting sub-national governments in resource-rich regions to manage resource wealth, including the implementation of local benefit-sharing mechanisms;

• Supporting the development of the gas sector and other alternative energy sources; and

• Supporting the government’s efforts to implement the One Map for Indonesia initiative.

This policy assessment has been agreed to by the Ministry of Energy and Mineral Resources (Kementerian Energi dan Sumber Daya Mineral or MEMR), specifically in this matter by the Directorate General of Mineral and Coal (Direktorat Jenderal Mineral dan Batubara or DGMC), to be carried out through the MSD methodology. The World Bank has commissioned the Indonesian Mining Institute (IMI) to carry out this assessment. Given the unique state administrative-decentralization system in Indonesia, the assessment was carried out at the national and provincial level. Three provinces—South Sumatera, South East Sulawesi, and West Kalimantan—were selected by the DGMC on the basis of the mining revenue significance for the province and the principal commodity it represents. For the national level, interviews were held in Jakarta.

The interviews collected data from 98 respondents at the national and provincial levels. Representing civil society organization (CSOs) are 10 respondents in Jakarta; seven in South Sumatera; seven in Southeast Sulawesi; and seven in West Kalimantan. For industry, there are eight respondents in Jakarta; seven in South Sumatera; eight in Southeast Sulawesi; and seven in West Kalimantan. For the government, 37 respondents come from the following agencies.

At the national level:

• Directorate General of Mineral and Coal (DGMC);

• Directorate General of Taxes (Direktorat Jenderal Pajak);

• Extractive Industries Transparency Initiative (EITI);

• Fiscal Policy Agency (Badan Kebijakan Fiskal or BKF);

• Geological Agency (Badan Geologi);

• Geospatial Information Agency (Badan Informasi Geospasial);

• Investment Coordinating Board (Badan Koordinasi Penanaman Modal or BKPM);

• Ministry of Environment and Forestry (Kementerian Lingkungan Hidup dan Kehutanan or MoEF);

• Ministry of Industry (Kementerian Perindustrian);

• Ministry of Manpower (Kementerian Ketenagakerjaan);

• Ministry of State-Owned Enterprise (Kementerian Badan Usaha Milik Negara);

• National Development Planning Agency (Badan Perencanaan Pembangunan Nasional or Bappenas); and

• Audit Board of the Republic of Indonesia (Badan Pemeriksa Keuangan Republik Indonesia or BPKRI).

At the provincial level:

• Department of Investment and Integrated Services (Dinas Penanaman Modal dan Pelayanan Terpadu Satu Pintu);

• Development Planning Agency at Sub-National Level (Badan Perencanaan dan Pembangunan Daerah or Bappeda);

• Dinas ESDM (Dinas Energy Dan Sumber Daya Mineral)

• Environmental Agency (Dinas Lingkungan Hidup or DLH);

• Forestry Agency (Dinas Kehutanan);


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• Public Work Services (Dinas Pekerjaan Umum);

• Regional Tax Office (Kantor Wilayah Direktorat Jenderal Pajak); and

• Rural Community Empowerment Agency (Badan Pemberdayaan Masyarakat dan Desa or BPMD).

A set of questionnaires had been provided by the World Bank for IMI, and the interviews were conducted within the context provided in the questionnaires. Nevertheless, IMI submitted its proposed adjustments to the provided questionnaires to accurately reflect the circumstances within the country, such as “artisanal and small-scale mining” (ASM), which was proposed to be translated to “tambang rakyat” (people mining) pursuant to the definition under the Mining Law. In addition, several notes were provided by IMI to assist the diagnostic process under MSD, including on the dualism of the contract and licensing regime that exists and is valid in Indonesia.

This report is organized as follows: an introduction, followed by chapter 2, which provides an

overview of the mining sector in Indonesia—its importance in the overall economy, the main

institutional roles and responsibilities, and the legal and regulatory framework governing the

sector. Chapter 3 presents a high-level summary of the results of the MSD, discussing the data as

aggregated into the MSD dashboard and analyzing implementation gaps between de jure and de

facto performance.

Chapter 4 discusses the detailed findings regarding the strengths and weaknesses of Indonesia’s

mining sector. The discussion is structured using the five stages of the Extractive Industries Value

Chain: (i) contracts, licenses, and exploration; (ii) operations; (iii) taxation and state participation;

(iv) revenue distribution and management; and (v) local impact. For each of these stages the MSD

assesses de jure and de facto performance along two dimensions: (i) policy efficiency and

(ii) accountability and inclusiveness.

The MSD also assesses the context and enabling environment of the mining sector, the results of

which are presented in chapter 5. Specifically, it looks at the economic environment, the political

environment, and the development policy environment. Chapter 6 analyzes stakeholder priorities

defined as those areas that respondents identified as key priority areas, reforms in which would

have a significant impact on improving the contribution of the mining sector to sustainable

economic development and the well-being of the entire population. Chapter 7 concludes with a

summary of sector strengths. Because this MSD report is meant to provide objective input into the

design of a reform agenda, it stops short of actually elaborating such a reform agenda. While the

current report notes areas in which there is room for improvement in earlier chapters, it does not

at this stage attempt to prioritize and sequence such an agenda.

This report has two annexes. Annex 1 provides a brief overview of the MSD methodology. Annex 2

contains the MSD questionnaire and the scores for all individual questions that form the basis for

this report. This report and the underlying data will be made available publicly on the MSD website.

INDONESIA – MINING SECTOR DIAGNOSTIC (MSD) INDONESIA’S MINING SECTOR

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INDONESIA’S MINING SECTOR

1. Mining Sector Importance

Because of the country’s world-class natural deposit and extensive reserves, Indonesia's substantial mineral and coal wealth makes mining a strategic sector (Figure 1, Table 1, and Table 2). Compared with the world’s total reserves, Indonesia’s mineral reserves are ranked fifth for gold, seventh for copper, sixth for nickel, second for tin, sixth for bauxite, and 10th for coal.2 With significant production of some of the world’s most vital commodities (Table 3), Indonesia continues to be a key player in the global mining industry.

Figure 1 Indonesia’s mineral and coal potentials map (2018).

Source: The Ministry of Energy and Mineral Resources (2018)

2“Mineral Commodity Summaries 2018,” United States Geological Survey (2018); “BP Statistical Review of World Energy 2017,” BP (2018).

2


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Table 1 Resources and Reserves for Select Mineral Commodities of Indonesia for 2017

Resources (million tons) Reserves (million tons)

Ore Resources Metal Resources Ore Reserves Metal Reserves

Gold 88,467.48 0.0677 46,701.29 0.0389

Silver 6,595.19 0.8392 2,842.91 0.0056

Copper 12,555.53 44.88 2,857.82 24.22

Bauxite 3,047.26 1,389.60 1,604.23 732.21

Nickel 6,853.85 92.45 3,159.50 62.35

Tin 3.23 0.30 0.90 0.10

Primary iron 2,534.96 501.84 976.67 138.70

Manganese 61.63 28.30 87.24 43.14

Chromite 1.64 0.76 - -

Lead 461.49 11.22 11.53 0.98

Cobalt 1,813.45 7.06 453.77 1.18 Source: Directorate General of Mineral and Coal (2018).

Table 2 Resources and Reserves for Coal of Indonesia for 2017

Quality Resources (million tons) Reserves (million tons)

Class CV (cal/gram) Inferred Indicated Measured Probable Proven

Low < 5,100 11,351 10,171 10,562 5,687 5,677

Medium 5,100 - 6,100 26,086 23,958 25,325 4,828 5,740

High 6,100 - 7,100 4,516 2,644 3,394 915 985

Very High > 7,100 1,578 676 390 259 144

Total 43,532 37,450 39,673 11,691 12,548 Source: Directorate General of Mineral and Coal (2018).

Table 3 Indonesia Historic Mine Production for Select Commodities

Commodity Production (tons) World Ranking for 2017

(USGS, 2018) 2013 2014 2015 2016 2017

Copper 214,805 103,371 96,811 246,156 247,176 9th

Gold 57 69 97 91 101 9th

Silver 208 252 319 322 328 N/A

Tin 82,954 60,038 70,073 62,877 78,070 2nd

Nickel (Matte) 78,074 80,341 82,440 78,748 78,007 1st

Coal 474 mil 458 mil 461 mil 348 mil 461 mil 5th Source: Directorate General of Mineral and Coal (2018).

The mining sector plays an important role in the Indonesian economy. This is evident from the contribution of the sector to the value of Indonesia’s gross domestic product (GDP) (Figure 2), to which the sector contributed 4.71 percent in 2017. GDP from the mining sector gradually declined from 5.50 percent to 4.23 percent (2013–2016) before increasing to 4.7 percent in 2017. This increase


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might be attributable to the increase in prices, especially of coal, because the trend shows direct correlation with fluctuations in commodity prices.3

Figure 2 Mining sector contribution to GDP (based on 2010 constant price) for 2010 to 2017.

Source: Badan Pusat Statistik (2018).

The mining sector is also one of the most important contributors in product exports, being the second-largest contributor to national exports in 2017, right after industrial exports.4 Although declining sharply (from 17.07 percent in 2013 to 12.98 percent in 2014) because of the ore export ban in 2014, the sector still managed to contribute more than 12 percent of national exports in 2014–16; that figure increased to 14 percent ($168.8 billion) in 2017 after the easing of the export ban (Table 4). Table 4 Mining Sector Contribution to Total Exports

Year Total Exports

(million US$)

Mining Sector

(million US$)

Mining Sector to Total Exports

(%)

2017 168,810.60 24,302.30 14.40

2016 145,186.10 18,171.40 12.52

2015 150,366.30 19,461.20 12.94

2014 175,979.90 22,850.30 12.98

2013 182,551.90 31,159.40 17.07 Source: Badan Pusat Statistik (2018).

The role of the mining sector in the country’s economy is also evident through its contribution to the tax state revenues (Figure 3) and nontax state revenue (Figure 4). After a series of declines from 2013 to 2016, the sector jumped to almost double of its 2016 tax state revenue, contributing

3 “Mining in Indonesia, Investment and Taxation Guide, May 2018, 10th Edition,” PwC (2018). 4 Badan Pusat Statistik (2018).

5.50%5.01%

4.30% 4.23%4.70%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

2013 2014 2015 2016 2017Year

Mining Sector Contribution to GDP (%)

Share to Total GDP


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IDR 35.82 trillion ($2.68 billion) of tax state revenue in 2017. The sector also contributed $3.89 billion of nontax state revenue in 2017.

Figure 3 Mining contribution to tax state revenue 2018.

Source: Directorate General of Mineral and Coal (2018).

Figure 4 Mining contribution to nontax state revenue.

Source: Directorate General of Mineral and Coal (2018).

27.1023.25 22.69

19.61

35.82

0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

2013 2014 2015 2016 2017

Trill

ion

IDR

Mining Contribution to Tax State Revenue

0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

45.00

2013 2014 2015 2016 2017

Trill

ion

IDR

Mining Contribution to Nontax State Revenue

Fixed fees Royalties Mining products sales Total


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As a labor-intensive industry, the mining sector has also contributed to job creation. Since 2012, the mining sector has consistently employed 1.3 to 1.6 million laborers annually (Figure 5). Mining companies have become significant employers where mining operations are located, ultimately being a key factor in the development of rural and underdeveloped areas. The mining industry represents a large share of the regional economies of many provinces, including Papua, Central Sulawesi, Bangka-Belitung, West Nusa Tenggara, and East Kalimantan.5

Figure 5 Employment in the mining sector.

Source: Badan Pusat Statistik (2018).

2. Mining Sector Management

As of September 1, 2018, 6,101 mining business licenses (Izin Usaha Pertambangan or IUPs) have been issued under the clean and clear (CnC) review,6 with 2,631 (of 4,226) IUPs for metals and coal and 652 (of 1,875) IUPs for nonmetals still being active.7 These licenses have been issued regardless of the size of each mining company because there is no such classification in Indonesia.

Under the current mining laws, the government no longer issues contract-based concessions for new mining projects. Holders of contracts of work (Kontrak Karya or CoWs) and coal contracts of work (Perjanjian Karya Pengusahaan Pertambangan Batubara/PKP2B or CCoWs) should convert their contracts to IUPs/IUPK-OPs before the expiration of the contracts, as stipulated in PerMen 15/2017 (later revoked and amended by Ministerial Regulation [Peraturan Menteri or PerMen] 11/2018 without substantial differences). At the time of writing, of 34 CoW holders, 29 have signed

5 “Mining in Indonesia,” PwC (2017). 6 Under the PerMen 11/2018, IUPs for nonmetals are not required to have a CnC status. 7 Directorate General of Mineral and Coal (2018).

1,602,706

1,426,454

1,436,370

1,320,466

1,476,484

1,391,690

1,000,000

1,100,000

1,200,000

1,300,000

1,400,000

1,500,000

1,600,000

1,700,000

2012 2013 2014 2015 2016 2017

Num

ber

of la

bors

abs

orbe

d

Employment in the Mining Sector


19

the amendment, two have not signed, two have converted their CoWs to IUPK-OPs, and one did not amend the contract. On the other hand, all 68 CCoW holders have signed the agreement.8

The MEMR administers the mining sector of Indonesia. Given the unique state administrative-decentralization system in Indonesia, different governmental bodies administer the sector at the national and provincial levels.

At the national level, there are two branches of the MEMR that administer the mining sector:

• The DGMC, which is responsible for the formulation and implementation of policies in the field of fostering, controlling, and supervising mineral and coal activities. The DGMC grants exploration and mining licenses at the national level, with BKPM playing a supporting role.

• The Geological Agency, which is responsible for conducting research, investigation, and service in the fields of geological resources, volcanology, and the mitigation of geological, groundwater, and environmental geological disasters, as well as geological surveys. The Geological Agency determines mining business license areas (Wilayah Izin Usaha Pertambangan or WIUPs) to be auctioned to the mining industry.

At the provincial level, there are two government bodies that lead the administration of the mining sector:

• The governor, who reports to the president through the Ministry of Home Affairs (Kementerian Dalam Negeri), is responsible for granting mining licenses, instead of the MEMR. The governor is also responsible for other permits, such as borrow-to-use forestry permits (IPPKHs) for mining operations located within forest areas at the provincial level.

• Dinas ESDM, which is responsible for monitoring and supervising mining activities at the provincial level.

Other important institutions for the mining sector are:

At the national level:

• The MoEF, which is responsible for the monitoring and enforcement of environmental requirements and safeguards. MoEF is responsible for issuing IPPKHs to mining companies operating in forest areas.

• The Ministry of Land and Spatial Planning, which is responsible for producing the National Spatial Plan.

• The Ministry of Finance (MoF), of which the BKF is responsible for designing the fiscal and taxation policy for all sectors, including the mining sector.

At the provincial level:

• The DLH is responsible for monitoring and controlling pollution and environmental damage.

8 Directorate General of Mineral and Coal (2018).


20

• The Forestry Agency is responsible for the monitoring and enforcement of requirements for mining operations located within the forest areas.

• The Spatial Planning Office coordinates with mining authorities regarding the implementation of land use.

3. Legal Framework

The law governing the mining sector in Indonesia is the Law on Mineral and Coal Mining No. 4 of 2009 (The Mining Law). This law replaced the previous mining law (Law No. 11 of 1967). The main objective of the current Mining Law is to support sustainable national development. Some of the key changes in the Mining Law are:

1. Related to regional autonomy, with the central government devolving significant power to the sub-national governments (in province and regency or city) in line with the Regional Autonomy Law (Law No. 32 of 2004), which grants greater autonomy to the regional government.

2. The abolition of the mining CoW/CCoW which under Law No. 11 of 1967 was the mining enterprise form for foreign investors. It was replaced by the licensing system applicable to both domestic and foreign investors.

3. The implementation of mineral and coal value added through in-country processing and refining.

Subsequent to the replacement of the previous mining law, some changes occurred that potentially have a bearing on the legal framework of the mining sector in Indonesia. Key concerns include:

a. Decentralization

Decentralization is the transfer of authority from the central government to the regional government to take care of its own home affairs based on the initiative and aspirations of its people within the framework of the unitary state of the Republic of Indonesia. With the existence of decentralization, the autonomy emerges for a regional government.

Decentralization is expected to positively influence the development of the disadvantaged regions in a country. The central government will function as policy maker and regulator with other responsibilities assigned to sub-national levels. However, it seems that the implementation of autonomy does not go smoothly because there is not sufficient time for a transitional period to prepare implementing regulations and resources to correspond to such drastic changes. The challenges surrounding Indonesia’s decentralization policy still lead to the lack of clarity of the laws and regulations governing the implementation of this policy at the provincial level, and these challenges have become significant barriers for investors over the past decade or more.

b. Mining Licensing System

Under the previous mining law, the central government granted the mining right (Kuasa Pertambangan or KP) framework for Indonesian investors and the CoW/CCoW framework for foreign investors. CoWs were regulated in the MEMR Decision Letter No. 1614 of 2004. In essence, a CoW is a comprehensive contract between the government and an Indonesian company. The company could be 100 percent foreign owned. However, if the company was 100 percent foreign owned, it may have been subject to divestment requirements at a later date. The CoW determines


21

the rights and obligations of the company related to all phases of mining operations, including exploration, preproduction development, production, and mine closure. The CoW applies to certain geographical areas (contract areas). Under the CCoWs, the mining company is, in effect, entitled to 100 percent of the coal production. However, a royalty of 13.5 percent of sales revenue is paid to the government.

Under the new Mining Law, the mining contracts were replaced by a new licensing system granting the mining business license (IUP) and special mining business license (Izin Usaha Pertambangan Khusus or IUPK). The biggest plus of the new licensing system for mining concessions is that, at least on the face of the law, they will be open to direct ownership by foreign-owned Indonesian (PMA) companies. The Mining Law allows for IUPs and IUPKs to be granted to a “business entity,” a cooperative, or an Indonesian individual. A business entity is defined as every business entity in the mining sector established on the basis of Indonesian law and having its domicile in the Republic of Indonesia. This is a significant change to the previous KP system, which was closed to foreign ownership, including PMA companies. IUPs will be granted by local, provincial or central governments in accordance with that government’s authority, depending on the location and extent of the proposed project area (as has been applied for the previous KP system) on an auction basis. Unlike the previous CoW/CCoW arrangements that incorporate the licenses for all stages in mining business cycles, the licensing system under the Mining Law (in the form of IUPs and IUPKs) is simplified into licenses for exploration and those for production operations. The license-based system is viewed as a positive improvement.9

In accordance with the Mining Law, it was intended that the conditions of an existing mining contract (CoW/CCoW) must be adjusted to the provisions of the Mining Law. For this reason, the government needs to amend the term of the contracts by renegotiation. There were a series of negotiation processes between the central government and the concession holders of CoWs and CCoWs. The renegotiation process began in 2010, with 33 CoW and 67 CCoW holders. As of January 2018, 21 CoW and 68 CCoW holders have signed the amended contracts.10

Furthermore, one of the main features of contracts (CoW/CCoW/Coal Cooperation Agreements or CCAs) is the lex specialis status, which means that the provisions in the contract override general law. The advantage of having a lex specialis tax rule in the contract includes tax stability throughout the life of the project or at least until the end of the contract period. This rule has historically been favored by investors, particularly for high-capital, long-life mining projects, because it provides stability in various aspects of the mining operations, including taxes. On the other hand, the Mining Law stipulates that the holders of an IUP or IUPK will pay tax and nontax revenue in accordance with prevailing laws and regulations. Therefore, the amount of tax and nontax revenue required to be paid throughout the term of an IUP or IUPK will be subject to change from time to time. This is a key point of departure from the previous CoW system, in which the specific tax and fiscal regime was generally fixed for the life of the project. As a significant new requirement for mining companies, the holder of an IUPK will also be obliged to provide the government with a share of 4 and 6 percent of its net profit at the production stage to the central government and regional government, respectively.

9 “Indonesia Mining Report Q3 2012,” Business Monitor International (2012). 10 http://www.beritasatu.com/bisnis/473835-18-pkp2b-dan-1-kk-tandatangani-amandemen-kontrak.html/ (2018, September 28).


22

c. Divestment

Although Law No. 11 of 1967 did not have any regulation on divestiture obligation, the CoW and CCoW have divestment obligation provisions. Under the new mining law regime, the divestment policy has gone through a series of changes. The latest divestment policy is regulated in the Government Regulation (GR) No. 1 of 2017 as the fourth amendment of the GR No. 23 of 2010 on Mineral and Coal Business. Under this regulation, the government requires foreign investors to release at least 51 percent of their shares in the IUP in the 10th year of production. This requirement is higher than in GR No. 23 of 2010, which requires foreign companies to release 20 percent of their shares after the fifth year of production. Under GR No. 77 of 2014, as the third amendment of GR No. 23 of 2010, the 51 percent divestment requirement is not applied to miners. Miners who undertake underground mining and build refining facilities (integrated) are obligated to divest a maximum of 30 and 40 percent, respectively, of the company’s foreign shares. Another issue with this policy relates to uncertainty about valuation issues for the divested shares (e.g., whether to use the replacement cost or market value), giving rise to significant investor concern and reduced appetite (among foreign investors) for expanding existing projects or undertaking greenfield exploration.

d. Downstream Mineral Processing/Refining

Under the Mining Law, the development of value-added minerals has become mandatory. In an effort to encourage downstream industries by promoting the development of processing facilities, the government imposed a ban on unprocessed ore exports in 2014, following the issuance of the MEMR Regulation No. 7 of 2012. Mining companies were required to develop the refining and processing facilities in Indonesia.

However, in January 2017, the government issued GR No. 1 of 2017 and Ministerial Regulation (PerMen) No. 5, which contains export relaxations for select commodities. Thus, holders of operation production mining business licenses (IUP-OPs) and special operation production mining business licenses (Izin Usaha Pertambangan Operasi Produksi Khusus or IUP-OPKs) are allowed to export a number of low-grade minerals for a period of 5 years, ending in January 2022. During this period, the companies are obliged to pay export duties and meet the minimum requirements for domestic processing and refining. This has caused confusion and frustration among mining companies in Indonesia, some of which have made significant investments in building downstream processing facilities. The relaxation of concentrate exports raises legal uncertainty in mining business activities in Indonesia. Since the issuance of Law No. 4 of 2009, a number of derivative rules have been made, amended, and revised, indicating inconsistencies in government regulations in the case of downstream mineral processing/refining. Thus, this ultimately highlights the ongoing inconsistencies faced by investors who want to enter or develop this sector.

e. Artisanal and Small-scale Mining

There have been some changes in the recognition of ASM/people mining in Indonesia. Before the decentralization and reformation era, ASM/people mining was centrally regulated through Law 11 of 1967 and subsequent regulations. Under this law, matters relating to ASM/people mining are regulated under the MEMR. Governors, but not regents or mayors, were given limited authority to issue people mining licenses (Izin Pertambangan Rakyat or IPR). Under its jurisdiction, the regency/city could only assist in registering the ASM/people mining activities, establishing groups, and reporting ASM/people mining activities to its respective governor. However, these arrangements have changed because of regional autonomy. Until now, ASM/people mining has not


23

become a prioritized matter in government policies. Thus, ASM/people mining has faced uncertainties, particularly regarding the area for people mining (Wilayah Pertambangan Rakyat or

WPR). Regulations regarding the WPR have already existed, and the regional authority is responsible for determining the WPR. However, until now, there has never been a follow-up to the regional authority, so few governments issue the regulations and publish the WPR. The regulation states that IPR must exist within its respective WPR. Therefore, the ASM/people mining workers cannot be granted an IPR if it is not within the WPR. Additionally, sometimes the WPR established by the government does not contain any mines. Consequently, this creates conflict between ASM/people mining miners and larger companies because ASM/people mining miners are considered illegal miners (penambang tanpa izin) when they enter the territory of larger companies.

f. Classification of Minerals

In Law No. 4 of 2009, the classification of excavated materials puts more emphasis on geological aspects such as the type of excavated materials. The minerals are divided into four groups: radioactive, metal, nonmetal, and rocks. This classification is based more on the type of mining material and does not reflect the strategic importance of the mining material in relation to important production branches, as mandated in the 1945 Constitution.11

The classification in Law No. 11 of 1967, on the other hand, put more emphasis on the political aspects associated with the interests of resilience and national defense. The minerals were divided into three groups: vital, being the minerals needed to guarantee the livelihood of the people; strategic, being the ones needed for the national economic security; and nonstrategic and nonvital. From this explanation, it can be concluded that measures for determining what is strategic can be described as:

• A part of the national defense;

• Relating to national security;

• Important for national security; and

• A scarce mining commodity. From these measures, it can be seen that the important or strategic classification of mining is dynamic and thus can change over time. Minerals that are classified as vital and strategic at the moment, may not be too important in the future and vice versa. The abolition of the classification of excavated materials according to strategic minerals, vital materials, and nonstrategic and nonvital minerals in the new Mining Law might encourage excessive exploitation of resources, which can weaken the nation’s mineral and energy security.12

11 Article 33 (2) of the 1945 Constitution. 12 “Academic Text for the Draft Law of the Amendment to Law No. 4 of 2009 concerning Mineral and Coal Mining,” Indonesian Mining Institute and PERHAPI (2016).

INDONESIA – MINING SECTOR DIAGNOSTIC (MSD) OVERVIEW OF RESULTS

24

OVERVIEW OF RESULTS

This chapter presents an overview of the results of the Indonesia MSD. The data are aggregated into the dashboard (Figure 6), which gives an overview of performance in the mining sector along the extractive industry (EI) value chain as well as with respect to the context and enabling environment in which the mining sector operates. The dashboard consists of three main elements:

1. Policy efficiency: the results of the (a) legislation, policy, and regulation; and (b) institutional capacity and effectiveness, which focuses on overall de jure and de facto results of all stages of the value chain.

2. Accountability and inclusiveness: the results of the de jure and de facto assessment of (a) transparency and disclosure of information; and (b) the requirements for inclusion of citizens at all stages of the value chain.

3. Context and enabling environment: the results of cross-cutting themes, which evaluate (a) the overall economic environment; (b) the political environment; and (c) the development policy environment in which mining development takes place.

The first two elements of the dashboard are analyzed along the EI value chain, whereas the third one looks at overarching issues.

Figure 6 Dashboard of mining sector in Indonesia.

Economic

Environment

Political

Environment

Development Policy

Environment

Very High (> 3.25 - 4.00)Very low (1.00 - 1.75)Scoring Key: Low (> 1.75 - 2.50) High (> 2.50 - 3.25)

Predictable Mining and Tax Policy Control of Corruption

Development Planning Local Supplier Development Faciliation of Investment and Trade Shared Infrastructure

Expropriation Risk Political Stability

Business and Investment

EnvironmentInfrastructure

Macroeconomic Stability and

GrowthHuman Capital Health

Context and Enabling Environment

Compensation, Resettlement and

ASM Voice--Implementation

Mining Taxation and State-

Owned Enterprise Financial

Management--Implementation

Budget Transparency and

Accountability, and Public

Investment Integrity--

Implementation

Accountability and

Inclusiveness

Cadastre, Geodata, License and

Tenure Management

Sector Management and

Intragovernmental Coordination

Mining Tax Administration and

State-Owned Enterprise

Governance

Budget Implementation and

Fiscal Management

Environemental and Social Impact

and Mine Closure--Management

Mining Sector

Policy,

Legislation and

Regulation--De

Jure

Institutional

Capacity and

Effectivenss--

De Facto

De Jure (Rules)

De Facto

(Implementation)

Human Rights, Employment

Equity and Environmental and

Social Impact Transparency--

Implementation

Openness, Transparency and

Independence of the Licensing

Process--Implementation

Rules on Transparency and

Independence of the Licensing

Process

Rules on Compensation,

Resettlement and Artisanal and

Small-Scale Mining Voice

Rules on Transparency of Mining

Taxation and State-Owned

Enterprise Management

Rules on Budget Transparency

and Public Investment Integrity

Rules on Human Rights,

Employment Equity and

Environmental and Social Impact

Transparency

Policy Efficiency

Extractive Industries Value Chain

Contracts, Licences and

ExplorationOperations Taxation and State Participation

Revenue Distribution and

ManagementLocal Impact

Rules for License Allocation and

Geological Data Collection

Clarity and Harmonization of

Sector Rules

Tax Policy and State-Owned

Enterprise Rules

Public Financial Management and

Revenue Sharing Rules

Environmental and Social Impact

Policies and Rules for Mine

Closure

3 Dashboard and Implementation Gaps


25

The dashboard shows that:

• In terms of policy efficiency, the scores vary from low to very high. “Mining Tax Administration and State-Owned Enterprise Governance”, “Clarity and Harmonization of Sector Rules”, and Public Financial Management and Revenue Sharing Rules” score within the very-high range, whereas both “Sector Management and Intragovernmental Coordination” and “Environmental and Social impact and Mine Closure—Management” are in the low range.

• In terms of accountability and inclusiveness the scores also vary from low to very high. Only “Openness, Transparency and Independence of the Licensing Process-Implementation” scores within the very-high range, whereas two areas—“Compensation, Resettlement and ASM Voice—Implementation” and “Budget Transparency and Accountability, and Public Investment Integrity—Implementation” are in the low range.

• Regarding the mining sector’s context and enabling environment, all the elements of “Political Environment” score in the low range, whereas all elements of “Economic Environment” and “Development Policy Environment” score in the high range.

This chapter also provides an analysis on the de jure and de facto performances for both policy efficiency and accountability and inclusiveness along the value chain in the form of the implementation gap. The implementation gap shows the difference between de jure and de facto performance that helps determine the performance for which reform should be prioritized for better mining sector’s governance.

Policy Efficiency

Figure 7 shows the implementation gap for policy efficiency in Indonesia: that is, the difference

between policies as they are written versus policies as they are applied. The data illustrate several

notable phenomena:

▪ From the figure, it can be inferred that the de

facto performance for taxation is higher than the

de jure performance. This suggests that even with

perceived weaknesses in the policies around the

fiscal regime and administration, there is

nevertheless strong performance of government

entities tasked with administering this segment of

the value chain—including the management of

state-owned enterprises (SOEs). Why might this

be the case? A considerable number of industry

respondents highlighted concerns over the clarity

and consistency (over time) of fiscal policies and

administration practices—specifically over a lack

of consultation by government when fiscal

policies are reformed and over the “dual administration” of CoW/CCoW and IUP/IUPK regimes.

It is likely (although not explicit from the available data) that recent renegotiations of

CoW/CCoWs have worsened perceptions of fiscal policy stability, particularly among industry

stakeholders. At the same time, the overall de facto performance under this category, including

Figure 7 Policy efficiency—implementation gap.

1.00

1.75

2.50

3.25

4.00

Contracts,Licences andExploration

Operations Taxation andState

Participation

RevenueDistribution and

Management

Local Impact

De Facto Performance De Jure Performance


26

tax administration systems, auditing practices, and SOE governance practices, is relatively

strong.

▪ For the other four value chains, however, the de facto performances are lower than the de jure

performances. This indicates that there is room for improvement for the implementation for

these value chains. For licensing, the first value chain, it is worth noting that the de jure

performance is assessed based on the Mining Law principle, whereas de facto performance is

judged on the basis of interview results, in which answers refer to the procedure based on the

previous mining law. This was because the licensing procedure in the Mining Law had not yet

been implemented in practice. Furthermore, from the interview results, the low scoring on de

facto performances is mainly caused by the poor implementation of mapping and geological

exploration and the ineffectiveness of the mining cadastre.

▪ Operations (the day-to-day performance by industry and oversight and management by

government) in Indonesia shows the weakest de facto performance with the most prominent

disconnect from de jure performance, indicating the need for significant improvement. The

data illustrate a perception of weak coordination between central and regional authorities on

a range of issues, including management of artisanal/illegal mining, clarity of roles and

responsibilities between central/provincial/regency governments, sharing of data between

these levels of government, and enforcement of occupation health and safety obligations.

▪ Regarding revenue distribution and management, the de jure performances is the highest

along the EI value chain. The lower scoring for the de facto performance is mainly caused by

some perceived issues on budget implementation and public investment management.

▪ Regarding local impact, the lower scoring on the de facto performance is caused by the weak

performance of some indicators assessing the theme of environmental and social impact

management effectiveness, indicating the need to improve implementation in this area.

The above results show positive correlation with some of the other survey results of the Indonesian

mining sector. In 2017, according to Fraser Institute,13 Indonesia was among the least-attractive

jurisdictions for investment based on the Policy Perception Index, ranking 84/91 with a score of

39.92 of 100. Some of the main issues causing the low scoring on this index include “regulatory

duplication and inconsistencies”; and “uncertainty concerning the administration, interpretation

and enforcement of existing regulations,” which were ranked 81st and 86th, respectively, of 91

jurisdictions. Furthermore, a survey conducted by Indonesian Mining Institute in 2017 showed

similarities in terms of main issues considered to be deterrents to mining investment. Most of the

industry from provinces of Indonesia reported issues that mainly dwell on administrative

uncertainties, regulatory duplications, and inconsistencies.14

Accountability and Inclusiveness

Figure 8 shows the implementation gaps regarding accountability and inclusiveness: that is, the

extent to which the public is involved in decision making and government/industry are held

accountable for their actions.

13 “Fraser Institute Annual Survey of Mining Companies 2016,” Fraser Institute (2017). 14 “Laporan Survei Pertambangan Indonesia 2016/2017,” Indonesian Mining Institute and DGMC (2017).


27

Figure 8 Accountability and inclusiveness—implementation gap

▪ Taxation shows a small gap between

performances with a slightly higher de facto

performance. The lower performance in de jure

performance is mainly caused by the

accountability of SOE financial management

because there is no rule for internal audit to

report periodically to the audit committee. In

practice, however, the internal audit does

cooperate with the audit committee.

▪ Regarding operations, from the interview results, the low scoring on the de facto performance is mainly caused by the weak enforcement of the legal requirements for compensation, resettlement and ASM/people

mining voice, indicating the need for improvement on this area.

▪ Revenue and distribution management shows the weakest de facto performance and a significant gap with the de jure performance. In this context, de jure performance measures the perception of actual policies on public budgeting and public investments and whether they are designed in a transparent and accountable manner. Related to these, de facto performance measures the extent to which actual implementation of these policies strengthens actual transparency and accountability. The data suggest there is room for improvement for de facto performance.

▪ Regarding local impact, both the scores for the de jure and de facto performances are within the high range. Some of the lower performances for this area are caused by the weak performance of the Independent Human Rights Commission and poor implementation of the grievance and complaints mechanism for environmental and social mitigation issues.

▪ One of the more unexpected results from the MSD data concerns the accountability of

Indonesia’s mineral licensing regime. As Figure 8 shows, de facto performance is rated highly—

indeed far higher than de jure performance. In light of several well-publicized issues around

mineral licensing practices in recent years—especially the standing moratorium on new license

issuance and the ongoing CnC review, which has already invalidated hundreds of improperly

issued licenses—readers should avoid making any hasty interpretations of the results presented.

The scoring for de facto performance is derived from the following questions asked of

respondents from industry, civil society, and government entities:

In practice, is the information for license applications made publicly available?

In practice, when licenses are denied are procedures followed?

In practice, when licenses are canceled are procedures followed?

In practice, are exploration and mining licenses, contracts, and agreements made publicly

available?

In practice, does the agency responsible for awarding licenses operate independently from

the Ministry?

1.00

1.75

2.50

3.25

4.00

Contracts,Licences andExploration

Operations Taxation andState

Participation

RevenueDistribution and

Management

Local Impact

De Facto Performance De Jure Performance


28

In practice, does the agency responsible for awarding licenses award licenses in a rules-

based manner?

Given the moratorium on new license issuance (and excepting a small number of cases in which

exploration IUPs have been converted to production IUPs), the government is indeed following

procedures by not granting any licenses. Similarly, the CoW/CCoW are not public license

registries at the central level and at most provincial levels are indeed made public. Nevertheless,

policy makers should view this score as a snapshot of licensing practices at the time the MSD

was undertaken (during a moratorium). Careful consideration should be given to the question

of whether the well-known structural deficiencies surrounding mineral licensing practices

before the moratorium/review have been adequately addressed over the course of the

moratorium to prevent another CnC review being necessary in 5 to 10 years.

INDONESIA – MINING SECTOR DIAGNOSTIC (MSD) PERFORMANCE ALONG THE EI VALUE CHAIN

29

PERFORMANCE ALONG THE EI

VALUE CHAIN The inspection of the dashboard and the gap analysis provides a general view of the functioning and performance of the mining sector. Specific information regarding the sector’s strengths and weaknesses, however, is not provided. This chapter gives insight into each stage of the value chain and discusses the findings in more detail.

1. Value Chain Stage 1: Contracts, Licenses, and Exploration

The dashboard presented in Figure 6 provides an aggregate view. Each cell in the dashboard consists of one or more indicators, and each indicator is scored based on a range of questions. Figure 9 below shows a more detailed breakdown of performance at the first stage of the EI value chain. A total of 13 indicators are being explored that reveal important disaggregated information on performance.

Figure 9 Value chain stage 1—indicators

Policy Efficiency—De Jure (2.91)

This theme measures the scope and quality (compared with good practice) of mining sector rules. Under this theme, there are several subtopics (indicators) assessed using primary desktop research, including rules for license allocation of both exploration and mining, the authority issuing the license, and monitoring of the license process.

Licensing—Institutional Roles (2.00)

This indicator is in the low range because there is no legally binding requirement for the establishment and operation of a mining cadastre. By definition a mining cadastre is the principal public institution that manages mining titles in a country with such mining titles’ administration

Indicators

Licensing--Institutional Roles (2.00)

Clarity of Rules for Exploration Licensing (3.12)

Clarity of Rules for Mining Licensing (3.50)

Clarity of Rules for License Oversight, Conversion, and Transfer (3.00)

Collection of Geological Information (2.88)

State of Mapping and Geological Exploration (1.79)

Mining Cadastre Effectiveness (1.89)

Allocating Both Exploration and Mining Licenses Effectively (3.08)

Managing and Transferring Licenses Effectively (3.00)

Rules (2.91)

Implementation

(2.53)

Rules (2.69)

Implementation

(3.67)

Po

licy

Effi

cien

cy

Acc

ou

nta

bili

ty

and

Incl

usi

ven

ess

Openness and Transparency of Licensing Process (2.69)

Openness and Transparency of Licensing Process--Implementation (3.67)

4


30

activities. Indonesia has yet to have an integrated cadastre system in place. The mining titles are predominantly recorded with the Directorate of Mining Business and Development for Minerals (Direktorat Pembinaan dan Pengusahaan Mineral) or the Directorate of Mining Business and Development for Coal (Direktorat Pembinaan dan Pengusahaan Batubara) of the MEMR, and some remain being kept at offices of the provincial government. In 2013, nonetheless, under MEMR Regulation No. 2 of 2013, a nationwide verification system, the so-called CnC, was introduced by the MEMR and followed by the Minerba One Map Indonesia to serve the purpose of monitoring the issuance of mining licenses, particularly those issued by local governments, ensuring the security of tenure for the titleholder as well as avoiding potential duplication or overlapping of mining rights; the system adopted some but not all of the general principles of the mining cadastre. However, the CnC list does not include the map of the mining area (cadastral maps) or the detail of the mining sequence and geological information.

There is a legally binding provision that identifies the authority that issues exploration and mining licenses. Under the Mining Law and the Regional Administration Law, MEMR or the governor is authorized to issue IUPKs, IUPs, and IPRs.15 In terms of exploration licenses, a governor shall issue such licenses at the provincial level where the IUP area is located within one province and the mining activities are conducted through a domestic investment. 16 Likewise, an IUP operation production is also granted by the governor if it is conducted through a domestic investment for which the mining commodities come from the same province.17 A governor, in this case, is an independent authority and separate from the mining ministry. The governor’s independence of the MEMR is confirmed under Article 70(2) of Law No. 23 of 2014, which states that a governor is held responsible to the president through the Ministry of Home Affairs by submitting an implementation report of the provincial government once a year.18 However, based on Mining Law, the governor is supervised and fostered by MEMR.

Clarity of Rules for Exploration Licensing (3.12)

There are legally binding procedures for granting exploration licenses that are consistent with good practice. Furthermore, standardized bidding documents are used for granting exploration rights licenses in which the evaluation criteria are set out. There are also legally binding procedures for registering or granting licenses to artisanal and small-scale mining operators. There are legally binding provisions regarding the time frame for the issuance of exploration licenses and the approval of exploration work programs. There are legally binding provisions that require exploration license holders to report exploration activities and results to the MEMR or governor.

Clarity of Rules for Mining Licensing (3.50)

There are legally binding procedures for granting mining rights that are consistent with good practice. In the case of competitive bidding, standardized bidding documents are used for granting mining rights licenses in which the evaluation criteria emphasize investment commitment and premium payments. There are no legally binding provisions that provide for the use of mining-

15 Although under the PerMen 11 of 2018, there is a license called IUPK, its validity is doubtful because there is no basis for this type of license. 16 Appendix CC item 2(b) of Law No. 23 of 2014. 17 Appendix CC item 2(e) of Law No. 23 of 2014.


31

related standard contracts and/or development agreements because licenses are given through an area-based licensing system. There are legally binding procedures for granting licenses to mineral traders that are required for trading minerals, gemstones, and so forth produced by mining license holders as well as artisanal and small-scale mining operators.

Clarity of Rules for License Oversight, Conversion, and Transfer (3.00)

A company that holds an exploration license and is in compliance with license conditions has a legally binding automatic priority right to apply for a mining license in that area. There are no legally binding provisions that permit exploration and mining license holders to transfer their licenses to an eligible party that meets the license provisions. There are legally binding provisions for penalties and sanctions for noncompliance with exploration and mining license conditions.

Policy Efficiency—De Facto (2.53)

This theme measures the quality of government organizations and their ability to effectively govern, including particularly the extent to which the de jure intent of the rules is applied in practice (de facto).

Collection of Geological Information (2.88)

The Geological Agency, under the MEMR, is the governmental agency providing the national geological information. The Geological Agency collects geological information in a publicly accessible library and maintains geological information from companies in a confidential manner until such time as it can be made publicly available. Most companies have never encountered any issues regarding this practice. Geological information can be acquired only by request as set by procedure.

In practice, exploration license holders are not delivering the required operational information to the Geological Agency on a regular basis because there are no obligations to do so. The Geological Agency maintains a library with current national or sub-national geological information, and there is also a website that presents the national geological information. The geological data collected by the Geological Agency is used to improve government and public awareness/understanding of geological prospectivity. However, the geological data are not used to monitor compliance with licenses.

The capacity of Geological Agency to fulfill its mandate in a satisfactory manner is high in terms of the number of experienced staffs, facilities, and procedures. However, adequate funding (institutional budget) relative to its workload has yet to be received. Most industry respondents are dissatisfied with the capacity of the Geological Agency in fulfilling its mandate. Some of the industry respondents added that the data and information are inaccessible and, even if there is any, the quality of the information is rather poor. Thus, most of the mining companies have never relied on the information and data from the Geological Agency.

State of Mapping and Geological Exploration (1.79)


32

The percentage of the licensed ground being serviced by active exploration is very low. According to the Fraser Institute, the quality of Indonesia's geological database is low, with Indonesia ranking 74th among mineral-rich countries. 19 According to some government respondents, the impediments for a company to carry out exploration include the failure to obtain licenses from other sectors (such as forestry), compensation of land, ambiguity of boundaries, and incompetence of the license holders.

The industry’s satisfaction with the availability of geological maps for the most prospective areas is also generally low. Most industry respondents are dissatisfied with the availability of geological maps for the most prospective areas, adding that the data and information are both inaccessible and, even if there is any, the quality of the information is rather poor. Thus, most mining companies have to conduct their own research.

Mining Cadastre Effectiveness (1.89)

Indonesia has yet to have an integrated mining cadastre system in place. From the interviews, it is found that there has been a lack of understanding on the role and scope of a mining cadastre. However, the respondents generally agree that some of the functions of a mining cadastre have partially been performed by the Dinas ESDM at the provincial level and DGMC at the national level.

The capacity of the institution in charge of the mining cadastre to fulfill its mandate is low because of a lack of staff, facilities, equipment, and budget. Moreover, mining companies are largely dissatisfied with the way the institution is fulfilling its mandate. The respondents of the three provinces generally agree that the record on the mining title may not be accurate and complete, which mainly is because of the transfer of authority from the regencies to the provinces, which may not be completed properly in a satisfactory manner.

Most industry respondents indicate that the mining map and information provided by the government on the website are unclear and inaccurate and the system is often inaccessible. Furthermore, less than 25 percent of the mining cadastre is up to date because of the very limited technology, especially in the provinces, with overlapping still being found. The central government is unable to obtain updated information on a timely basis from the provincial level. The compatibility of the topographic map with the global positioning system (GPS) is also low.

Allocating Both Exploration and Mining Licenses Effectively (3.08)

In the interview, it was noted that all industry respondents were holding exploration or mining licenses that were issued before the enactment of the Mining Law; thus, they were granted pursuant to the procedure under the old mining regime. The effectiveness and implementation of the procedure for granting exploration and mining licenses under the current Mining Law is therefore untested.

Most industry respondents indicate that the procedures in the legal framework and the limits to discretionary power for the awarding of mining and exploration licenses are almost always followed in practice. There is no preference for local companies or producers in the award process of mining and exploration licenses. The legislated time frames for mining and exploration license awards

19 “Survey of Mining Companies 2016,” Fraser Institute (2017).


33

along with their extensions are often being followed, while the time frames for the approval of exploration work programs are almost always followed in practice. However, industry respondents indicate that more than half of the time, the mining and exploration licenses were awarded to applicants that did not have the technical and financial capacity to fulfill license requirements and any associated work program.

Regarding the compatibility of the timelines for deciding IUP exploration or IUP-OP and other permits, most industry respondents are of the opinion that the time frames are often incompatible for various reasons, mainly because of the lack of interdepartmental coordination. The problem was mainly with the forestry sector in the application of the IPPKH and with the environmental sector, for which obtaining an environmental license is mandatory before applying for a mining license. In reality, the process for obtaining such a permit is extensive and has resulted in the delay of the issuance of the mining license.

The capacity of the unit issuing exploration and mining licenses to fulfill its mandate is also low because of the lack of sufficient funding and staff. However, most in the industry are satisfied with the unit managing the monitoring and extension of exploration and mining licenses because of the significant improvement over how it used to be with regard to the quality and effectiveness of the service. Boundary disputes have been an ongoing issue in the mining sector until now, especially at the regency level. The percentage of licenses subject to boundary disputes, however, is low. The license cancellations or denials result in appeals less than half of the time.

Managing and Transferring Licenses Effectively (3.00)

The government is effectively managing compliance with exploration and mining license conditions. Most government respondents, however, view that the capacity of the unit managing the monitoring of licenses to fulfill its mandate in a satisfactory manner is low. Most in the industry, on the other hand, are satisfied with the way the unit is fulfilling its mandate, adding that they are satisfied with the authorities’ practices regarding the extension of exploration and mining licenses. License holders are not able to transfer their licenses to companies that meet the same qualification criteria. In practice, most of the industry respondents reported that a company does have an automatic first priority to obtain a mining license in an area for which it holds an exploration license providing provided it is in compliance with license conditions.

Accountability and Inclusiveness—De Jure (2.69)

There are legally binding provisions that an applicant be informed if a license application is denied that include the requirement that the applicant be given the reasons; the communication take place within a given time period after the decision; and procedures for appealing the denial be provided to the applicant. However, an appeal cannot be made to an authority separate from the authority that denied the application. There are also legally binding provisions that provide a process for license cancellations.

However, there are no legally binding requirements that exploration and mining licenses, contracts, and agreements be made publicly available and there are barriers to the disclosure of new contracts, agreements, licenses, and geological information (apart from confidentiality requirements during the exploration period). There are legally binding provisions that require license holders to provide the government with details of the beneficial ownership of the license.


34

Accountability and Inclusiveness—De Facto (3.67)

In practice, most industry respondents view that the information required for license applications is publicly available. However, it was noted that this answer was in relation to the license application process before the enactment of the current Mining Law. The government respondent reported that the procedures regarding license cancellations and denials are being followed, with the government giving the reason for the license denial/cancellation and following the procedure when the applicant appeals the denial/cancellation. Also, according to the government respondent, exploration and mining licenses, contracts, and agreements have been made available to the public. Most industry respondents reported that the agency or ministry responsible for awarding exploration and mining licenses does operate in a rules-based manner.

Regarding “Contracts, Licenses, and Exploration” there is room for improvement as follows:

• Strengthen the DGMC, Dinas ESDM, and Geological Agency mainly through providing adequate budget;

• Update and enrich the topographic map to decrease overlaps and inaccuracy;

• Ensure the precision of and consistency between the national and provincial license registries;

• Enrich the geological information;

• Provide advanced technology, particularly on the provincial level, thus allowing the central office to obtain updated information;

• Ensure that licenses are awarded to applicants with technical and financial capacity; and

• Ensure the timelines for deciding on exploration and mining license applications are compatible with the timelines for other required permits.

2. Value Chain Stage 2: Operations

Figure 10 below provides details on the performance at the operations stage of the EI value chain.

There is considerable variation in the performance of the various indicators that comprise this

stage.

Figure 10 Value chain stage 2— indicators

Clarity of Legislation, Rules and Timeframes (4.00)

Harmonization of Legislation and Government Coordination (4.00)

Provisions for Artisanal and Small-Scale Mining (ASM) (3.25)

Occupational Health and Safety (2.12)

Support to Artisanal and Small-Scale Mining (1.37)

Intergovernmental Coordination (2.25)


Rules (2.75) Rules on Compensation, Resettlement and Artisanal and Small-Scale Mining Voice (2.75)

Implementation

(2.14) Compensation, Resettlement and ASM Voice--Implementation (2.14)

Po

licy

Effi

cien

cy Rules (3.34)

Implementation

(2.42)

Acc

ou

nta

bili

ty

and

Incl

usi

ven

ess


35


Clarity of Legislation, Rules and Time frames (4.00)

There are clear, legally binding regulations that cover exploration activities, mining activities, physical mine closure, and reclamation. The time frames for the approval of work plans and budgets (Rencana Kerja Anggaran dan Biaya) and extensions of mining operations are set out in the regulations.

Harmonization of Legislation and Government Coordination (4.00)

The laws and regulations governing exploration and mining operations are available from a single and up-to-date online government source.

The mining legislation (including rules and regulations) is consistent with other legislation, including the land legislation (land access legislation included); the environmental protection legislation; the social protection and risk mitigation legislation (resettlement and compensation legislation included); and the fiscal legislation. Furthermore, the mining legislation assigns clear authorities and responsibilities to government ministries/agencies in the mining sector with no overlapping authorities and responsibilities (roles) between government ministries/agencies.

Provisions for Artisanal and Small-Scale Mining (3.25)

There are legally binding provisions for the operation of ASM/people mining activities. There are no legally binding provisions that permit ASM/people mining activities to take place with the consent of the non-ASM/non-people mining license holder, on land for which an exploration or mining license (IUP operation production or IUPK operation production) has been issued. ASM/people mining activities can be implemented only within a WPR,20 and any dispute arising in the implementation of IUP, IPR, or IUPK shall be settled through the courts and domestic arbitration in accordance with the provisions of the law.21 There are legally binding provisions that provide for the settlement of disputes between ASM/people mining and industrial mining operations. There are also legally binding provisions for ASM/people mining safeguarding the environment (including water sources and forests) from potential harm; abating the use of mercury; and requiring safe working conditions.


There are legally binding Occupational Health and Safety (OHS) standards and procedures that include penalties for noncompliance, related education, and training requirements. However, there is no grievance mechanism available in the event of noncompliance with OHS standards and procedures.

20 Article 20 of the Mining Law. 21 Article 154 of the Mining Law.


36


Support to Artisanal and Small-Scale Mining (1.37)

Although in the adjusted methodology, ASM/people mining referred to IPR holders, the data collected from interviews of various stakeholders indicate the term was perceived to also include illegal miners.

There is no dedicated unit within the mining authority dealing with ASM/people mining. However, matters related to ASM/people mining may be filed to the Directorate of Mining Business and Development for Mineral/Coal of the MEMR. Almost all of the CSO respondents indicate that the government does not provide any technical training to ASM/people mining miners to help improve their mining activities. Some CSO respondents, however, indicate that the government, with the fund proposed by the local government, does give training but not necessarily all provinces provide it.

Although cooperation between ASM/people mining and industrial mining may bring various benefits, including to the environment, the interview result reveals that most respondents strongly agree that the ASM/people mining is unable to coexist with other mining activities. Furthermore, most industry respondents also indicate that the ASM/people mining activities are unable to coexist with large-scale mining activities, adding that this might occur if required by the government.

According to the government, some (less than half) of the ASM/people mining miners are operating in the formal market. Holders of IPRs are allowed to sell openly their products to market. The mechanisms for the settlement of disputes between ASM/people mining and other mining operations are never or rarely being used because disputes are commonly solved by a direct approach in dialogues to achieve an amicable dispute settlement.

Intra-Governmental Coordination (2.25)

In practice, there have been some disagreements between mining authorities and other authorities that include disagreements with regard to land use issues with land access and use authorities; preservations of forest with the environmental protection authorities; and the industrial business license (Izin Usaha Industri) with the fiscal authorities. The government respondent indicate that this is because of the different priorities among the authorities. There is a formal mechanism for sharing information among government ministries/agencies working on the mining sector. However, regular sharing of information among government agencies that have regulatory responsibilities rarely takes place because sharing of information has mostly been done on an upon-request basis when there are cases to be discussed.


According to industry respondents, the implementation of the OHS standards and procedures, including education and training requirements, is almost always monitored and enforced. The government does track the number of injuries and fatalities related to mining activities. In practice, the right to refuse entry to unsafe working places is almost always protected and enforced. On the other hand, the grievance and complaints mechanism for OHS is followed in practice, according to the government respondent.


37


The holder of a mineral right does not automatically have legally guaranteed access rights to surface land. The rights for IUP, WPR, or IUPK areas are separated from land surface rights22 and do not constitute the ownership of land rights.23 There are legally binding established procedures for the resettlement of communities displaced by mining activities and for the payment of compensation when exploration and/or mining activities interfere with land ownership or land use.

There is a legally binding process to appeal decisions by mining authorities outside and independent of the mining authorities.

There is a voluntary association that represents ASM/people mining miners. There is no government-run program in which ASM/people mining workers and their families can access basic health services in the area where they work.


Some of the CSO respondents indicated that the legal requirements to resettle communities affected by mining companies are rarely enforced. Land compensation is usually paid by the mining company to the affected local residents in an amount that refers to the market price of the area and without any intervention of the government. Some CSO respondents also reported that the government rarely enforces payments of compensation when exploration and/or mining activities interfere with land ownership or land use, adding that the compensation is usually paid through a direct negotiation between the community and the company without the intervention of the government.

The legislative branch of government carries out an oversight role regarding the mining sector beyond the consideration and approval of legislation. The legally binding appeals process has the legal standing to overturn decisions by mining authorities.

According to the some of CSO respondents, ASM/people mining associations do participate in the monitoring, advocacy for, and protection of their mining and property rights but only through discussions with CSOs. In practice, ASM/people mining workers and their families are rarely able to access basic health and education services in the area where they work.

Regarding “Operations” there is room for improvement as follows:

• Establish a grievance mechanism for non-compliance with OHS standards and procedures;

• Establish a dedicated unit within the mining authority dealing with ASM/people mining;

• Provide technical training to ASM/people mining miners to help improve their mining activities;

• Ensure that ASM/people mining miners and large-scale mining operations are able to coexist;

• Ensure that the mechanisms for the settlement of disputes between ASM/people mining and other mining operations are being used;

• Ensure that disagreements between government ministries/agencies over the responsibilities regarding the mining sector are properly addressed and coordinated;

22 Article 134 of the Mining Law. 23 Article 135 of the Mining Law.


38

• Establish regular sharing of information between government agencies that have regulatory responsibilities for the mining sector;

• Establish a government-run program that ASM/people mining workers and their families can access to get basic health and education services in the area where they work;

• Strengthen the enforcement of the legal requirements to resettle communities affected by mining activities;

• Strengthen the enforcement of the legally binding payments of compensation when exploration and/or mining activities interfere with land ownership or land use; and

• Ensure that ASM/people mining miners along with their families are able to access basic health and education services in the area where they work.

3. Value Chain Stage 3: Taxation and State Participation

Figure 11 Value Chain Stage 3—indicators

Figure 11 above provides detail on the de jure and de facto performance at the third EI value chain

stage.


Tax Policy and Instruments (3.50)

There are legally binding provisions that prescribe government agencies have the authority to collect taxes and payments from mining companies. Income and withholding tax payments and royalties from mining companies to government are required by law to be placed in the national treasury. The rates, formulas, and bases for the main fiscal instruments (such as income taxes, withholding taxes, indirect taxes and royalties) that apply to mining are prescribed by law.

There are legally binding provisions for the granting of tax incentives to mining companies, but they do not require that a cost–benefit analysis be conducted before granting the tax incentives. In cases of CoW and CCoW only, the government was able to negotiate or renegotiate fiscal provisions with mining companies that differ from those provided in the law; fiscal provisions are no longer negotiable under the current Mining Law.

There are legally binding provisions that ensure that the government has a minimum revenue stream (relative to sales revenue) in all production periods that varies from 1.50 to 7 percent of the

Indicators

Tax Policy and Instruments (3.50)

Mining Tax Administration (3.11)

State-Owned Enterprise Governance Rules (1.96)


Mining Tax Auditing (3.00)

State-Owned Enterprise Governance (3.81)

Accountability of Mining Taxation (2.50)

State-Owned Enterprise Financial Management and Accountability (3.50)

Accountability of Mining Taxation--Implementation (2.05)

State-Owned Enterprise Financial Management and Accountability--Implementation (4.00)

Po

licy

Effi

cien

cy Rules (2.85)

Implementation

(3.46)

Acc

ou

nta

bili

ty

and

Incl

usi

ven

ess

Rules (3.00)

Implementation

(3.03)


39

selling price depending on whether it is coal or mineral. There is a royalty-like instrument on gross sales to ensure revenues for the government even if profitability is affected and a corporate income tax applied on profits. The rates, formulas, and bases for royalties are prescribed in GR No. 9 of 2012 and based on selling price.24 The tax rate applied on the taxable income of a domestic corporate taxpayer is 25 percent.25 There are also additional deductions, apart from standard deductions in the tax code, applied to the mining sector. A domestic corporate taxpayer in the energy and mineral resources sector who invests, either in a new investment or an existing business expansion, may be granted income tax facility (additional deductions) in accordance with the provisions of legislation.26 In cases in which the government holds equity shares in resource companies, the expected benefits from equity holding are greater than the costs for acquiring equity.


There are legally binding provisions that specify which agencies collect mining sector payments. In Indonesia, there are more than four agencies involved. There are legally binding provisions for mining sector payment processes which are consistent with good practice. The provisions cover timeframes for mining sector payment processes, specifying the accounts where payments must be made, including documents providing evidence of payments and receipts and provisions for settling disputes. The government, however, does not have a simplified tax collection system for ASM/People mining. There are legally binding provisions that require regular tax, cost, and physical audits to be conducted of mining operations which apply to all mining taxpayers (excluding ASM/People mining).

There are legally binding provisions that require an annual disclosure of related party transactions. There are legally binding provisions regarding transfer pricing, which require taxpayers to demonstrate that transfer-pricing transactions are priced on an arm’s-length basis and use advanced pricing agreements for transfer-pricing transactions. The provisions also require documentation to be filed with the tax authority to demonstrate compliance with transfer-pricing rules.27 There are legally binding provisions that limit the risk of thin capitalization and include debt-to-equity caps. However, the provisions do not include interest rate caps. There are legally binding provisions that identify profits from the indirect or offshore transfer of exploration and mining assets/rights so that they are taxable in the host country.

State-Owned Enterprise Governance Rules (1.96)

There are legally binding provisions regarding the board composition of mining sector SOEs that are consistent with good practice. However, there are no legally binding provisions that set out the roles and responsibilities of mining SOEs when engaging in quasi-fiscal activities. There are legally binding provisions that set out the roles and responsibilities of the SOE board. The appointment and dismissal of the SOE’s Board of Directors are conducted by the General Meeting of Shareholders (GMS). In the event that the Minister is acting as GMS, the appointment and dismissal of the Board of Directors shall be determined by the Minister. The SOE has the authority to retain earnings. There are no policies on earning distribution and investment agreed upon between the

24 Appendix Section IIC of GR No. 9 of 2012. 25 Article 17(2a) of Law No. 36 of 2008. 26 Article 2 of MEMR Regulation No. 16 of 2015. 27 http://www.pajak.go.id/content/istilah-istilah-perpajakan-harga-transfer-transfer-pricing/ (2018, February 18).


40

SOE and governments (national, regional, or local). There are no requirements for the board to share dividends from the SOE earnings or obtain the government’s approval before taking debt positions.



The taxation authority issues guidance notes. Most mining companies are quite satisfied with these guidance notes. The bases on which taxes are levied are sometimes (less than half of the time) subject to disputes between taxpayers and the tax authorities. Such disputes are resolved through active tax tribunals.

The tax administration has a large taxpayer unit/office or one specialized in natural resources/mining. More than the half of the mining industry is quite satisfied with the way in which the large taxpayer unit/office of the one specialized in natural resources/mining is fulfilling its mandate, adding that the collection system has continuously improved as the monitoring and supervision function by the tax office has increasingly progressed.

In practice, taxes and payments by mining sector taxpayers are collected only by the mandated agencies. Income, withholding tax payments, and royalties from mining companies to government are placed in the national treasury. Fiscal terms, including provisions for tax incentives in the law, are often followed. The government does not negotiate fiscal terms and fiscal incentives that differ from those in the mining and fiscal laws and regulations.

Mining Tax Auditing (3.00)

Most government respondents indicate that the tax, cost, and physical audits of mining companies are conducted systematically in a risk-based manner. In practice, legally binding provisions regarding transfer pricing are being implemented. There are regular audits for domestic and international related party transfer pricing transactions. Advanced pricing rules are never used for regularly occurring domestic and international related party transactions. There is no information on whether there are regular audits of mining companies for compliance with thin capitalization rules.

State-Owned Enterprise Governance (3.81)

The board composition of mining sector SOEs conforms to good practice in terms of some board members having private sector experience and some having mining sector experience. The positions of board chair and company chief executive officer are kept separate, and there are no board members who are also civil servants (or former civil servants exposed to government influence). Civil servants may be appointed as board of commissioner members only after they withdraw from their position as civil servants. The internal audit department of mining sector SOEs reviews the effectiveness of internal audit controls annually. In practice, mining sector SOEs always follow the legally binding provisions that set out their roles and responsibilities when engaging in quasi-fiscal activities, such as providing subsidies to other parties or undertaking social expenditures. It is worth noting that, instead of the actual quasi-fiscal activities, the quasi-fiscal


41

activities perceived by the government respondents are in the form of corporate social responsibility and community development programs. Mining sector SOEs or state equity partners honor their financial obligations to their private partners in joint ventures.



Legal provisions for independent agencies to exercise oversight of the administration of the fiscal regime is limited. The audit agency audits the tax authority and assesses the performance of the fiscal regime. There is an internal audit office within the revenue authority and parliamentary oversight on the fiscal regime along with its application in the mining sector. There are no legally binding provisions that require government officials with a role in the oversight of the mining sector to disclose information about their financial interests in any extractive activity or project.


There are legally binding provisions that require mining sector SOEs to prepare annual financial accounts and that require the accounts to be published. Mining sector SOEs are required to have an audit committee that reports to the board. Mining sector SOEs are also required to have an internal audit department. The internal audit department reports periodically to the audit committee although there is no requirement to do so. There are legally binding provisions that require annual financial audits of mining SOEs by an independent external auditor and that the annual financial audits be published. Mining SOEs are required to use the latest published version of internationally recognized accounting standards (IFRS), such as those maintained by the International Accounting Standards Board (IASB) or the Generally Accepted Accounting Principles (GAAP).



Changes to mining tax legislation are rarely undertaken through a consultative process, and most of the mining industry is dissatisfied with this. Public consultations are sometimes held by the central government for changes to tax systems or rules imposed by the central government. However, regional tax and retribution has almost never (or perhaps never) been reported to the public in advance. Furthermore, there is also nontax state revenue (Penghasilan Negara Bukan Pajak or PNBP) collected by mining and non-mining departments. Public consultation usually occurs only for PNBP collected by the mining ministry and not by other ministries.

The government discloses details relevant to mining sector revenues, such as data on production, sales, reported profits, and payments by fiscal instrument, through the EITI. In practice, government officials with a role in the oversight of the mining sector do not disclose information about their financial interests in any extractive activity or project, and there is no obligation to do so. Under the applicable law, there has been no specific requirement on the disclosure of information about any government official’s financial interests in any extractive activity or project.


42

High-level officials, however, must submit complete records of their assets before taking office. Assets and interests registered under different names would thus be difficult to trace.


It is worth noting that the three state-owned mining companies in Indonesia (PT Antam, Tbk; PT Timah, Tbk; and PT Bukit Asam, Tbk) are also publicly listed companies, for which the preparation and publication of annual financial accounts is required. Annual audits of mining SOEs’ financial accounts are undertaken by an independent external auditor and published. Mining SOEs use the latest published version of internationally recognized accounting standards. There are no outstanding financial obligations between mining SOEs and the government.

Regarding “Taxation and State Participation” there is room for improvement as follows:

• Ensure that changes to mining tax legislation are undertaken through a consultative process; and

• Introduce a simplified tax collection system for ASM/people mining.

4. Value Chain Stage 4: Revenue Distribution and Management


Figure 12 above provides detail on both the de jure and de facto performance at the fourth stage of

the EI value chain.


Public Financial Management and Revenue Sharing (4.00)

All government spending and revenues, including revenues from the mining sector, are appropriated through the national budget. There are legally binding provisions regarding arrangements for resource revenue sharing between central and sub-national (provincial and regency) governments that clearly articulate the objectives of resource revenue sharing and they specify how much should be transferred to sub-national governments. The Ministry of Finance has written guidelines regarding when and how yearly budget allocations to provincial and regency governments should be disbursed. There is also a legally binding provision for the ministries to

Indicators

Public Financial Management and Revenue Sharing (4.00)

Fiscal Management Rules and Stabilization (3.00)

Budget Implementation (2.39)

Public Investment Management (2.67)

Ensuring Fiscal Discipline and Fiscal Sustainability (3.00)

Budget Transparency and Accountability (4.00)

Public Investment Integrity and Accountability (2.20)

Budget Transparency and Accountability--Implementation (2.33)

Public Investment Integrity and Accountability--Implementation (1.50)

Po

licy

Effi

cien

cy Rules (3.50)

Implementation

(2.69)

Acc

ou

nta

bili

ty

and

Incl

usi

ven

ess

Rules (3.10)

Implementation

(1.92)


43

produce costed strategic plans, which are then aligned with the annual budget. Therefore, the performance of the legal framework that regulates this issue shows the highest scores.

Fiscal Management Rules and Stabilization (3.00)

There are legally binding provisions that require a medium-term fiscal framework. The Medium-Term Development Plan is a planning document for a period of 5 years, and the government has a debt-management strategy designed to lower borrowing costs that is mandated by law or codified in regulation. However, there are no legally binding provisions for a mechanism to protect budget expenditures from revenue volatility.


Budget Implementation (2.39)

In practice, the arrangements for resources revenue sharing between central and sub-national governments are often being implemented. However, the agency at the provincial level does not have any accurate information regarding the amount of tax and nontax payment collected from the province because the collection is conducted by the MoF in the central government. The MoF, on the other hand, always follows its guidelines regarding when and how it disburses budget allocations to sub-national governments. According to Public Expenditure and Financial Accountability (PEFA) indicators, transfers to sub-national governments, medium-term perspective in expenditure budgeting, and predictability of in-year revenue allocation are rated low; and the aggregate expenditure outturns and expenditure composition outturns score very weak. On the other hand, accounting for revenue is rated as high and performance regarding expenditure arrears is rated very high.28

Public Investment Management (2.67)

In the Global Competitiveness Index (GCI), Indonesia received a very high score with regard to how efficiently the government spends public resources. 29 The government adheres to the legally binding process for screening ministries’ public investment project proposals for consistency with government policy (including the overall procurement plan) and strategic guidance. The government always uses a formal cost–benefit appraisals process for public investment projects. The project appraisals of public investment are rarely undertaken by external agencies or experts. The assessment of public investment projects has been conducted by the Deputy Content of Development Performance Evaluation of the Bappenas along with the funds derived from the state budget (Anggaran Pendapatan Belanja Negara or “APBN”). Project time and/or cost overruns are rarely monitored and reported on a regular basis. In practice, there are often (more than half of the time) delays in project completion relative to the initial estimated time on major public investment projects because of technical constraints or complex administrative requirements.

28 “Indonesia Public Expenditure and Financial Accountability (PEFA) 2016,” PEFA (2017). 29 “Global Competitiveness Index 2017–2018 edition (Indonesia),” World Economic Forum (2017).


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Ensuring Fiscal Discipline and Fiscal Sustainability (3.00)

There is very limited variation in domestic revenues in real terms over a 5-year period according to data from the International Monetary Fund’s World Economic Outlook (IMF WEO).30 In practice, the government follows a debt management strategy that minimizes non-concessional borrowing and borrowing costs. However, there are no specific mechanisms for protecting budget expenditures from revenue volatility.


Budget Transparency and Accountability (4.00)

There are legally binding provisions for the audit for government expenditures. Legislative hearings on budget formulation and audit findings are conducted in public.


The government is required to prepare strategic guidance for public investment decisions. However, there are no legally binding provision that new project be subject to appraisal of costs and benefits before their inclusion in the budget. There is no legally binding process for screening ministries’ public investment proposals to be consistent with government policy as indicated in the overall procurement plan. There are legally binding provisions for the implementing agencies to report on project implementation progress and cost overruns to the Ministry of Finance. There is no legally binding provision that require public investment projects to be evaluated by an independent auditor.


Budget Transparency and Accountability—Implementation (2.33)

Indonesia scores moderately high on the Open Budget Index relative to other mining-rich countries.31 In practice, the assets and liabilities of mining sector SOEs and any natural resource funds are not included in the public sector accounts as reported by the MoF because SOE assets are treated as separate from state wealth. Indonesia scores moderately high on PEFA with regard to central government operations outside financial reporting.32


In practice, public investment projects are never evaluated by an independent auditor. The PEFA score of Indonesia with regard to procurement management is low.33

Regarding “Revenue Distribution and Management”, there is room for improvement as follows:

30 IMF WEO Database for 2017, IMF (2017). 31 http://survey.internationalbudget.org/#rankings/ (2018, September 28). 32 “Indonesia Public Expenditure and Financial Accountability (PEFA) 2016,” PEFA (2017). 33 “Indonesia Public Expenditure and Financial Accountability (PEFA) 2016,” PEFA (2017).


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• Introduce a legally binding provision regarding appraisal of cost and benefits;

• Introduce a process for screening ministries’ public investment proposals; and

• Require that the public investment projects be evaluated by an independent auditor.

5. Value Chain Stage 5: Local Impact


Figure 13 above provides details on both de jure and de facto performance at the fifth stage of the EI value chain.


Community Impact, Consultation and Corporate Social Responsibility Requirements (2.30)

There is a requirement for community stakeholder consultation with affected communities throughout the mine life, with initial consultation required to take place before the commencement of mining operations. However, it is not required that a written report be prepared of the consultation. There is a legally binding requirement that the results of community stakeholder consultations be used in preparing and updating Environmental and Social Impact Assessments and Environmental and Social Management Plans (ESIAs and ESMPs or their equivalents). There is no requirement for Community Development Agreements (CDAs) between mining companies, the government, and affected communities. There is a national policy on Corporate Social Responsibility that applies to mining and is publicly available. Moreover, there is an agency that is responsible for oversight of the national policy and its application in different sectors, including mining.

Environmental Impact Management, including Combating Climate Change Requirements (2.68)

Indicators

Community Impact, Consultation, and Corporate Social Responsibility Requirements (2.30)

Environmental Impact Management, including Combating Climate Change Requirements (2.68)

Social Impact Management Requirements (2.34)

Mine Closure and Financial Sureties for Decommissioning Requirements (3.94)

Impact and Community Consultation Effectiveness (2.58)

Environmental Impact Management Effectiveness, including Combating Climate Change (2.27)

Social Impact Management Effectiveness (2.16)

Mine Closure Effectiveness, Financial Sureties for Decommissioning, and Abandoned Mines (2.89)

Human Rights and Employment Equity--International Conventions (3.06)

Human Rights and Employment Equity--National Measures (2.57)

Environmental and Social Impact Transparency Requirements (2.14)

Gender Equity (4.00)

Human Rights and Employment Equity--International Conventions--Implementation (4.00)

Human Rights and Employment Equity--National Measures--Implementation (2.45)

Environmental and Social Impact Transparency Effectiveness--Implementation (1.90)

Gender Equity--Implementation (2.36)

Po

licy

Effi

cien

cy

Rules (2.81)

Implementation

(2.47)

Acc

ou

nta

bili

ty a

nd

Incl

usi

ven

ess

Rules (2.94)

Implementation

(2.68)


46

There is a legally binding requirement that the clearance of the agency or ministry responsible for environmental protection be obtained before an exploration or mining right is issued, and the agency or ministry responsible for environmental protection is a separate entity from the mining authorities. There is also a legally binding requirement for companies to prepare and submit Environmental Impact Assessments (EIAs), Environmental Management and Monitoring Plans (EMMPs), or combined ESIAs, ESMMPs and related reports, including implementation and monitoring reports for review and approval by the concerned government agencies, which is consistent with good practice. However, there is no requirement for these reports to address mining’s environmental impacts on women separately from the impacts on men.

There are legally binding requirements for pollution prevention and management of air pollution, waste (hazardous and nonhazardous), chemicals, hazardous materials, and pesticides. There are also detailed requirements for the protection of surface water and groundwater quality and the review and balancing of water allocations, including requirements for dynamic management standards for groundwater use and allocation; reviewing and balancing of water allocations in times of increasing water insecurity, taking into account historical and current use and needs; and quality and quantity of mine effluent streams discharged to the environment by mining companies. However, mining companies are not required to adopt new processes and technologies to reduce net water consumption. There is a legally binding requirement for structures, such as tailing dams and impoundments that hold mine waste, to be designed, operated, and maintained according to internationally recognized standards consistent with good practice. There are also legally binding requirements for biodiversity and natural habitat to be identified, managed, and protected by mining operations. However, companies are not required to undertake periodic updating of these plans, do regular reporting, or use offsets in the protection of biodiversity and natural habitat.

There is no a legally binding requirement that mine design and operations reflect anticipated trends in weather event severity and frequency related to climate change. There is a legally binding provision for mining operations to have an Emergency Preparedness and Response Program (EPRP) prior to commencement of mining operations. However, the EPRP is not required to be developed in close collaboration with both local communities and local government. There is no legal provision for a simplified environmental permit for ASM/people mining.

Social Impact Management Requirements (2.34)

There are legally binding provisions that identify which institutions are responsible for oversight of mining-related social impacts. However, the provisions do not identify the authorities responsible for approving Social Impact Assessments (SIAs), approving Social Management and Monitoring Plans (SMMPs), monitoring social impact, and enforcing compliance with legal requirements related to managing social impacts. There is a legally binding requirement for companies to prepare and submit SIAs and SMMPs (and related reports, including implementation and monitoring reports) for review and approval by the concerned government agencies consistent with good practice. This legally binding requirement supports local and national employment, supply of goods and services, and business development. On the other hand, there is no legally binding requirement for local government and companies to work together to manage the effects of the potentially rapid and disruptive in-migration around mining operations. Companies are also not required to collect data on, report on, or address the impacts of mining on women separately from the impacts on men.


47

Mine Closure and Financial Sureties for Decommissioning Requirements (3.94)

There is a legally binding requirement for a Mine Closure and Reclamation Plan (MCRP) to be prepared, which is consistent with good practice. There are provisions that outline what the MCRP must cover with regard to environmental protection, remediation, reclamation, management, and mitigation of potentially harmful social impacts. The MCRP must be prepared in consultation with the affected communities and local government. There are also legally binding requirements for progressive rehabilitation to be included in the mining plan and for the posting of environmental bonds or similar financial assurance methods to cover the cost of environmental rehabilitation and reclamation post-mining. There are legally binding provisions regarding the financial assurance mechanism that requires financial securities to be issued and held only by government or approved, qualified financial institutions. Furthermore, the provisions clearly stipulate the conditions under which the company or the government can access the funds and ensure that the funds can be used only for mine closure and environmental rehabilitation and reclamation costs.


Impact and Community Consultation Effectiveness (2.58)

Meaningful and comprehensive community consultations between mining companies and affected communities do take place and cover all issues, including those related to health, education, water access and water rights, land access and land rights, and the environment. However, most of the CSO respondents indicate that companies usually do not provide the community with relevant information and that women’s views are not always taken into account. Government respondents indicate that the results of community consultations are used in the preparation of relevant documents. Most of the CSO respondents indicate that community development agreements are not negotiated between mining companies and affected communities and local governments. In practice, some large-scale mining companies do prepare community development agreements.

Environmental Impact Management Effectiveness (2.27)

According to most government respondents, the institution tasked with monitoring and enforcing environmental laws and regulations is not carrying out its task in a satisfactory manner. Most CSO respondents are generally dissatisfied with the institution, mostly because of the very poorly conducted supervision and monitoring functions and the incompetency of the staff. On the other hand, the mining industry is generally satisfied with the institution, adding that the monitoring that is provided by the institution is very strict and regular physical visits do take place, although the government officers often require companies to facilitate the visit because of budget constraints.

The approval of EIAs and EMMPs by the mining authority before the mining right is granted does take place, according to half of the government respondents. In practice, the implementation of EMMPs and other environmental impact management and mitigation requirements and compliance with legal requirements are monitored and enforced systematically.


48

The quality of surface water and groundwater is being protected while the water allocations are reviewed and balanced. Although structures, such as tailings dams and impoundments that hold mine wastes, are designed, operated, and maintained according to internationally recognized standards by the mining companies, the government is not fully satisfied. According to most industry respondents, in practice, natural habitats and biodiversity are not being fully identified, managed, and protected.

Mine operations (including maintenance and practices) do take into account anticipated trends in future weather events, including their severity or frequency. However, mine designs mostly do not take into account anticipated trends in future weather event severity and frequency. Regarding monitoring practices, respondents are generally divided on whether they take into account possible future weather events. Mining operations are not increasing their use of renewable energy and hydro power over time.

In practice, most of the mining companies do have EPRPs. However, the documents are mostly available for internal use only; therefore, they are not approved, reviewed, tested, or updated on a regular basis with reporting to the government. EPRPs are also not prepared and updated in close collaboration with the local community. The government is not regularly monitoring the environmental requirements for artisanal and small-scale miners.

Social Impact Management Effectiveness (2.16)

Regarding the institution that monitors and enforces the social mitigation measures and requirements, although it has experienced staff and efficient procedures, government respondents indicate the institution lacks a sufficient number of staff and institutional budget relative to workload and has limited coordination with both the mining and environmental authority. Consequently, the industry and civil society are generally dissatisfied with how the institution carries out its task. In practice, the implementation of SMMPs, mitigation requirements, and compliance with legal requirements are poorly monitored and enforced.

Most CSO respondents indicate that the provision of health, education, and other services barely keeps up with the population growth. Although CSO respondents agree there is adequate cooperation between local governments and companies, they indicate measures are mostly not taken to prevent the increases in crime. According to most CSO respondents, communities in areas where large mining companies operate generally have better health and education services than do nearby non-mining communities. Health and education services in mining communities are generally dependent on regular support from mining companies.

Mine Closure Effectiveness, Financial Sureties for Decommissioning and Abandoned Mines (2.89)

In practice, an initial MCRP is not prepared and approved before the commencement of production. The MCRP must be prepared by the company before the commencement of production; however, the MCRP will be approved by the government after the decree of operation production is issued. However, a final MCRP audited by independent experts is prepared and approved before the commencement of mine closure activities.

The mining industry is generally satisfied with the way the institutions tasked with monitoring and enforcing the environmental and social obligations associated with mine closure are carrying out


49

their tasks. Civil society, however, is predominantly dissatisfied because of the institution’s inadequate and incomprehensive skills; CSO respondents noted further that many mining companies rarely conduct reclamation activities.

Most mining companies have conducted consultations to discuss an MCRP. The MCRP is prepared with all stakeholders and addresses the social and economic impacts of mine closure. The consultation results are recorded in writing and used to shape the approved MCRP. However, CSO respondents indicate they are generally dissatisfied with the way mining companies consult with communities when developing and updating the MCRP.

According to most industry respondents, progressive rehabilitation does take place to reduce the scope and cost of work needed for mine closure and reclamation once production ceases. They also added that they are setting aside funds for mine closure in practice. The amount of funds set aside is consistent with the estimates in the MCRP and sufficient to cover the costs of premature closure.

Adequate procedures regarding the funds being set aside for mine closure are in place, and mining companies are generally satisfied with them. The respondents explained that the fund for reclamation is saved in a guaranteed bank, and the fund for mine closure is saved as a deposit. Neither the company nor the government is able to access the funds for mine closure in a timely manner when needed. The company has to save the other fund to do reclamation or mine closure. This fund can be accessed if reclamation or mine closure has been done and reported to the DGMC.

According to the government respondent, the government is working to inventory abandoned mine sites and determine the most effective way forward in partnership with the industry while prioritizing risk levels and assessing economic, environmental, and social viability of future options. The government is also considering a range of options, such as reactivating the mines, reprocessing mining waste, or final post-closure rehabilitation and restoration. The government reports that the approved plan for moving forward with abandoned mine sites is being implemented. However, fiscal incentives to revitalize closed mines or mining areas have not been provided.


Human Rights and Employment Equity—International Conventions (3.06)

The government is a signatory to an international Human Rights charter and to the United Nations Guiding Principles on Business and Human Rights (UNGP) with an agency designated to implement and enforce compliance with the charters. There is also an agency designated by law to protect human rights (Pillar 1 of the UNGP), which has put in place monitoring procedures and developed a national action plan. However, the government is not a signatory to the Voluntary Principles on Security and Human Rights (VPSHR).

Human Rights and Employment Equity—National Measures (2.57)

There is no legally binding requirement that companies undertake due diligence to ensure that they operate in line with human rights conventions. There is an independent human rights commission that is mandated in the law to hear and resolve human rights complaints and grievances resulting from human rights violations; the commission has put in place procedures for hearings. There are legally binding rules that require employment equity, and there is an agency designated to enforce


50

the rules that has put in place monitoring procedures and enforcement mechanisms. Furthermore, there are legally binding provisions that prohibit child labor, including in ASM/people mining. However, there is no legally binding requirement for free, prior and informed consent.

Environmental and Social Impact Transparency—Requirements (2.14)

There is a legally binding requirement for EIAs and EMMPs (or other key environmental and social impact-related documents, such as monitoring reports) to be made public. However, there is no requirement for the documents to be available in both hard copy and online, available in the local language, or available at the mine site and the community. Summaries are also not required of large technical or other documents.

There is a legally binding requirement for SIAs and SMMPs to be made public, available in both hard copy and online, and available at the mine site and at the community. However, such documents are not required to be available in the local language. Summaries are also required to be available of large technical or other documents. However, there is no legally binding requirement for EPRPs or MCRPs to be made public.

There is a legally binding provision establishing a grievance and complaints mechanism for environmental and social mitigation issues. The mechanism specifies who may file a grievance or complaint and applies to environmental protection grievances and complaints. There is an authority with whom a grievance or complaint can be filed that has put in place procedures for hearings and corrective procedures to be used, if needed, as a result of the hearings.

The government is also party to the UNESCO Convention Concerning the Protection of the World Cultural and Natural Heritage. There is an agency designated to enforce compliance with the convention, which has put in place monitoring procedures and corrective procedures.

Gender Equity (4.00)

There are government commitments to provide women with equal employment opportunities and conditions.


Human Rights and Employment Equity—International Conventions—Implementation (4.00)

According to stakeholder consultations, the regional human rights charter and the national action plan to protect human rights are being implemented in practice with monitoring taking place. Whenever needed, corrective measures are being implemented and are achieving the intended results.

Human Rights and Employment Equity—National Measures—Implementation (2.45)

Based on interview results, there is no obligation for mining companies to undertake due diligence that they operate in line with human rights conventions. Some large mining companies, however,


51

reported that they do undertake due diligence in line with human rights conventions. Although effective procedures are in place at the commission, most CSO respondents are dissatisfied with the way the Human Rights Commission is fulfilling its mandate. The government respondent reported that the commission does not have sufficient budget and staff (quantity and quality wise) to carry out its function.

According to the government respondent, employment equity is being implemented in practice with monitoring and, if needed, enforcement measures taking place. Most CSO respondents indicated that the laws prohibiting child labor, including ASM/people mining child labor, are enforced more than half of the time. According to most CSO respondents, the government does recognize indigenous peoples in its territory and sometimes does safeguard their rights. However, there is no grievance mechanism for indigenous people in relation to mining. The government’s policy of free, prior and informed consent is implemented in practice with monitoring taking place. Enforcement measures are being implemented, if needed.

Environmental and Social Impact Transparency—Implementation (1.90)

In practice, mining rights are rarely issued without the approval of the agency or ministry responsible for environmental protection. Government respondents reported that EIAs, EMMPs, SIAs, SMMPs, ERPRs, and MCRPs are mostly not made public. Most civil society groups interviewed are not satisfied with the public availability of these documents. Some CSO respondents are also dissatisfied with how industry, government, and civil society collaborate in the planning and implementation of CSR activities and with the participation of women in these activities, adding that the activities are carried out only to fulfill the formal requirement without any further investigation regarding what the community actually needs. Most mining industry respondents, however, are satisfied with the planning and implementation of CSR activities. Some of the industry respondents added that they have given support to the community through various programs relating to education, health, and development. BPMD, which holds a role in empowering the rural area surrounding the mining area by making use of the provincial budget allocated, reported that there is no obligation to cooperate and work together with mining companies in developing the rural area. The grievance and complaints mechanism for environmental and social mitigation issues is not working very well in practice. Most CSO respondents indicate that there is no socialization subsequent to the establishment of the mechanism.

Gender Equity—Implementation (2.36)

In practice, according to most CSO groups interviewed, women are not satisfied with the way mining companies and government address women's concerns and issues. Some of the civil society respondents are also dissatisfied with the government's actions to provide women with equal employment opportunities and conditions. Almost all of mining companies report that they are providing equal employment opportunities and conditions for women, adding that they value and respect their female employees. Regarding compensation for women who are land users for loss of land taken for mining, most civil society groups interviewed view that there has been an inadequate compensation for loss of income and farming land or plantation for women who are land users.

Regarding “Local Impact” there is room for improvement as follows:


52

• Ensure that consultations that take place between mining companies and affected communities are meaningful and comprehensive;

• Ensure that mining companies have EPRPs that are approved, reviewed, tested, and updated on a regular basis with reporting to the government;

• Ensure that compliance with environmental requirements for ASM/people mining is monitored and enforced;

• Strengthen the institution tasked with the monitoring and enforcement of environmental and social laws and regulations;

• Improve the capacity of the institution tasked with monitoring and enforcing environmental laws and regulations in terms of number of staffs, budget, and facilities;

• Ensure the MCRP final is audited by independent experts;

• Strengthen the procedure of the grievance and complaints mechanisms and ensure they are well used;

• Establish a provision for making EPRPs and MCRPs public; and

• Ensure that CSR activities to develop the communities are well planned and implemented.

INDONESIA – MINING SECTOR DIAGNOSTIC (MSD) CONTEXT AND ENABLING ENVIRONMENT

53

CONTEXT AND ENABLING ENVIRONMENT

After assessing performance details along the EI value chain, this chapter now looks at the context and enabling environment in which mining operates through 13 topics that assess the themes of (1) economic environment, (2) political environment, and (3) development policy environment (Figure 14). The overall economic and political environment in the country has an impact on investment decisions. On the other hand, the development policy environment has an influence on how well mining is integrated with other parts of the economy and thereby can contribute to overall economic development and well-being for the entire population.

Figure 14 Context and Enabling Environment

Economic Environment (3.02)

The economic environment in Indonesia shows the highest scoring among the other environments. All topics in this theme score within the high range. Among the five topics, “Human Capital” received the highest score, whereas “Business and Investment Environment” received the lowest.

Business and Investment Environment (2.67)

In Indonesia, according to the Doing Business indicators, starting a new business and enforcement of contracts are rated very weak, whereas dealing with construction permits is rated low, and getting credit is rated high. According to the World Economic Forum’s Global Competitiveness Index (WEF GCI), it is highly burdensome for businesses to comply with governmental administrative requirements. According to the World Justice Project’s perceptions index the effectiveness of the civil law system is low.

The Bertelsmann Stiftung's Transformation Index (BTI) rates the rule of law in Indonesia high. The country is a signatory to the International Centre for the Settlement of Investment Disputes (ICSID) Convention and provides in its domestic law for the international arbitration of foreign investment disputes.

Theme

Economic Environment

(3.02)

Political Environment

(2.15)

Development Policy

Environment (2.87)Shared Infrastructure (2.72)

Faciliation of Investment

and Trade (2.71)

Local Supplier

Development (3.17)

Development Planning

(2.88)

Topic

Business and

Investment

Environment (2.67)

Infrastructure (3.20)

Macroeconomic

Stability and Growth

(3.00)

Human Capital (3.22) Health (3.00)

Control of Corruption

(1.88)

Predictable Mining and

Tax Policy (2.13)Political Stability (2.07)Expropriation Risk (2.50)

5


54

Infrastructure (3.20)

The quality of roads, extent of infrastructure, and quality of port facilities are rated high by the WEF GCI, whereas the quality of the railroad system is very high. Indonesia also has a high ranking in the World Bank’s Logistics Performance Index.

Macroeconomic Stability and Growth (3.00)

According to IMF WEO, the 5-year cumulative inflation in Indonesia, the 5-year cumulative GDP, and the 5-year total average debt-to-GDP ratio are rated low, high, and very high, respectively, in relation to comparator countries. According to Standard and Poor’s, the credit rating in Indonesia is high.

Human Capital (3.22)

According to Fraser Institute, the perception of the availability of labor/skills is rated low. According to the WEF GCI, the gross tertiary education enrollment rate is high, whereas the quality of math and science education and the attraction and retention of talented nationals in Indonesia are very high. Based on the UN’s Human Development Index, both mean and expected years of schooling are high. According to BTI, education policy is weak.

In Indonesia, there are postsecondary educational institutions and vocational training programs that provide mining sector-related skills/certifications. There is a requirement for mining companies to provide their employees with job training, which, in practice, almost all the mining companies have complied with. However, the industry almost never works with government to provide such training.

Health (3.00)

According to the UN’s Human Development Index, the life expectancy at birth is rated high. The prevalence of Human Immunodeficiency Virus (HIV) and deaths caused by communicable disease and maternal, prenatal, and nutrition conditions (World Bank world development indicators) are also rated high.

Political Environment (2.15)

The score for Political Environment in Indonesia is low. The score for each topic in this theme is within the low range. “Political Stability” received the lowest score among the four topics.

Expropriation Risk (2.50)

Based on the Organization for Economic Co-operation and Development (OECD) country risk classification, the transfer and convertibility risk, force majeure is rated very low providing a high score. The scores from the property rights (BTI) and expropriation risk (Delcredere Ducroire) index, however, are low. However, the protection of property rights (WEF CGI) and investors (Doing


55

Business indicator) are strong. There are no legally binding provisions that ensure fair and equitable compensation for owners in the event of expropriation.

Political Stability (2.07)

The political stability (Worldwide Governance Indicators), order and security (World Justice Project), and conflict intensity (BTI) indicators for Indonesia result in low scores in relation to comparator countries. Moreover, the security situation is considered a deterrent to investment (Fraser Institute) resulting in a very low score.

If mining is taking place in areas where armed conflict is occurring, there are no legally binding requirements for a diagnostic review for appropriate actions regarding existing mineral rights. In practice, the government always takes appropriate action regarding existing mineral rights in such areas. There have never been any armed conflicts within the mining industry. Most mining industry respondents are satisfied with the government’s assistance to solve conflicts.

Predictable Mining and Tax Policy (2.13)

Most industry respondents are dissatisfied with the stability over time of the fiscal terms for mining and the mining legislation. According to some industry respondents, there have been too many changes in the regulation relating to mining, which make the company and investors generally confused and uncertain about their investment.

Control of Corruption (1.88)

According to several indicators (BTI, Worldwide Governance Indicators, World Justice Project) corruption is an issue with control of corruption generally assessed as relatively weak. Most mining companies are aware of the practice of bribing in the mining sector, and they agree that the impact of corruption is very bad and burdening the industry.

Development Policy Environment (2.87)

The Development Policy Environment of Indonesia scores within the high range. All four topics of this theme are also in the high range. “Local Supplier Development” received the highest score among the four topics, whereas “Facilitation of Investment and Trade” has the lowest score.

Development Planning (2.88)

There is a current multi-year national development plan that is publicly available that has a section on the mining sector. In practice, a national consultation does take place during the preparation of the national development plan, providing relevant information and involving every stakeholder. The multi-year national development plan is partially on track to meet its targets. Plans to leverage the mining sector as a driver of development, however, are not at all being implemented. The country prepares spatial development plans that recognize mining and investment location. Based on the government interview, the spatial development plans to support mining regional development are partially meeting the targets.


56

There is no approved mining development policy that is publicly available. To date, the mining development policy is still being formulated. According to the government respondents, consultations are held publicly, involve all stakeholders, and the government provides the relevant information to all stakeholders.

Local Supplier Development (3.17)

The government has a policy for the promotion of opportunities for the local, regional, and national supply of goods and services to the mining industry that is consistent with good practice. The government has sought the views of domestic suppliers, local communities, and mining companies in preparing the local content policy. There are site-specific agreements with mining companies to promote local and national supplier development. In practice, a relatively high percentage of goods and services are provided by local/national suppliers, and most in the mining industry are satisfied with the suppliers’ services. There is a government agency that is tracking demand and supply of goods and services. According to WEF GCI, the quality of local suppliers for mining sector is high, and the number of local suppliers is very high.

Facilitation of Investment and Trade (2.71)

There are no or low tariffs on imports of capital equipment. Companies are required to pay a value-added tax or sales tax on imports of capital equipment. The level of efficiency of custom procedures related to the entry and exit of merchandise is considered strong according to the World Economic Forum (WEF). Trade barriers are considered very low according to Fraser Institute. There is an Investment Promotion Agency in Indonesia, and its capacity to fulfill its mandate is high.

Leveraging Infrastructure (2.72)

In practice, there are barely any examples of shared infrastructure in the transport sector and energy sector, and the mining industry is largely dissatisfied with the availability of shared infrastructure in both the energy sector and the transport sector. There are legal provisions that provide a framework for the private financing of infrastructure, and there are government units that are responsible for negotiating the private financing of infrastructure.

INDONESIA – MINING SECTOR DIAGNOSTIC (MSD) STAKEHOLDER PRIORITIES

57

STAKEHOLDER PRIORITIES

The analysis in chapters 4 and 5 on performance along the EI value chain and with respect to the context and enabling environment has treated each topic and each indicator equally. Each issue that was identified as not working well or not achieving its intended purpose was identified as providing room for improvement. The analysis of stakeholder priorities in this chapter is a first step in prioritization among issues.

During the interview phase, all respondents were asked to identify their top five priorities for the sector. Respondents were asked to choose five cells from the dashboard that represents 20 topics along the EI value chain (four for each stage) plus 13 topics representing the context and enabling environment. Priority areas are defined as those areas in which reforms would be most likely to significantly improve the functioning of the sector with the aim of increasing the mining sector’s contribution to overall sustainable growth and development (Figure 15).

Twenty percent of the government stakeholders identified “Sector Management and Intragovernmental Coordination” as a priority to be improved, and almost 50 percent of total votes were allocated to the top three priorities. Moreover, the top eight priorities for the government captured 79 percent of total votes. The industry stakeholder, on the other hand, identified the “Clarity and Harmonization of Sector Rules” and “Predictable Mining and Tax Policy” as the top two priority topics to be improved. Industry stakeholders strongly agreed with the top three priorities, with over 50 percent of the group total votes in the top three priorities. The top three priorities for civil society stakeholders received less than 40 percent of total votes and captured only 67 percent of total votes for the top eight priorities; in addition, civil society stakeholders identified the “Implementation of Openness, Transparency, and Independence of the Licensing Process” issue as a priority to be improved.

The correlation between priority and scores for these areas can also be inferred from Figure 15. The

expectation was that the high priority areas would be the ones with low average scores on the

dashboard (<2.50). However, the table shows that this is not the case. Of the top eight priorities of

the government stakeholder group, six topics score above the high range (>2.50) on the dashboard.

Similarly, five topics prioritized by the industry stakeholder group and four by the civil society

stakeholder group score within the higher range. Four of 11 topics that score within the lower range

(<2.50) are not chosen by all the stakeholder groups as their priority. This indicates that the

personal view of each stakeholder group on some particular areas might play a bigger role in

determining the top eight priorities.

Figure 16 shows that there are two shared priorities between government and industry. Both of

them agree on “Clarity of Harmonization of Sector Rules” and “Sector Management and

Intragovernmental Coordination” as shared priorities for improvement. Although rated very high

on the dashboard, government and industry respondents agree that “Clarity of Harmonization of

Sector Rules” still needs to improve. Industry stakeholders also added that most issues (such as

compatibility of the timelines in relation to those for other permits) might come as a result of the

6


58

lack of coordination within the government. On the other hand, the government and civil society

stakeholders prioritized “Environmental and Social Impact and Mine Closure Management”

because they are both concerned about former mines that are yet to be reclaimed, which the

government admitted is because of the limited budget for monitoring, especially in provinces.

There are no shared priorities between industry and civil society stakeholders.

It is notable that the stakeholder priority analysis for Indonesia identified no top priorities shared across all three stakeholder groups. On face value, this illustrates the profoundly differently orientation of these groups toward the Indonesian mining sector and its perceived problems—civil society prioritizes transparency and accountability, industry overwhelmingly prioritizes improved clarity of policies, and government prioritizes strengthened management and coordination. In truth, however, none of these priorities exist independently of one another; indeed, they are closely related in terms of what improved governance actually looks like in practice: transparency, accountability, predictability and clarity of roles. These different priorities may serve as a useful guide for how multi-stakeholder consultations and policy making should be undertaken by the government in the future

Figure 15 Top Priorities of Stakeholder Groups

Topic VotesVotes

(Cumulative)Score

Sector Management and Intragovernmental Coordination 20% 20% 2.42

Budget Implementation and Fiscal Management 15% 35% 2.69

Clarity and Harmonization of Sector Rules 13% 48% 3.34

Human Capital 12% 60% 3.22

Public Financial Management and Revenue Sharing Rules 5% 66% 3.50

Development Planning 5% 71% 2.88

Environemental and Social Impact and Mine Closure--Management 4% 75% 2.47

Environmental and Social Impact Policies and Rules for Mine Closure 4% 79% 2.81

Clarity and Harmonization of Sector Rules 22% 22% 3.34

Predictable Mining and Tax Policy 22% 44% 2.13

Macroeconomic Stability and Growth 9% 54% 3.00

Business and Investment Environment 7% 61% 2.67

Sector Management and Intragovernmental Coordination 7% 68% 2.42

Cadastre, Geodata, License and Tenure Management 5% 73% 2.53

Rules on Transparency and Independence of the Licensing Process 4% 78% 2.69

Openness, Transparency and Independence of the Licensing Process--Implementation 4% 81% 3.67

Openness, Transparency and Independence of the Licensing Process--Implementation 15% 15% 3.67

Human Rights, Employment Equity and Environmental and Social Impact Transparency--Implementation 12% 27% 2.68

Compensation, Resettlement and ASM Voice--Implementation 10% 37% 2.14

Rules on Compensation, Resettlement and Artisanal and Small-Scale Mining Voice 9% 46% 2.75

Environemental and Social Impact and Mine Closure--Management 6% 52% 2.47

Budget Transparency and Accountability, and Public Investment Integrity--Implementation 5% 57% 1.92

Environmental and Social Impact Policies and Rules for Mine Closure 5% 62% 2.81

Control of Corruption 5% 67% 1.88

Government

Industry

Civil Society


59

Figure 16 Shared Stakeholder Priorities

Government CSO

1

4 6

0

2 0

5

Industry

INDONESIA – MINING SECTOR DIAGNOSTIC (MSD) CONCLUSIONS

60

CONCLUSIONS

This chapter concludes the report by noting the strengths that exist at present—where the rules are in line with modern good practice and where there is competent and capable institutional performance—rules and capabilities that should be sustained.

Summary of Main Strengths

Overall, governance in the Indonesian mining sector is strong in certain areas. Licensing processes

are open and transparent to the public. The process to appeal decisions made by mining authorities,

OHS, and overall mining tax administration are consistently implemented. SOEs’ financial

management, public financial management, and revenue sharing have been carried out in

accordance with existing regulations. Regulations on human rights, gender, and mine closure have

also been well implemented.

Openness, transparency, and independence of the licensing process have been well implemented

in practice. Procedures for the cancellation and denial of licenses are being followed. Exploration

and mining licensing are well legislated. There are clear provisions with regard to laws governing

exploration and mining licensing. The government does not give preference to particular local

companies in granting licenses. Nevertheless, it is worth noting that respondents, especially those

representing the industry, have not had any experience in the process of applying for new licenses

under the Mining Law. For the most part, the government merely converted the old exploration

and mining licenses to comply with the new provisions. Therefore, the respondent's response must

still be proven by the results of the implementation of the Mining Law related to the submission of

new exploration and mining licenses.

In terms of operation, openness to the mining process and legislation, particularly regarding the

process to appeal decisions made by mining authorities, have been well regulated in the existing

legislation and in its implementation; the results of the appeal process do have binding legal

standing. OHS standards and procedures are well enforced. Most mining companies have provided

training and education on OHS and imposed penalties on noncompliant employees. Although OHS

regulation still lacks a grievance mechanism, the government has voluntarily administered such

procedures.

The mining tax administration, for the most part, has been well regulated and implemented in practice. Taxes and payments from the mining sector are collected only by the authorized agencies. The proceeds from the collection of taxes and royalties from mining companies to the government are placed in the state treasury office. Determination of tariffs and formulas related to key fiscal instruments (such as income tax, taxes on dividends, other indirect taxes and royalties) for the mining sector has been carried out in accordance with the applicable law. Implementation of the provision of tax incentives for mining companies has also been carried out in accordance with the

7

INDONESIA – MINING SECTOR DIAGNOSTIC (MSD) CONCLUSIONS

61

applicable law. The government implements said fiscal provisions consistently and does not make changes or renegotiate the fiscal provisions previously set. Openness to the financial management of BUMN companies is very high in terms of the existing regulations and their implementation. The three state-owned mining companies (PT Antam, Tbk; PT Timah, Tbk; and PT Bukit Asam, Tbk), which are also publicly listed companies, have prepared and published their annual financial accounts, which have undergone audits by independent external auditors. BUMN mining companies have also adopted internationally recognized accounting standards (IFRS) even though the standard is being implemented gradually until 2020. Regarding Public Financial Management and Revenue sharing, arrangements for the distribution of revenue from natural resources between the central government and regional governments are in accordance with the applicable law (Law No. 33 of 2004 concerning Central and Local Fiscal Balance). In addition, the Ministry of Finance has issued regulations concerning guidelines on when and how the annual budget allocation for local governments is channeled. Regarding local impact, the issue of openness associated with human rights has been well implemented and accommodated with the signing of Human Rights Charter by the government. The National Commission on Human Rights established to monitor the implementation of human rights protection in Indonesia, has implemented procedures and developed a national action plan. In this study, there were no problems related to gender issues in mining activities in Indonesia. Employee equality is regulated in the legislation. Although in their implementation, gender equity issues that received an assessment were not satisfactory, probably because of several criteria that distinguish the roles of men and women in the scope of work in the mining sector. In Indonesia, there are no criteria that distinguish male and female roles, including an absence of restrictions to pursuing career paths and the opportunity to become leaders within companies. Regarding mine closure, progressive rehabilitation has been regulated and implemented consistently to reduce the scope of work and the work costs needed for mine closure and reclamation after the end of production activities. Towards a Reform Agenda

As indicated in the discussion of strengths and weaknesses along the EI value chain in chapter 4,

there are also many areas in which there is room for improvement. Identifying these areas is a first

step towards elaborating a reform agenda for Indonesia’s mining sector. The expectation is that the

MSD—together with other inputs—will form the basis for a discussion on such an agenda.


62

Annex 1: MSD Methodology—Brief Description

MSD is a data-driven diagnostic of the mining sector. Data are collected with the help of a

questionnaire that consists of 399 questions. Questions draw on three different data sources:

• Primary data regarding the country’s laws, regulations and procedures—these are questions

regarding the de jure “rules.” These data are generated through a desk review of relevant

documents.

• Secondary data, which are reliable public sources/surveys previously prepared and

published by the World Bank (for example Doing Business indicators) and other parties,

such as the Fraser Institute, the International Monetary Fund, and the World Economic

Forum.

• Interview data from in-country interviews with representatives from government, civil

society, and industry—these are questions regarding the de facto “implementation”

performance.

The answer to each question is scored on a scale from 1 (lowest) to 4 (highest). More specifically,

• Primary questions typically deal with the existence of legally binding requirements. In some

cases, primary questions are simple yes/no questions, which are scored as 4 or 1, depending

on the answers. In many other cases, the primary questions do explore whether the legally

binding requirement is consistent with good practice. This is done through a series of sub-

questions. The overall score then averages the sub-question scores.

• For secondary data, scoring is done relative to the performance of comparator countries.

This is a group of 72 countries for which mining is an important aspect of the economy.

Scoring is on a scale of 1/2/3/4, with a “1” indicating that the country falls into the bottom

quartile of performance relative to comparator countries.

• Interview questions have specific answer choices. Either four, three, or two answer choices

are given. An example of four choices is very satisfied/satisfied/unsatisfied/very unsatisfied,

with respective scoring from 1 to 4. An example of three answer choices is fully/partially/not

at all, with scoring of 4/2.5/1. An example of two answer choices is yes/no, with scoring of 4

or 1. Interview questions can consist of two or more sub-questions, in which case the overall

score would be an average of sub-question scores.

The interview responses obtained from civil society and industry are averaged into one civil society

and one industry response, respectively. Interviewees have an opportunity to provide comments to

support or clarify their views. Questions are aggregated into indicators, and indicators are grouped

into “topics” representing the cells of the dashboard (indicators are shown in Figures 11–16 of the

report and are clearly identified through headings in Annex 2). Aggregation at each step involves

simple averaging. The resulting scores are broken into four groups:

- Very low (score of 1–1.75)

- Low (score of >1.75–2.5)

- High (score of >2.5–3.25)


63

- Very high (score of >3.25–4)

The figures in the report translate these scores into color coding as follows:

Very High (> 3.25 - 4.00)Very low (1.00 - 1.75)Scoring Key: Low (> 1.75 - 2.50) High (> 2.50 - 3.25)


64

Annex 2: Question Scores

Number Question Data Source Score

1 Contracts, Licenses, and Exploration

A Policy, Legislation and Regulation--De Jure

A1 Rules for License Allocation and Geological Data Collection

A1.1 Licensing--Institutional Roles

1Is there a legally binding provision for the establishment and operation of a mining

cadastre that specifies its authority and responsibilities?Primary 1.00

2Is there a legally binding provision that identifies the authority that issues

exploration and mining licenses and is this authority separate from the mining

ministry?

Primary 4.00

3Is there a legally binding provision that provides for the use of mining-related

standard contracts and/or development agreements, does the law define the

signatory and is the signatory the same as the license issuer?

Primary 1.00

A1.2 Clarity of Rules for Exploration Licensing

4Are there legally binding procedures for granting exploration rights and , if so, are

they consistent with good practice?Primary 4.00

5Are the procedures used in granting exploration licenses consistent with good

practice?Primary 3.00

6If competitive bidding is used, are standardized bidding documents and contracts

used for granting exploration licenses and, if so, do the evaluation criteria

emphasize work commitments?

Primary 3.00

7Are there legally binding procedures for registering or granting licenses to artisanal

and small-scale mining operators and, if so, can the registration/license be obtained

from field offices, not just the mining authority head office?

Primary 4.00

8Are there legally binding provisions regarding the timeframes for the issuance of

exploration licenses and the approval of exploration work programs?Primary 4.00

9Is there a legally binding requirement or guideline that requires that a map

component be used to record license boundaries in the cadastre?Primary 1.00

10Are there legally binding provisions that require exploration license holders to

report exploration activities and results to the Geological Survey Department or the

mining authority and, if so, are they consistent with good practice?

Primary 2.85

A1.3 Clarity of Rules for Mining Licensing

11Are there legally binding procedures for granting mining rights and, if so, are they

consistent with good practice?Primary 4.00

12 Are the procedures used in granting mining licenses consistent with good practice? Primary 3.00

13If competitive bidding is used, are standardized bidding documents used for

granting mining rights licenses and, if so, do the evaluation criteria for granting

mining licenses emphasize investment commitment and premium payments?

Primary 3.00

14Are there legally binding provisions regarding the timeframe for mining licenses to

be issued?Primary …

15Are there legally binding procedures for granting licenses to mineral traders and are

they required for trading minerals, gemstones, etc. produced by mining license

holders as well as artisanal and small-scale mining operators?

Primary 4.00


65

A1.4 Clarity of Rules for License Oversight, Conversion, and Transfer

16Does a company that holds an exploration license and is in compliance with license

conditions have a legally binding automatic priority right to apply for a mining

license in that area?

Primary 4.00

17Are there legally binding provisions that permit exploration and mining license

holders to transfer their licenses to an eligible party that meets the license

provisions?

Primary 1.00

18Are there legally binding provisions for penalties and sanctions for non-compliance

with exploration and mining license conditions?Primary 4.00

B Policy, Legislation and Regulation--De Facto

B1 Cadastre, Geodata, License and Tenure Management

B1.1 Collection of Geological Information

19In practice, are exploration license holders delivering the required operational

information to the Geological Survey Department (GSD) or mining authority on a

regular basis?

Interview

Government1.00

20In practice, does the GSD or similar organization collect geological information in a

publicly accessible library?

Interview

Government4.00

21In practice, does the GSD or similar organization maintain geological information

from companies in a confidential manner until such time as it can be made publicly

available?

Interview

Government4.00

22

Has your company encountered any issues concerning the Geological Survey

Department (GSD) or similar organizing maintaining geological information from

your company in a confidential manner until such time as it can be made publicly

available?

Interview

Industry1.10

23Is there a government website that presents what national geological information is

available or, if not at the national, at the sub-national level?Primary 4.00

24Is there a library with current national or sub-national geological information

maintained by the Geological Survey Department (GSD) or a similar organization?Primary 4.00

25In practice, does the GSD or similar organization make use of the geological data

collected from companies to improve government and public

awareness/understanding of geological prospectivity?

Interview

Government4.00

26In practice, does the GSD or similar organization make use of the geological data

collected from companies to monitor compliance with licenses?

Interview

Government1.00

27In practice, does the GSD or similar organization have the capacity to fulfill its

mandate in a satisfactory manner?

Interview

Government3.50

28How satisfied is the mining industry with the way in which the Geological Survey

Department (GSD) or similar organization is fulfilling its mandate?

Interview

Industry2.19

B1.2 State of Mapping and Geological Exploration

29 Quality of geological database (Fraser Institute) Secondary 2.00

30 What percentage of the licensed ground is being serviced by active exploration?Interview

Government1.33

31How satisfied is the mining industry with the availability of geological maps for the

most prospective areas?

Interview

Industry2.03

B1.3 Mining Cadastre Effectiveness

32In practice, does the Mining Cadastre have the capacity to fulfill its mandate in a

satisfactory manner?

Interview

Government2.00

33How satisfied is the mining industry with the way in which the Mining Cadastre is

fulfilling its mandate?

Interview

Industry2.21


66

34 In practice, is the topographic map for the cadastre compatible with GPS systems?Interview

Government2.50

35 What percentage of the mining cadastre is up-to-date?Interview

Government1.00

36In practice, if there is a decentralized cadastre system in place, is the central office

able to obtain updated information on a timely basis?

Interview

Government1.75

B1.4 Allocating Exploration and Mining Licenses Effectively

37Are the procedures in the legal framework for the award of exploration rights

followed in practice?

Interview

Industry3.74

38Are the limits to discretionary power in the award of exploration licenses followed

in practice?

Interview

Industry3.48

39In practice, is there a preference for local companies or producers in the award

process of exploration licenses?

Interview

Industry3.68

40

In practice, are exploration licenses awarded to applicants which do not have the

technical and financial capacity to fulfill license requirements and any associated

work program?

Interview

Industry2.65

41In practice, are the legislated timeframes for exploration license awards and

extensions followed?

Interview

Industry2.89

42Are the timeframes for the approval of exploration work programs followed in

practice?

Interview

Industry3.50

43Are the procedures in the legal framework for the award of exploration rights

followed in practice?

Interview

Industry3.68

44Are the limits to discretionary power in the award of mining licenses followed in

practice?

Interview

Industry3.50

45In practice, is there a preference for local companies or producers in the award

process of mining licenses?

Interview

Industry3.68

46

In practice, are mining licenses awarded to applicants which do not have the

technical and financial capacity to fulfill license requirements and any associated

work program?

Interview

Industry2.59

47In practice, are the legislated timeframes for the award and extension of mining

licenses followed?

Interview

Industry2.80

48Are the timelines for deciding on exploration and/or mining license applications

compatible with the timelines of other required permits?

Interview

Industry2.29

49In practice, does the unit issuing exploration and mining licenses have the capacity

to fulfill its mandate in a satisfactory manner?

Interview

Government2.30

50How satisfied is the mining industry with the way in which the unit issuing

exploration and mining licenses is fulfilling its mandate?

Interview

Industry2.74

51What percentage of licenses are subject to boundary disputes between license

holders due to the ambiguity of boundaries?

Interview

Government2.33

52Are mining contracts and agreements signed and approved by the authority or

authorities defined in the law?

Interview

Government...

53 In practice, how often do license cancellations or denials result in appeals?Interview

Government3.50

54If mining-related standard contracts and/or development agreements are used, are

they used to modify the law?

Interview

Government…

B1.5 Managing and Transferring Licenses Effectively

55Is the government effectively managing compliance with exploration license

conditions?

Interview

Government4.00


67

56 Is the government effectively managing compliance with mining license conditions?Interview

Government4.00

57In practice, does the unit managing the monitoring of licenses have the capacity to

fulfill its mandate in a satisfactory manner?

Interview

Government2.30

58How satisfied is the mining industry with the way in which the unit managing the

monitoring of licenses is fulfilling its mandate?

Interview

Industry2.74

59How satisfied is the mining industry with the authorities' practices regarding the

extension of exploration licenses?

Interview

Industry2.70

60How satisfied is the mining industry with the authorities' practices regarding the

extension of mining licenses?

Interview

Industry2.70

61In practice, are license holders able to transfer their licenses to companies which

meet the same qualification criteria?

Interview

Government2.00

62

In practice, does a company have an automatic first priority to obtain a mining

license in an area for which it holds an exploration license providing it is in

compliance with license conditions?

Interview

Industry3.56

C Accountability and Inclusiveness

C1 Rules on Transparency and Independence of the Licensing Process

C1.1 Openness and Transparency of Licensing Process

63Are there legally binding provisions that an applicant be informed if a license

application is denied and, if so, are they consistent with good practice?Primary 3.43

64Are there legally binding provisions that provide a process for license cancellations

and, if so, are they consistent with good practice?Primary 4.00

65Are there legally binding requirements that exploration and mining licenses,

contracts and agreements be made publicly available?Primary 1.00

66Are there legally binding provisions, such as state secrecy laws, that contain barriers

to the disclosure of mining sector information?Primary 1.00

67Are there legally binding provisions that require license holders to provide the

government with details of the beneficial ownership of the license?Primary 4.00

D1 Openness, Transparency and Independence of the Licensing Process--Implementation

D1.1 Openness and Transparency of Licensing Process--Implementation

68 In practice, is the information required for license applications publicly available?Interview

Industry3.75

69 In practice, when licenses are denied, are the procedures followed?Interview

Government4.00

70 In practice, when licenses are cancelled, are the procedures followed?Interview

Government4.00

71In practice, are exploration and mining licenses, contracts and agreements made

publicly available?

Interview

Government2.83

72If the answer to the question above is "No", are key details of exploration and

mining license readily accessible?

Interview

Government…

73

In practice, does the agency or ministry responsible for awarding licenses for

exploration and mining operate independently from the mining ministry (without

undue influence from the mining ministry)?

Interview

Industry3.59

74In practice, does the agency or ministry responsible for awarding licenses for

exploration and mining award licenses in a rules-based manner?

Interview

Industry3.83


68

2 Operations


A2 Clarity and Harmonization of Sector Rules

A2.1 Clarity of Legislation, Rules and Timeframes

75Are there legally binding regulations which cover exploration, mining and mine

closure and reclamation activities?Primary 4.00

76Are timeframes for the approval of mine development plans and the approval of

extensions of mining operations set out in the regulations?Primary 4.00

A2.2 Harmonization of Legislation and Government Coordination

77Are the laws and regulations governing exploration and mining operations available

from a single and up-to-date online government source?Primary 4.00

78Are there instances where mining sector legislation (including rules and regulations)

conflicts with other relevant legislation (including rules and regulations)?Primary 4.00

79Does mining or other legislation assign clear authorities and responsibilities

between government ministries/agencies in the mining sector?Primary 4.00

80Does mining or other legislation assign non-overlapping authorities and

responsibilities ("roles") between government ministries/agencies?Primary 4.00

A2.3 Provisions for Artisanal and Small-Scale Mining (ASM)

81Are there legally binding provisions that provide for the legal operations of artisanal

and small-scale mining (ASM) activities?Primary 4.00

82

Are there legally binding provisions that permit ASM activities to take place, with

the consent of the (non-ASM) license holder, on land for which an exploration or

mining license has been issued?

Primary 1.00

83Are there legally binding provisions that provide for the settlement of disputes

between ASM and exploration and mining license holders?Primary 4.00

84Are there legally binding provisions for ASM that safeguard from potential

environmental and other harm?Primary 4.00

A2.4 Occupational Health and Safety

85

Are there legally binding Occupational Health and Safety (OHS) standards and

procedures, and, if so, do they include related education and training requirements

and are they in line with internationally used standards?

Primary 3.23

86

Is there a a grievance mechanism for non-compliance with Occupational Health and

Safety (OHS) standards and procedures, and, if so, does it include penalties in case

of non-compliance?

Primary 1.00


B2 Sector Management and Intragovernmental Coordination

B2.1 Support to Artisanal and Small-Scale Mining

87Is there a dedicated unit within the mining authority dealing with artisanal and

small-scale mining (ASM)?Primary 1.00

88In practice, does the government provide technical training to ASM miners to help

improve their mining activities and, if so, is the training effective?

Interview

Civil Society1.15

89 In practice, are small scale miners able to coexist with other mining activities?Interview

Civil Society1.62

90 In practice, are large-scale mining operations able to coexist with ASM activities?Interview

Industry1.32

91 In practice, are artisanal and small-scale miners operating in the formal market?Interview

Government2.00

92In practice, are the mechanisms for the settlement of disputes between ASM and

other mining operations being used?

Interview

Civil Society1.15


69

B2.2 Intra-Governmental Coordination

93In practice, are there disagreements between government ministries/agencies over

the roles and responsibilities regarding the mining sector?

Interview

Government1.75

94Are there formal mechanisms for sharing information between government

ministries/agencies working on the mining sector?Primary 4.00

95In practice, is there regular sharing of information between government agencies

that have regulatory responsibilities for the mining sector?

Interview

Government1.00

B2.3 Occupational Health and Safety

96

In practice, is the implementation of Occupational Health and Safety (OHSA)

standards and procedures including any related education and training

requirements enforced?

Interview

Industry3.60

97Is the grievance and complaints mechanism for operational health and safety

working well in practice?

Interview

Government3.00

98In practice, does the government track the number of injuries and fatalities related

to mining activities?

Interview

Government4.00

99In practice, is the right to refuse entry to unsafe working places protected and

enforced?

Interview

Government4.00

C Accountability and Inclusiveness

C2 Rules on Compensation, Resettlement and Artisanal and Small-Scale Mining Voice

C2.1 Rules on Compensation, Resettlement and Artisanal and Small-Scale Mining Voice

100Does the holder of a mineral right have legally guaranteed access rights to surface

land?Primary 1.00

101

Is there a legally binding established procedure for the resettlement of communities

displaced by mining activities and, if so, does it follow internationally accepted

principles such as the Equator Principles or the IFC Performance Standards?

Primary 2.50

102Is there a legally binding procedure for the payment of compensation when

exploration and/or mining activities interfere with land ownership or land use?Primary 4.00

103Is there a legally binding process to appeal decisions by mining authorities and, if so,

is the process outside and independent of the mining authorities?Primary 4.00

104 Is there an association that represents artisanal and small-scale miners? Primary 4.00

105Is there a government-run program that ASM workers and their families can access

to get basic health and education services in the area where they work?Primary 1.00

D2 Compensation, Resettlement and Artisanal and Small-Scale Mining Voice--Implementation

D2.1 Compensation, Resettlement and Artisanal and Small-Scale Mining Voice--Implementation

106In practice, does the government enforce the legal requirements to resettle

communities affected by mining activities?

Interview

Civil Society1.20

107

In practice, does the government enforce the legally binding payments of

compensation when exploration and/or mining activities interfere with land

ownership or land use?

Interview

Civil Society1.24

108Does the legislative branch of government carry out an oversight role regarding the

mining sector beyond the consideration and approval of legislation?

Interview

Government3.00

109Does the legally binding appeals process have the legal standing to overturn

decisions by mining authorities?

Interview

Government4.00

110In practice, do artisanal and small-scale miner associations participate in the

monitoring, advocacy and protection of ASM mining and property rights?

Interview

Civil Society2.13

111In practice, are ASM workers and their families able to access basic health and

education services in the area where they work?

Interview

Civil Society1.30


70

3 Taxation and State Participation


A3 Tax Policy and State-Owned Enterprise Rules

A2.1 Tax Policy and Instruments

112Are there legally binding provisions that prescribe which government agencies have

the authority to collect taxes and payments from mining companies?Primary 4.00

113Are income and withholding tax payments and royalties from mining companies to

government required by law to be placed in the national treasury?Primary 4.00

114

Are the rates, formulae and bases for the main fiscal instruments (such as income

taxes, withholding taxes, indirect taxes and royalties) that apply to mining

prescribed by law?

Primary 4.00

115

Are there legally binding provisions for the granting of tax incentives to mining

companies and, if so, do they require that a cost-benefit analysis be conducted

before granting the tax incentives?

Primary 2.50

116

Can the government negotiate fiscal provisions with mining companies that differ

from those provided in the law and, if so, are these fiscal provisions being made

public?

Primary 4.00

117

Are there legally binding provisions that ensure that the government has an

adequate minimum revenue stream (relative to sales revenue) in all production

periods?

Primary 3.50

118Does the country employ an adequate mix of progressive and regressive fiscal

instruments with respect to revenues from mining?Primary 2.00

119In cases where the government holds equity shares in resource companies, are the

expected benefits from equity holding greater than the costs for acquiring equity?Primary 4.00

A3.2 Mining Tax Administration

120Are there legally binding provisions that specify which agency/agencies collect

mining sector payments and is the number of agencies involved relatively small?Primary 2.00

121Are there legally binding provisions for mining sector payment processes and, if so,

are they consistent with good practice?Primary 4.00

122 Does the government have a simplified tax collection system for ASM? Primary 1.00

123

Are there legally binding provisions that require regular tax, cost and physical audits

to be conducted of mining operations and, if so, do the provisions apply to all

mining taxpayers (excluding ASM) and are the audits risk-based?

Primary 3.00

124Are there legally binding provisions that require an annual disclosure of related

party transactions?Primary 4.00

125Are there legally binding provisions regarding transfer pricing and, if so, are they

consistent with good practice?Primary 4.00

126Are there legally binding provisons that limit the risk from thin capitalization and, if

so, do they include interest rate caps and debt to equity caps?Primary 2.85

127

Are there legally binding provisions that identify profits from the indirect or

offshore transfer of exploration and mining assets/rights so that they are taxable in

the host country?

Primary 4.00

A3.3 State-Owned Enterprise Governance Rules

128

Are there legally binding provisions regarding the Board composition of mining

sector State Owned Enterprises (SOEs) and, if so, are they consistent with good

practice?

Primary 3.43


71

129

Are there legally binding provisions that set out the roles and responsibilities of

mining SOEs when engaging in quasi-fiscal activities such as providing subsidies to

other parties or undertaking social expenditures?

Primary 1.00

130

Are there legally binding provisions that set out the roles and responsibilities of the

SOE Board and, if so, does the SOE Board have the authority to appoint and remove

the CEO?

Primary 1.80

131Are there legally binding provisions that give the SOE Board authority over the

dividend and debt policy?Primary 1.60


B3 Mining Tax Administration and State-Owned Enterprise Governance

B3.1 Mining Tax Administration

132

In practice, does the taxation authority issue guidance notes which meet the needs

of mining sector taxpayers and, if so, how satisfied is the mining industry with these

guidance notes?

Interview

Industry2.76

133

In practice, are the bases on which taxes are levied subject to disputes between

taxpayers and the tax authorities and if there are such disputes are they resolved

through active tax tribunals?

Interview

Government3.50

134Does the tax administration have a large taxpayer unit/office or one specialized in

natural resources/mining?Primary 4.00

135In practice, does the large taxpayer unit/office or the one specialized in natural

resources/mining have the capacity to fulfill its mandate in a satisfactory manner?

Interview

Government4.00

136

In practice, how satisfied is the mining industry with the way in which the large

taxpayer unit/office or the one specialized in natural resources/mining is fulfilling its

mandate?

Interview

Industry2.71

137In practice, are taxes and payments by mining sector tax payers only collected by

the mandated agency/agencies?

Interview

Government4.00

138In practice, are income and withholding tax payments and royalties from mining

companies to government placed in the national treasury?

Interview

Government4.00

139In practice, are the fiscal terms, including provisions for tax incentives in the law

followed?

Interview

Government3.00

140

In practice, does the government negotiate fiscal terms and fiscal incentives with

mining companies that differ from those in the mining and fiscal laws and

regulations and, if so, does the government have well experienced and qualified

representative to negotiate fiscal terms and fiscal incentives with mining companies

and are the negotiated terms publicly available?

Interview

Government4.00

B3.2 Mining Tax Auditing

141In practice, are tax, cost and physical audits of mining companies conducted

systematically?

Interview

Government4.00

142In practice, are the legally binding provisions regarding transfer pricing being

implemented?

Interview

Government3.00

143In practice, are there regular audits for domestic and international related party

transfer pricing transactions?

Interview

Government4.00

144In practice, are advanced pricing rules used for regularly occurring domestic and

international related party transactions?

Interview

Government1.00

145In practice, are there regular audits of mining companies for compliance with thin

capitalization rules?

Interview

Government...

B3.3 State-Owned Enterprise Governance

146In practice, does the Board composition of mining sector SOEs conform to good

practice?

Interview

Government3.25


72

147Does the internal audit department of mining sector SOEs review the effectiveness

of internal audit controls annually?

Interview

Government4.00

148

In practice, do mining sector SOEs follow the legally binding provisions that set out

their roles and responsibilities when engaging in quasi-fiscal activities such as

providing subsidies to other parties or undertaking social expenditures?

Interview

Government4.00

149In practice, do mining sector SOEs or state equity partners honor their financial

obligations to their private partners in joint ventures?

Interview

Government4.00

C Accountability and Inclusiveness--De Jure

C3 Rules on Transparency of Mining Taxation and State-Owned Enterprise Management

C3.1 Accountability of Mining Taxation

150Are there legal provisions for independent agencies to exercise oversight of the

administration of the fiscal regime?Primary 4.00

151

Are there legally binding provisions that require government officials with a role in

the oversight of the mining sector to disclose information about their financial

interests in any extractive activity or project (NB: These could be general, e.g. not

mining-specific provisions)?

Primary 1.00

C3.2 State-Owned Enterprise Financial Management and Accountability

152

Are there legally binding provisions that require mining sector SOEs to prepare

annual financial accounts and, if so, do they require that the annual financial

accounts be published?

Primary 4.00

153Are mining sector SOEs required to have an audit committee reporting to the

Board?Primary 4.00

154 Are mining sector SOEs required to have an internal audit department? Primary 4.00

155Is the internal audit department required to report periodically to the audit

committee?Primary 1.00

156

Are there legally binding provisions that require annual financial audits of mining

SOEs by an independent external auditor or at least a state auditor and, if so, do the

provisions require that the annual financial audits be published?

Primary 4.00

157

Are there legally binding provisions that require mining SOEs to use the latest

published version of internationally recognized accounting standards (IFRS) such as

those maintained by the International Accounting Standards Board (IASB) or the

Generally Accepted Accounting Principles (GAAP)?

Primary 4.00

D3 Mining Taxation and State-Owned Enterprise Financial Management--Implementation

D3.1 Accountability of Mining Taxation--Implementation

158In practice, are changes to mining tax legislation undertaken through a consultative

process and, if so, how satisfied is the mining industry with the process?

Interview

Industry1.16

159

In practice, does the country disclose details relevant to mining sector revenues,

such as data on production, sales, reported profits and payments by fiscal

instruments, through EITI or another disclosure process?

Interview

Government4.00

160

In practice, do government officials with a role in the oversight of the mining sector

disclose information about their financial interests in any extractive activity or

project?

Interview

Government1.00

D3.2 State-Owned Enterprise Financial Management and Accountability--Implementation

161 In practice, do mining sector SOEs prepare and publish annual financial accounts?Interview

Government4.00

162In practice are annual audits of mining SOEs financial accounts undertaken by an

independent external auditor and are they published?

Interview

Government4.00


73

163

In practice, do mining SOEs use internationally recognized accounting standards

(IFRS) such as those maintained by the International Accounting Standards Board

(IASB) or the Generally Accepted Accounting Principles (GAAP)?

Interview

Government4.00

164In practice, are there outstanding financial obligations between the mining SOEs

and the Government?

Interview

Government4.00

4 Revenue Distribution and Management


A4 Public Financial Management and Revenue Sharing Rules

A4.1 Public Financial Management and Revenue Sharing

165

Are all government spending and revenues (or at least government spending from

resource revenues), including revenues from the mining sector, appropriated

through the national budget and, if not, are off-budget funds that manage resource

revenues audited and subject to external oversight?

Primary 4.00

166

Are there legally binding provisions regarding arrangements for resource revenue

sharing between central and sub-national governments that clearly articulate the

objectives of resource revenue sharing and do they specify how much should be

transferred to sub-national governments?

Primary 4.00

167Does the Ministry of Finance have written guidelines regarding when and how

yearly budget allocations to sub-national governments should be disbursed?Primary 4.00

168Are there legally binding provisions for line ministries to produce costed strategic

plans which are then aligned with the annual budget?Primary 4.00

A4.2 Fiscal Management Rules and Stabilization

169 Are there legally binding provisions that require a medium-term fiscal framework? Primary 4.00

170Does the government have a debt-management strategy designed to lower

borrowing costs that is mandated by law or codified in regulation?Primary 4.00

171Are there legally binding provisions for a mechanism to protect budget

expenditures from revenue volatility?Primary 1.00


B4 Budget Implementation and Fiscal Management

B4.1 Budget Implementation

172 Transfers to Sub-National Governments (PEFA PI-7) Secondary 2.00

173 Aggregate Expenditure Outturn (PEFA PI-1) Secondary 1.00

174 Expenditure Composition Outturn (PEFA PI-2) Secondary 1.00

175In practice, are the arrangements for resource revenue sharing between central and

sub-national governments being followed?

Interview

Government3.00

176 Medium-Term Perspective in Expenditure Budgeting (PEFA PI-16) Secondary 2.00

177 Accounting for Revenue (PEFA PI-20) Secondary 3.00

178 Predictability of In-Year Revenue Allocation (PEFA PI-21) Secondary 2.00

179 Expenditure Arrears (PEFA PI-22) Secondary 4.00

180

ln practice, does the Ministry of Finance follow its guidelines regarding when and

how it disburses budget allocations to sub-national governments and do sub-

national governments receive their entire yearly budget allocations?

Interview

Government3.50

B4.2 Public Investment Management

181In this country, how efficiently does the government spend public resources - WEF

GCISecondary 4.00

182

In practice, does the government adhere to the legally binding process for screening

ministries' public investment project proposals for consistency with government

policy (including the overall procurement plan) and strategic guidance?

Interview

Government4.00


74

183In practice, does the government use a formal cost benefit appraisal process for

public investment project proposals?

Interview

Government4.00

184In practice, are the project appraisals of public investment projects undertaken by

an external agency or expert?

Interview

Government1.00

185In practice, do ministries follow established procurement procedures for public

investment projects?

Interview

Government...

186

In practice, are project time and/or cost overruns monitored and reported on a

regular basis (e.g., twice annually) and are actions initiated on projects that have

time and/or cost overruns?

Interview

Government1.00

187In practice, are there delays in project completion relative to the initial estimated

time on major public investment projects?

Interview

Government2.00

B4.3 Ensuring Fiscal Discipline and Fiscal Sustainability

188 Variation of domestic revenues in real terms over 5 years - IMF WEO Secondary 4.00

189 Macroeconomic and Fiscal Forecasting (PEFA PI-14) Secondary …

190 Fiscal Strategy (PEFA PI-15) Secondary …

191In practice, does the government follow a debt management strategy that

minimizes non-concessional borrowing and borrowing costs?

Interview

Government4.00

192In practice, is the mechanism to protect budget expenditures from revenue

volatility being applied?

Interview

Government1.00


C4 Rules on Budget Transparency and Public Investment Integrity

C4.1 Budget Transparency and Accountability

193Are there legally binding provisions for the audit for general government

expenditures?Primary 4.00

194

Are legislative hearings on budget formulation and audit finidngs conducted in

public except for select issues of national security or are the proceedings of the

hearings made available to the public through a website or other easily accessible

means?

Primary 4.00

C4.2 Public Investment Integrity and Accountability

195

Is the government required to prepare strategic guidance for public investment

decisions and, if so, is the strategic guidance publicly available, detailed, and

updated on a regular basis?

Primary 4.00

196

Are there legally binding provisions that new projects be subject to appraisal of

costs and benefits before their inclusion in the budget, do the provisions apply to all

projects, do the guidelines differ by project value and do they reflect environmental

and social costs?

Primary 1.00

197

Is there a legally binding process for screening ministries' public investment

proposals to be consistent with government policy as indicated in the overall

procurement plan?

Primary 1.00

198Are there legally binding provisions for implementing agencies to report on project

implementation progress and cost overruns to the Ministry of Finance?Primary 4.00

199Are there legally binding provisions that require public investment projects to be

evaluated by an independent auditor?Primary 1.00

D4 Accountability and Inclusiveness--De Facto

D4.1 Budget Transparency and Accountability--Implementation

200 Open Budget Index - Open Budget Survey Secondary 3.00

201In practice, are the assets and liabilities of mining sector SOEs included in the public

sector accounts as reported by the Ministry of Finance?

Interview

Government1.00


75

202In practice, are the assets and liabilities of any natural resource funds included in

the public sector accounts as reported by the Ministry of Finance?

Interview

Government…

203 Central Government Operations outside Financial Reporting (PEFA PI-6) Secondary 3.00

D4.2 Public Investment Integrity and Accountability

204 In practice, are public investment projects evaluated by an independent auditor?Interview

Government1.00

205 Procurement Management (PEFA PI-24) Secondary 2.00

206 Public Investment Management (PEFA PI-11) Secondary …

5 Local Impact


A5 Environmental and Social Impact Policies and Rules for Mine Closure

A5.1 Community Impact, Consultation, and Corporate Social Responsibility Requirements

207

Is there a legally binding requirement for community stakeholder consultation

throughout the mine life with affected communities and, if so, is it consistent with

good practice?

Primary 3.23

208

Does this legally binding requirement for community stakeholder consultation

conform with good practice in terms of record keeping, access, and use of

information?

Primary 1.00

209Is there a legally binding requirement that the results of community stakeholder

consultations be used in preparing and updating EIAs, EMMPs, SIAs and SMMPs?Primary 2.28

210

Is there a legally binding requirement for Community Development Agreements

between mining companies, government and affected communities and, if so, is it

consistent with good practice?

Primary 1.00

211

Is there a national policy on Corporate Social Responsibility (CSR) that applies to

mining and is publicly available and is there an agency that is responsible for

oversight of the policy and its application in different sectors including mining?

Primary 4.00

A5.2 Environmental Impact Management, including Combating Climate Change Requirements

212

Is there a legally binding requirement that the clearance of the agency or ministry

responsible for environmental protection be obtained before an exploration or

mining right is issued and is the agency or ministry separate from the mining

authorities or in a separate line of authority from the mining licensing agency?

Primary 4.00

213

Is there a legally binding requirement for companies to prepare and submit EIAs,

EMMPs (or combined ESIAs and ESMMPs) and related reports including

implementation and monitoring reports for review and approval by the concerned

government agencies?

Primary 4.00

214

Is there a legally binding requirement for EIAs and EMMPs (or combined ESIAS and

ESMPS) and related implementation and monitoring reports to address mining's

environmental impacts on women separately from the impacts on men?

Primary 1.00

215

Are there legally binding requirements for pollution prevention and management of

air pollution, hazardous and non-hazardous wastes, chemicals and hazardous

materials and pesticides?

Primary 4.00

216

Are there legally binding requirements for the protection of surface and ground

water quality and the review and balancing of water allocations and are they


Primary 3.43

217

Is there a legally binding requirement for structures such as tailings dams and

impoundments that hold mine wastes to be designed, operated and maintained

according to internationally recognized standards that is consistent with good

practice?

Primary 4.00


76

218Is there a legally binding requirement for mining operations to identify, manage and

protect biodiversity that is consistent with good practice?Primary 2.28

219Is there a legally binding requirement for mining operations to identify, manage and

protect natural habitat that is consistent with good practice?Primary 2.28

220

Is there a legally binding requirement that mine design and operations reflect

anticipated trends in weather event severity and frequency related to climate

change that is consistent with good practice?

Primary 1.00

221

Is there a legally binding requirement for mining operations to have an Emergency

Preparedness and Response Program (EPRP) prior to commencement of mining

operations that is consistent with good practice?

Primary 2.47

222Is there a legal provision for a simplified Environmental Permit for artisanal and

small-scale mining (ASM)?Primary 1.00

A5.3 Social Impact Management Requirements

223

Are there provisions that identify which institution or institutions are responsible

for approving SIAs and SMMPs (or combined ESIAS and EMMPS) as well as

monitoring and enforcing compliance with legal requirements related to managing

social impact?

Primary 1.70

224

Is there a legally binding requirement for companies to prepare and submit SIAs and

SMMPs (and related reports including Implementation and Monitoring reports) for

review and approval by the concerned government agencies and is the requirement


Primary 4.00

225Does this legally binding requirement support local and national employment,

supply of goods and services, and business development?Primary 4.00

226

Are there legally binding requirements for local governments and companies to

work together to manage the effects of the potentially rapid and disruptive in-

migration around mining operations?

Primary 1.00

227Is there a legally binding requirement for companies to collect data on, report on,

and address the impacts of mining on women separately from the impacts on men?Primary 1.00

A5.4 Mine Closure and Financial Sureties for Decommissioning Requirements

228Is there a legally binding requirement for a Mine Closure and Reclamation Plan

(MCRP) to be prepared and is it consistent with good practice?Primary 3.43

229Are there legally binding provisions that outline what the MCRP must cover

regarding environmental protection, remediation and reclamation?Primary 4.00

230Are there legally binding provisions that outline what the MCRP must cover

regarding managing and mitigating potentially harmful social impacts?Primary 4.00

231

Is there a legally binding requirement for the MCRP to be prepared in consultation

with the affected communities and local government and is it consistent with good

practice?

Primary 4.00

232Is there a legally binding requirement for mining companies to include progressive

rehabilitation in the mining plan?Primary 4.00

233

Is there a legally binding requirement for the posting of environmental bonds or

similar financial assurance methods to cover the cost of environmental

rehabilitation and reclamation post-mining?

Primary 4.00

234

Are there legally binding provisions regarding the financial assurance mechanism

which require that financial securities be issued and held only by government or

approved, qualified financial institutions?

Primary 4.00


77

235


for mine closure which clearly stipulate the conditions under which the company or

the government can access the funds?

Primary 4.00

236


for mine closure which ensure that the funds can only be used for mine closure and

environmental rehabilitation and reclamation costs?Primary 4.00


B5 Environemental and Social Impact and Mine Closure--Management

B5.1 Impact and Community Consultation Effectiveness

237In practice, are the consultations that take place between mining companies and

affected communities meaningful and comprehensive?

Interview

Civil Society2.40

238In practice are the consultations that take place between mining companies and

affected communities comprehensive?

Interview

Civil Society2.87

239Are the results of the mining company-community stakeholder consultations used

in the preparation of relevant documents?

Interview

Government3.50

240In practice are community development agreements negotiated between mining

companies and affected communities and local governments?

Interview

Civil Society1.54

B5.2 Environmental Impact Management Effectiveness, including Combating Climate Change

241

Is the institution tasked with monitoring and enforcing environmental laws and

regulations carrying out its task in a satisfactory manner regarding the mining sector

from exploration to post-mine closure?

Interview

Government1.50

242How satisfied is civil society with the way the institution tasked with monitoring and

enforcing environmental law is carrying out its task?

Interview

Civil Society1.82

243How satisfied is the mining industry with the way the institution tasked with

monitoring and enforcing environmental law is carrying out its task?

Interview

Industry2.89

244

In practice are EIAs and EMMPs (or other key environmental impact related

documents) approved by the mining authority before a mining right is granted and

are the documents updated and approved on a regular basis with specified

timeframes?

Interview

Government2.50

245

In practice is the implementation of EMMPs and other environmental impact

management and mitigation requirements and compliance with legal requirements

monitored and enforced systematically?

Interview

Government2.60

246In practice is surface and ground water quality being protected and water

allocations reviewed and balanced?

Interview

Government2.20

247

In practice are structures such as tailings dams and impoundments that hold mine

wastes desgined, operated and maintained according to internationally recognized

standards?

Interview

Industry3.71

248 In practice is biodiversity being identified, managed and protected?Interview

Industry2.18

249

How satisfied is the government with the mining companies' design, operation and

maintenance of structure such as tailings dams and impoundments that hold mine

wastes?

Interview

Industry2.25

250 In practice is natural habitat being identified, managed and protected?Interview

Industry2.18

251In practice do mine design and operations reflect anticipated trends in weather

event severity and frequency related to climate change?

Interview

Industry2.13


78

252

In practice do mining companies have an Emergency Preparedness and Response

Plan (EPRP) that is approved by Government, is reviewed, tested, and updated on a

regular basis with reporting to the Govenrment and is prepared and updated in

close collaboration with the local community?

Interview

Industry1.75

253In practice is the government monitoring and enforcing compliance with

environmental requirements for artisanal and small-scale miners?

Interview

Government1.80

B5.3 Social Impact Management Effectiveness

254

Are the institutions tasked with monitoring and enforcing social mitigation

measures and requirements carrying out their tasks in a satisfactory manner

regarding the mining sector from exploration to post-mine closure?

Interview

Government2.00

255

How satisfied is civil society with the way the institutions tasked with monitoring

and enforcing social mitigation measures and requirements are carrying out their

tasks?

Interview

Civil Society1.94

256

How satisfied is the mining industry with the way the institutions tasked with

monitoring and enforcing social mitigation measures and requirements are carrying

out their tasks?

Interview

Industry2.52

257

In practice are SIAs and SMMPs (or other key social impact related documents)

approved by the mining authority before a mining right is granted and are the

documents updated and approved on a regular basis with specified timeframes?

Interview

Government…

258

In practice is the implementation of SMMPs and other social impact management

and mitigation requirements and compliance with legal requirements monitored

and enforced systematically?

Interview

Government2.20

259In practice are the effects of the potentially rapid and disruptive in-migration

around mining operations adequately managed?

Interview

Civil Society2.20

260In practice are the health services in mining communities similar to or better than

nearby non-mining communities?

Interview

Civil Society1.95

261In practice are the education services in mining communities similar to or better

than in nearby non-mining communities?

Interview

Civil Society1.88

262In practice, do mining communities depend on regular support from mining

companies for the provision of basic services?

Interview

Civil Society2.59

B5.4 Mine Closure Effectiveness, Financial Sureties for Decommissioning, and Abandoned Mines

263In practice is an initial Mine Closure and Reclamation Plan (MCRP) prepared and

approved prior to the commencement of production?

Interview

Government1.00

264In practice is a final MCRP prepared and approved prior to the commencement of

mine closure activities and is it audited by independent experts?

Interview

Government4.00

265

How satisfied is the mining industry with the way the institutions tasked with

monitoring and enforcing the environmental and social obligations associated with

mine closure are carrying out their tasks?

Interview

Government2.77

266

How satisfied is civil society with the way the institutions tasked with monitoring

and enforcing the environmental and social obligations associated with mine

closure are carrying out their tasks?

Interview

Civil Society1.95

267In practice do mining companies consult communities and local government when

developing and updating the Mine Closure and Reclamation Plan (MCRP)?

Interview

Industry3.32

268

How satisfied is civil society with the way mining companies consult with

communities when developing and updating the Mine Closure and Reclamation

Plan (MCRP)?

Interview

Civil Society1.88

269How satisfied is local government with the way mining companies consult with

communities when developing and updating the MCRP?

Interview

Government...


79

270In practice does progressive rehabilitation take place to reduce the scope and cost

of work needed for mine closure and reclamation once production ceases?

Interview

Industry3.00

271

In practice are mining companies setting aside funds for mine closure consistent

with the estimates in the MCRP and are the funds sufficient to cover the costs of

premature closure as well as the cost of closure by third party contractors in the

event this becomes necessary?

Interview

Industry3.58

272Are adequate procedures in place regarding the funds being set aside for mine

closure?

Interview

Government2.50

273Are mining companies satisfied with the procedures in place regarding the funds

being set aside for mine closure?

Interview

Industry3.20

274In practice is government working to inventory abandoned mine sites, and

determine the most effective way forward?

Interview

Government3.50

275In practice, is the approved plan for moving forward with abandoned mine sites

being implemented?

Interview

Government4.00


C5 Rules on Human Rights, Employment Equity and Environmental and Social Impact Transparency

C5.1 Human Rights and Employment Equity--International Conventions

276

Is the government a signatory to any regional or global Human Rights charters or

similar and if so, is there an agency designated to implement the charter and have

monitoring and corrective procedures been put in place?

Primary 3.23

277

Is there an agency designated by law to protect human rights (Pillar I of the UN

Guiding Principles on Business and Human Rights, UNGP) and has the agency put in

place monitoring procedures and developed a National Action Plan?

Primary 4.00

278

Is the government a signatory to the Voluntary Principles on Security and Human

Rights (VPSHR), has an agency been designated to implement the Principles and has

the agency put in place monitoring and corrective procedures?

Primary 1.00

279

Is the government party to the UNESCO Convention Concerning the Protection of

the World Cultural and Natural Heritage, has an agency been designated to enforce

compliance and has the agency put in place monitoring and corrective procedures?

Primary 4.00

C5.2 Human Rights and Employment Equity--National Measures

280

Is there a legally binding requirement that companies undertake due diligence to

ensure that they operate in line with human rights conventions, has an agency been

designated to enforce compliance and has the agency put in place monitoring and

corrective procedures?

Primary 1.00

281

Is there an independent Human Rights Commission or equivalent institution that is

mandated in the law to hear and resolve human rights complaints and grievances

resulting from human rights violations and has the Commission put in place

procedures for hearings as well as corrective procedures?

Primary 2.85

282

Are there legally binding rules that require employment equity, has an agency been

designated to enforce the rules and has the agency put in place monitoring

procedures and enforcement mechanisms?

Primary 4.00

283Are there legally binding provisions that prohibit child labor including ASM child

labor?Primary 4.00

284

Is there a legally binding requirement for free, prior and informed consent, has an

agency been designated to enforce the requirement and has the agency put in place

monitoring procedures and enforcement mechanisms?

Primary 1.00


80

C5.3 Environmental and Social Impact Transparency Requirements

285

Is there a legally binding requirement for EIAs and EMMPs (or other key

environmental impact related documents such as monitoring reports) to be made

public and is the requirement consistent with good practice?

Primary 1.70

286

Is there a legally binding requirement for SIAs and SMMPs (or other key social

impact related documents such as monitoring reports) to be made public and is the

requirement consistent with good practice?

Primary 3.43

287Is there a legally binding requirement for Emergency Preparedness Plans are

required to be made public and is the requirement consistent with good practice?Primary 1.00

288Is there a legally binding requirement for Mine Closure and Remediation Plans to be

made public and is the requirement consistent with good practice?Primary 1.00

289

Is there a legally binding provision establishing a grievance and complaints

mechanism for environmental and social mitigation issues and is the complaints

mechanism consistent with good practice?

Primary 2.85

290Is there an authority with whom a grievance or complaint can be filed and has the

authority put in place procedures for hearing as well as corrective procedures?Primary 2.85

C5.4 Gender Equity

291Are there government commitments to provide women with equal employment

opportunities and conditions?Primary 4.00

D Accountability and Inclusiveness--De Facto

D5 Human Rights, Employment Equity and Environmental and Spocial Impact Transparency--Implementation

D5.1 Human Rights and Employment Equity--International Conventions--Implementation

292Is the regional or global Human Rights Charter or similar being implemented in

practice including monitoring and corrective measures?

Interview

Government4.00

293

Is the National Action Plan to protect human rights (Pillar I of the UN Guiding

Principles on Business and Human Rights, UNGP) being implemented in practice

including monitoring and corrective measures?

Interview

Government4.00

294

If the government is a signatory to the Voluntary Principles on Security and Human

Rights (VPSHR), are the Principles being implemented in practice including

monitoring and corrective actions?

Interview

Government…

295Is the UNESCO Convention Concerning the Protection of the World Cultural and

Natural Heritage being implemented in practice?

Interview

Government…

D5.2 Human Rights and Employment Equity--National Measures--Implementation

296

Is the legally binding requirement that companies undertake due diligence that they

operate in line with human rights conventions being implemented in practice

including monitoring and corrective measures?

Interview

Government…

297In practice is the Independent Human Rights Commission or equivalent institution

fulfilling its mandate?

Interview

Government1.75

298How satisfied is civil society with the way in which the Independent Human Rights

Commission (or its equivalent) is fulfilling its mandate?

Interview

Civil Society2.50

299 Is employment equity being implemented in practice?Interview

Government3.00

300 Are the laws prohibiting child labor, including ASM child labor, enforced?Interview

Civil Society2.57

301Does the government recognize indigenous people on its territory and, if so, does it

safeguard their rights in relation to mining?

Interview

Civil Society2.44

302If the Government has a policy of free, prior and informed consent, is it

implemented in practice?

Interview

Government…


81

D5.3 Environmental and Social Impact Transparency Effectiveness--Implementation

303In practice, are mining rights issued without the approval of the agency or ministry

responsible for environmental protection?

Interview

Government3.30

304

Are Environemntal Impact Assessments (EIAs) and Environmental Management and

Mitigation Plans (EMMPs) (or other key environmental impact related documents

such as monitoring reports) made public in practice and are they widely available?

Interview

Government1.30

305

Are Social Impact Assessments (SIAs) and Social Management and Mitigation Plans

(SMMPs) (or other key social impact related documents such as monitoring reports)

made public in practice and are they widely available?

Interview

Government1.50

306Are Emergency Preparedness Plans made public in practice and are they widely

available?

Interview

Government1.50

307Are Mine Closure and Remediation Plans made public in practice and are they

widely available?

Interview

Government1.30

308

How satisfied is civil society with the public availability of mining-related

documentation (e.g. EIAs, EMMPs, SIAs, SMMPs, EPPs, Emergency Preparedness

Plans, and Mine Closure and Remediation Plans)?

Interview

Civil Society2.09

309

In practice, are mining community representatives satisfied with how industry,

government and civil society collaborate in the planning and implementation of

Community Social Responsibility (CSR) activities and with the participation of

women in these activities?

Interview

Civil Society1.64

310In practice, is the mining industry satisfied with the planning and implementation of

CSR activities?

Interview

Industry2.86

311Is the grievance and complaints mechanism for environmental and social mitigation

issues working well in practice?

Interview

Civil Society1.65

D5.4 Gender Equity--Implementation

312In practice do women consider that mining companies and government are doing a

satisfactory job addressing women's concerns and issues?

Interview

Civil Society2.06

313How satisfied is civil society with the government's actions to provide women with

equal employment opportunities and conditions?

Interview

Civil Society2.25

314In practice are mining companies providing equal employment opportunities and

conditions for women?

Interview

Industry3.01

315 In practice do mining companies value and respect their female employees?Interview

Industry2.74

316In practice do women who are land users but not land owners receive adequate

compensation for loss of land taken for mining?

Interview

Civil Society1.75

317

In practice does the government provide support to improve the productivity and

incomes of female subsistence farmers who have had to relocate their agricultural

activities due to mining development taking place?

Interview

Government...

E Economic Environment

E1 Business and Investment Environment

318 Starting a business - Doing Business Indicator Secondary 1.00

319 Dealing with construction permits - Doing Business Indicator Secondary 2.00

320 Getting credit - Doing Business Indicator Secondary 3.00

321 Enforcing contracts - Doing Business Indicators Secondary 1.00

322How burdensome is it for businesses to comply with governmental administrative

requirements (e.g., permits, regulations, reporting)? - WEF GCISecondary 4.00


82

323Perceptions index measuring effectiveness of civil law system - World Justice

Project (WJP)Secondary 2.00

324 Rule of Law - BTI Secondary 3.00

325Is the country a signatory to the International Center for the Settlement of

Investment Disputes (ICSID) Convention?Primary 4.00

326

Does the country provide in its domestic law for the international arbitration of

foreign investment disputes and, if so, are awards granted through international

arbitration enforceable in domestic courts?

Primary 4.00

E2 Infrastructure

327 Quality of roads - WEF GCI Secondary 3.00

328 Logistics Performance Index - World Bank Secondary 3.00

329 Extent of infrastructure (e.g., transpsort, telephony, and energy) - WEF GCI Secondary 3.00

330 Quality of the railroad system - WEF GCI Secondary 4.00

331 Quality of port facilities, or port accessibility in case of landlocked country - WEF GCI Secondary 3.00

E3 Macroeconomic Stability and Growth

332 Five-year cumulative inflation - IMF WEO Secondary 2.00

333 Credit rating - Standard and Poor's Secondary 3.00

334 Five-year cumulative gross domestic product (GDP) growth - IMF WEO Secondary 3.00

335 Five-year total average debt to GDP - IMF WEO Secondary 4.00

336 Five-year average adjusted net savings - World Bank WDI Secondary …

E4 Human Capital

337 Perception of the availability of labor/skills - Fraser Secondary 2.00

338 Gross tertiary education enrollment rate - WEF CGI Secondary 3.00

339 Quality of math and science education - WEF GCI Secondary 4.00

340 Attraction and retention of talented nationals - WEF GCI Secondary 4.00

341Are there post-secondary educational institutions that offer mining-related

certifications and/or degrees?Primary 4.00

342 Are there vocational training programs that provide mining-sector related skills? Primary 4.00

343Does the government work with the mining industry to develop relevant technical

capacity in tertiary education at the national level?

Interview

Industry1.78

344Is there a legally binding requirement that requires mining companies to provide on-

the-job training?Primary 4.00

345 In practice, is your company providing on-the-job training for your employees?Interview

Industry3.89

346 Mean years of schooling - Human Development Index Secondary 3.00

347 Expected years of schooling - Human Development Index Secondary 3.00

348 Education Policy - BTI Secondary 2.00

E5 Health

349 Life expectancy at birth - Human Development Index Secondary 3.00

350Death caused by communicable diseases and maternal, prenatal, and nutrition

conditions (percentage of total) - World Bank WDISecondary 3.00

351 Prevalence of Human Immunodeficiency Virus (HIV) - World Bank WDI Secondary 3.00

F Political Environment

F1 Expropriation Risk

352 Transfer and convertibility risk, force majeure - OECD Country Risk Classification Secondary 4.00

353 Expropriation risk - Delcredere Ducroire Secondary 2.00

354 Protection of property rights, including financial assets - WEF GCI Secondary 3.00


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355 Property Rights - BTI Secondary 2.00

356 Protecting Investors - Doing Business Indicator Secondary 3.00

357Are there legally binding provisions that ensure fair and equitable compensation for

owners in case of expropriation?Primary 1.00

F2 Political Stability

358 Political Stability - WGI Secondary 2.00

359Order and security (control of crime, civil conflict, and violence) + World Justice

ProjectSecondary 2.00

360Security Situation (includes physical security due to the threat of attack by

terrorists, criminals, guerilla groups, etc.) - FraserSecondary 1.00

361 Conflict Intensity BTI Secondary 2.00

362

If mining is taking place in areas where armed conflict is taking place, are there

legally binding requirements for a diagnostic review for appropriate actions

regarding existing mineral rights in such areas?

Primary 1.00

363

If mining is taking place in areas where armed conflict is taking place, does the

government take appropriate actions in practice regarding existing mineral rights in

such areas?

Interview

Government4.00

364

If mining is taking place in areas where armed conflict is taking place, how satisfied

is the mining industry with the actions taken by government regarding existing

mineral rights in such areas?

Interview

Industry2.50

F3 Predictable Mining and Tax Policy

365How satisfied is the mining industry with the stability over time of the fiscal terms

for mining?

Interview

Industry2.30

366How satisfied is the mining industry with the stability over time of the mining

legislation?

Interview

Industry1.97

F4 Control of Corruption

367 Control of corruption - WGI Secondary 3.00

368 Anti-corruption Policy - BTI Secondary 2.00

369 Control of corruption - WJP Secondary 2.00

370 Do you perceive corruption as having a negative impact on mining-sector activities?Interview

Industry1.27

371 Is your company aware of the payment of bribes in the mining sector?Interview

Industry1.11

G Sustainable Development

G1 Development Planning

372Is there a current multi-year national development plan that has a section on the

mining sector and that is publicly available?Primary 4.00

373Did an informed and meaningful national consultation take place during the

preparation of the national development plan?

Interview

Government4.00

374 Is the multi-year national development plan on track to meet its targets?Interview

Government2.50

375Are plans to leverage the mining sector as a driver of development within the

national development plan being implemented?

Interview

Government1.00

376Does the country prepare spatial development plans that recognize mining and

investment locations?Primary 4.00

377Are the spatial development plans to support mining regional development meeting

the targets set?

Interview

Government2.50

378 Is there an approved mining development policy that is publicly available? Primary 1.00

379Did an informed and meaningful national consultation take place during the

preparation of the mining development policy?

Interview

Government4.00


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G2 Local Supplier Development

380

Does your government have a policy for the promotion of opportunities for local,

regional and national supply of goods and services to the mining industry that is


Primary 3.54

381Has the government sought the views of a wide range of stakeholders in preparing

the local content policy for goods and services within the mining value chain?

Interview

Government4.00

382

Are there site-specific agreements with mining companies that promote

opportunities for local, regional and national supply of goods and services to the

mining industry?

Primary 2.00

383What percentage of goods and services is your company sourcing from local

suppliers?

Interview

Industry3.97

384How satisfied is the mining industry with the support provided for domestic

suppliers in attaining local content goals?

Interview

Industry3.00

385

Is there an agency in the government whose mandate includes tracking demand

and supply of goods and services needed by the mining sector and does this agency

periodically conduct this assessment?

Primary 2.50

386

In practice, is there an agency in the government that is tracking demand and

supply of goods and services needed by the mining sector and does this agency

periodically track demand and supply?

Interview

Government2.50

387 Quality of local supliers for the mining sector - WEF GCI Secondary 3.00

388 Number of local suppliers - WEF GCI Secondary 4.00

G3 Faciliation of Investment and Trade

389 Are there no or low tariffs on imports of capital equipment? Primary 4.00

390 Do companies have to pay VAT or sales tax on imports of capital equipment? Primary 1.00

391 Are there no or low tariffs (or non-tariff barriers) on raw material exports? Primary ...

392 Is there an Investment Promotion Agency? Primary 4.00

393How would you rate the level of efficiency of customs procedures related to the

entry and exist of merchandise? WEF GCISecondary 3.00

394 Trade Barriers - Fraser Secondary 1.00

395In practice, does the Investment Promotion Agency (IPA) or similar organization

have the capacity to fulfill its mandate in a satisfactory manner?

Interview

Government3.25

G4 Shared Infrastructure

396

Are there examples of shared infrastructure in the transport sector and, if so, how

satisfied is the mining industry with the shared infrastructure in the transport

sector?

Interview

Industry1.63

397Are there examples of shared infrastructure in the energy sector and, if so, how

satisfied is the mining industry with the shared infrastructure in the energy sector?

Interview

Industry1.25

398Are there legal provisions that provide a framework for the private financing of

infrastructure?Primary 4.00

399Are there government units which are responsible for negotiating the private

financing of infrastructure?Primary 4.00

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