Report On Indonesia Mining Sector Diagnostic - The World Bank

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November 2018
Report on
Indonesia Mining Sector Diagnostic
For:
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
3
INDONESIA – MINING SECTOR DIAGNOSTIC (MSD)
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
4
List of Acronyms
Term Definition
APBN Anggaran Pendapatan Belanja Negara (State Budget)
ASM Artisanal and Small-Scale Mining
Badan Perencanaan dan Pembangunan Daerah (Development Planning Agency at
Bappeda
Sub-National Level
Badan Perencanaan Pembangunan Nasional (National Development Planning
Bappenas
Agency)
BIG Badan Informasi Geospasial (Geospatial Information Agency)
BKF Badan Kebijakan Fiskal (Fiscal Policy Agency)
BKPM Badan Koordinasi Penanaman Modal (Investment Coordinating Board)
Badan Pemeriksa Keuangan Republik Indonesia (Audit Board of the Republic of
BPK RI
Indonesia)
Badan Pemberdayaan Masyarakat dan Desa (Rural Community Empowerment
BPMD
Agency)
BTI Bertelsmann Stiftung's Transformation Index
Perjanjian Karya Pengusahaan Pertambangan Batubara/”PKP2B” (Coal Contract of
CCoW
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)
5
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)
Izin Usaha Pertambangan Operasi Produksi (Operation Production Mining Business
IUP-OP
License)
Izin Usaha Pertambangan Operasi Produksi Khusus (Special Operation Production
IUP-OPK
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
Kementerian Energi dan Sumber Daya Mineral (Ministry of Energy and Mineral
MEMR
Resources)
Kementerian Lingkungan Hidup dan Kehutanan (Ministry of Environment and
MoEF
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
Terbuka; Indonesian equivalent for incorporation or "Inc.", a legal ending appended
Tbk
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
6
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)
7
INTRODUCTION
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
8
INTRODUCTION
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
9
INTRODUCTION
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.
10
INTRODUCTION
INTRODUCTION
1
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).
11
INTRODUCTION
• 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);
12
INTRODUCTION
• 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.
13
INDONESIA’S MINING SECTOR

2
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).
14
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
Table 3 Indonesia Historic Mine Production for Select Commodities
Production (tons) World Ranking for 2017

Commodity
2013 2014 2015 2016 2017 (USGS, 2018)
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
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
15
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.
Mining Sector Contribution to GDP (%)

6.00%
5.00%
4.00%
3.00%
5.50%
5.01% 4.70%
2.00% 4.30% 4.23%
1.00%
0.00%
2013 2014 2015 2016 2017
Year
Share to Total GDP
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
Total Exports Mining Sector Mining Sector to Total Exports

Year
(million US$) (million US$) (%)
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
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, 10 th Edition,” PwC (2018).
4 Badan Pusat Statistik (2018).
16
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.
Mining Contribution to Tax State Revenue

40.00
35.00
30.00
25.00
Trillion IDR
20.00
35.82
15.00
27.10
23.25 22.69
10.00 19.61
5.00
0.00
2013 2014 2015 2016 2017
Figure 4 Mining contribution to nontax state revenue.
Mining Contribution to Nontax State Revenue

45.00
40.00
35.00
30.00
Trillion IDR
25.00
20.00
15.00
10.00
5.00
0.00
2013 2014 2015 2016 2017
Fixed fees Royalties Mining products sales Total
17
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.
Employment in the Mining Sector

1,700,000
1,602,706
Number of labors absorbed
1,600,000
1,500,000 1,476,484
1,436,370
1,400,000
1,426,454 1,391,690
1,300,000
1,320,466
1,200,000
1,100,000
1,000,000
2012 2013 2014 2015 2016 2017
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).
18
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).
19
• 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
20
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).
21
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
22
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
11Article 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).
23
OVERVIEW OF RESULTS
OVERVIEW OF RESULTS
3 Dashboard and Implementation Gaps
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.
Mining Sector
Extractive Industries Value Chain
Contracts, Licences and Revenue Distribution and

Operations Taxation and State Participation Local Impact
Exploration Management
Policy,
Environmental and Social Impact
Legislation and Rules for License Allocation and Clarity and Harmonization of Tax Policy and State-Owned Public Financial Management and
Policies and Rules for Mine
Regulation--De Geological Data Collection Sector Rules Enterprise Rules Revenue Sharing Rules
Closure
Jure
Policy Efficiency
Institutional
Mining Tax Administration and
Capacity and Cadastre, Geodata, License and Sector Management and Budget Implementation and Environemental and Social Impact
State-Owned Enterprise
Effectivenss-- Tenure Management Intragovernmental Coordination Fiscal Management and Mine Closure--Management
Governance
De Facto
Rules on Human Rights,

Rules on Transparency and Rules on Compensation, Rules on Transparency of Mining
Rules on Budget Transparency Employment Equity and
De Jure (Rules) Independence of the Licensing Resettlement and Artisanal and Taxation and State-Owned
and Public Investment Integrity Environmental and Social Impact
Process Small-Scale Mining Voice Enterprise Management
Transparency
Accountability and
Inclusiveness
Budget Transparency and Human Rights, Employment
Openness, Transparency and Mining Taxation and State-
De Facto Compensation, Resettlement and Accountability, and Public Equity and Environmental and
Independence of the Licensing Owned Enterprise Financial
(Implementation) ASM Voice--Implementation Investment Integrity-- Social Impact Transparency--
Process--Implementation Management--Implementation
Implementation Implementation
Context and Enabling Environment

Economic Business and Investment Macroeconomic Stability and
Infrastructure Human Capital Health
Environment Environment Growth
Political
Expropriation Risk Political Stability Predictable Mining and Tax Policy Control of Corruption
Environment
Development Policy
Development Planning Local Supplier Development Faciliation of Investment and Trade Shared Infrastructure
Environment
Scoring Key: Very low (1.00 - 1.75) Low (> 1.75 - 2.50) High (> 2.50 - 3.25) Very High (> 3.25 - 4.00)
24
OVERVIEW OF RESULTS
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:
Figure 7 Policy efficiency—implementation gap.
▪ From the figure, it can be inferred that the de
4.00 facto performance for taxation is higher than the
de jure performance. This suggests that even with
3.25 perceived weaknesses in the policies around the
fiscal regime and administration, there is
2.50 nevertheless strong performance of government
entities tasked with administering this segment of
1.75 the value chain—including the management of
state-owned enterprises (SOEs). Why might this
1.00 be the case? A considerable number of industry
Contracts, Operations Taxation and Revenue Local Impact
Licences and State Distribution and respondents highlighted concerns over the clarity
Exploration Participation Management
De Facto Performance De Jure Performance

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
25
OVERVIEW OF RESULTS
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).
26
OVERVIEW OF RESULTS
Figure 8 Accountability and inclusiveness—implementation gap

▪ Taxation shows a small gap between
4.00
performances with a slightly higher de facto
performance. The lower performance in de jure
3.25
performance is mainly caused by the
accountability of SOE financial management
2.50 because there is no rule for internal audit to
report periodically to the audit committee. In
1.75 practice, however, the internal audit does
cooperate with the audit committee.
1.00
Contracts, Operations Taxation and ▪ Regarding operations, from the interview
Revenue Local Impact
Licences and State Distribution and
Exploration Participation results, the low scoring on the de facto
Management
De Facto Performance De Jure Performance 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?
27
OVERVIEW OF RESULTS
 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.
28
PERFORMANCE ALONG THE EI VALUE CHAIN
PERFORMANCE ALONG THE EI

4 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
Indicators
Licensing--Institutional Roles (2.00)
Clarity of Rules for Exploration Licensing (3.12)
Rules (2.91)
Clarity of Rules for Mining Licensing (3.50)
Policy Efficiency
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)
Implementation
Mining Cadastre Effectiveness (1.89)
(2.53)
Allocating Both Exploration and Mining Licenses Effectively (3.08)
Managing and Transferring Licenses Effectively (3.00)
Accountability
Inclusiveness
Rules (2.69) Openness and Transparency of Licensing Process (2.69)

and
Implementation
Openness and Transparency of Licensing Process--Implementation (3.67)
(3.67)
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
29
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.
30
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)
31
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).
32
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.
33
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)
Policy Efficiency
Rules (3.34)
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)
Implementation
Intergovernmental Coordination (2.25)
(2.42)
Accountability
Inclusiveness
Rules (2.75) Rules on Compensation, Resettlement and Artisanal and Small-Scale Mining Voice (2.75)
and
Implementation
Compensation, Resettlement and ASM Voice--Implementation (2.14)
(2.14)
34

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.

35

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.
36

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;

37
• 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
Indicators
Tax Policy and Instruments (3.50)
Policy Efficiency
Rules (2.85) Mining Tax Administration (3.11)

State-Owned Enterprise Governance Rules (1.96)
Mining Tax Administration (3.55)
Implementation
Mining Tax Auditing (3.00)
(3.46)
State-Owned Enterprise Governance (3.81)
Accountability of Mining Taxation (2.50)
Accountability
Inclusiveness
Rules (3.00)
State-Owned Enterprise Financial Management and Accountability (3.50)
and
Implementation Accountability of Mining Taxation--Implementation (2.05)

(3.03) State-Owned Enterprise Financial Management and Accountability--Implementation (4.00)
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
38
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).
39
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
40
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.
41
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

Indicators
Public Financial Management and Revenue Sharing (4.00)
Policy Efficiency
Rules (3.50)
Fiscal Management Rules and Stabilization (3.00)
Budget Implementation (2.39)
Implementation
Public Investment Management (2.67)
(2.69)
Ensuring Fiscal Discipline and Fiscal Sustainability (3.00)
Budget Transparency and Accountability (4.00)
Accountability
Inclusiveness
Rules (3.10)
Public Investment Integrity and Accountability (2.20)
and
Implementation Budget Transparency and Accountability--Implementation (2.33)

(1.92) Public Investment Integrity and Accountability--Implementation (1.50)
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
42
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).
43
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).
44
• 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

Indicators
Community Impact, Consultation, and Corporate Social Responsibility Requirements (2.30)
Environmental Impact Management, including Combating Climate Change Requirements (2.68)
Rules (2.81)
Policy Efficiency
Social Impact Management Requirements (2.34)

Mine Closure and Financial Sureties for Decommissioning Requirements (3.94)
Impact and Community Consultation Effectiveness (2.58)
Implementation Environmental Impact Management Effectiveness, including Combating Climate Change (2.27)
(2.47) Social Impact Management Effectiveness (2.16)
Mine Closure Effectiveness, Financial Sureties for Decommissioning, and Abandoned Mines (2.89)
Accountability and Inclusiveness
Human Rights and Employment Equity--International Conventions (3.06)

Human Rights and Employment Equity--National Measures (2.57)
Rules (2.94)
Environmental and Social Impact Transparency Requirements (2.14)
Gender Equity (4.00)
Human Rights and Employment Equity--International Conventions--Implementation (4.00)
Implementation Human Rights and Employment Equity--National Measures--Implementation (2.45)
(2.68) Environmental and Social Impact Transparency Effectiveness--Implementation (1.90)
Gender Equity--Implementation (2.36)
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)
45
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.
46
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.
47
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
48
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
49
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,
50
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:
51
• 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.
52
CONTEXT AND ENABLING ENVIRONMENT
CONTEXT AND ENABLING

5 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
Theme Topic
Business and Macroeconomic

Economic Environment
I nv estment I nfrastructure (3.20) Stability and Growth Human Capital (3.22) Health (3.00)
(3.02)
Env ironment (2.67) (3.00)
Political Environment Predictable Mining and Control of Corruption

Expropriation Risk (2.50) Political Stability (2.07)
(2.15) Tax Policy (2.13) (1.88)
Development Policy Dev elopment Planning Local Supplier Faciliation of I nv estment

Shared I nfrastructure (2.72)
Environment (2.87) (2.88) Dev elopment (3.17) and Trade (2.71)
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.
53
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
54
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.
55
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.
56
STAKEHOLDER PRIORITIES
6
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
57
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

Votes
Topic Votes Score
(Cumulative)
Government
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
Industry
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
Civil Society
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
58
Figure 16 Shared Stakeholder Priorities
Government CSO
1
4 6
2 0
Industry
59
CONCLUSIONS
CONCLUSIONS
7
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
60
CONCLUSIONS
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.
61
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)
62
- Very high (score of >3.25–4)
The figures in the report translate these scores into color coding as follows:
Scoring Key: Very low (1.00 - 1.75) Low (> 1.75 - 2.50) High (> 2.50 - 3.25) Very High (> 3.25 - 4.00)
63
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
Is there a legally binding provision for the establishment and operation of a mining
1 Primary 1.00
cadastre that specifies its authority and responsibilities?
Is there a legally binding provision that identifies the authority that issues
2 exploration and mining licenses and is this authority separate from the mining Primary 4.00
ministry?
Is there a legally binding provision that provides for the use of mining-related
3 standard contracts and/or development agreements, does the law define the Primary 1.00
signatory and is the signatory the same as the license issuer?
A1.2 Clarity of Rules for Exploration Licensing
Are there legally binding procedures for granting exploration rights and , if so, are
4 Primary 4.00
they consistent with good practice?
Are the procedures used in granting exploration licenses consistent with good
5 Primary 3.00
practice?
If competitive bidding is used, are standardized bidding documents and contracts
6 used for granting exploration licenses and, if so, do the evaluation criteria Primary 3.00
emphasize work commitments?
Are there legally binding procedures for registering or granting licenses to artisanal
7 and small-scale mining operators and, if so, can the registration/license be obtained Primary 4.00
from field offices, not just the mining authority head office?
Are there legally binding provisions regarding the timeframes for the issuance of
8 Primary 4.00
exploration licenses and the approval of exploration work programs?
Is there a legally binding requirement or guideline that requires that a map
9 Primary 1.00
component be used to record license boundaries in the cadastre?
Are there legally binding provisions that require exploration license holders to
10 report exploration activities and results to the Geological Survey Department or the Primary 2.85
mining authority and, if so, are they consistent with good practice?
A1.3 Clarity of Rules for Mining Licensing
Are there legally binding procedures for granting mining rights and, if so, are they
11 Primary 4.00
consistent with good practice?
12 Are the procedures used in granting mining licenses consistent with good practice? Primary 3.00
If competitive bidding is used, are standardized bidding documents used for
13 granting mining rights licenses and, if so, do the evaluation criteria for granting Primary 3.00
mining licenses emphasize investment commitment and premium payments?
Are there legally binding provisions regarding the timeframe for mining licenses to
14 Primary …
be issued?
Are there legally binding procedures for granting licenses to mineral traders and are
15 they required for trading minerals, gemstones, etc. produced by mining license Primary 4.00
holders as well as artisanal and small-scale mining operators?
64
A1.4 Clarity of Rules for License Oversight, Conversion, and Transfer

Does a company that holds an exploration license and is in compliance with license
16 conditions have a legally binding automatic priority right to apply for a mining Primary 4.00
license in that area?
Are there legally binding provisions that permit exploration and mining license
17 holders to transfer their licenses to an eligible party that meets the license Primary 1.00
provisions?
Are there legally binding provisions for penalties and sanctions for non-compliance
18 Primary 4.00
with exploration and mining license conditions?
B Policy, Legislation and Regulation--De Facto
B1 Cadastre, Geodata, License and Tenure Management
B1.1 Collection of Geological Information
In practice, are exploration license holders delivering the required operational
Interview
19 information to the Geological Survey Department (GSD) or mining authority on a 1.00
Government
regular basis?
In practice, does the GSD or similar organization collect geological information in a Interview
20 4.00
publicly accessible library? Government
In practice, does the GSD or similar organization maintain geological information
Interview
21 from companies in a confidential manner until such time as it can be made publicly 4.00
Government
available?
Has your company encountered any issues concerning the Geological Survey
Department (GSD) or similar organizing maintaining geological information from Interview
22 1.10
your company in a confidential manner until such time as it can be made publicly Industry
available?
Is there a government website that presents what national geological information is
23 Primary 4.00
available or, if not at the national, at the sub-national level?
Is there a library with current national or sub-national geological information
24 Primary 4.00
maintained by the Geological Survey Department (GSD) or a similar organization?
In practice, does the GSD or similar organization make use of the geological data
Interview
25 collected from companies to improve government and public 4.00
Government
awareness/understanding of geological prospectivity?
In practice, does the GSD or similar organization make use of the geological data Interview
26 1.00
collected from companies to monitor compliance with licenses? Government
In practice, does the GSD or similar organization have the capacity to fulfill its Interview
27 3.50
mandate in a satisfactory manner? Government
How satisfied is the mining industry with the way in which the Geological Survey Interview
28 2.19
Department (GSD) or similar organization is fulfilling its mandate? Industry
B1.2 State of Mapping and Geological Exploration
29 Quality of geological database (Fraser Institute) Secondary 2.00
Interview
30 What percentage of the licensed ground is being serviced by active exploration? 1.33
Government
How satisfied is the mining industry with the availability of geological maps for the Interview
31 2.03
most prospective areas? Industry
B1.3 Mining Cadastre Effectiveness
In practice, does the Mining Cadastre have the capacity to fulfill its mandate in a Interview
32 2.00
satisfactory manner? Government
How satisfied is the mining industry with the way in which the Mining Cadastre is Interview
33 2.21
fulfilling its mandate? Industry
65
Interview
34 In practice, is the topographic map for the cadastre compatible with GPS systems? 2.50
Government
Interview
35 What percentage of the mining cadastre is up-to-date? 1.00
Government
In practice, if there is a decentralized cadastre system in place, is the central office Interview
36 1.75
able to obtain updated information on a timely basis? Government
B1.4 Allocating Exploration and Mining Licenses Effectively
Are the procedures in the legal framework for the award of exploration rights Interview
37 3.74
followed in practice? Industry
Are the limits to discretionary power in the award of exploration licenses followed Interview
38 3.48
in practice? Industry
In practice, is there a preference for local companies or producers in the award Interview
39 3.68
process of exploration licenses? Industry
In practice, are exploration licenses awarded to applicants which do not have the
Interview
40 technical and financial capacity to fulfill license requirements and any associated 2.65
Industry
work program?
In practice, are the legislated timeframes for exploration license awards and Interview
41 2.89
extensions followed? Industry
Are the timeframes for the approval of exploration work programs followed in Interview
42 3.50
practice? Industry
Are the procedures in the legal framework for the award of exploration rights Interview
43 3.68
followed in practice? Industry
Are the limits to discretionary power in the award of mining licenses followed in Interview
44 3.50
practice? Industry
In practice, is there a preference for local companies or producers in the award Interview
45 3.68
process of mining licenses? Industry
In practice, are mining licenses awarded to applicants which do not have the
Interview
46 technical and financial capacity to fulfill license requirements and any associated 2.59
Industry
work program?
In practice, are the legislated timeframes for the award and extension of mining Interview
47 2.80
licenses followed? Industry
Are the timelines for deciding on exploration and/or mining license applications Interview
48 2.29
compatible with the timelines of other required permits? Industry
In practice, does the unit issuing exploration and mining licenses have the capacity
Interview
49 2.30
to fulfill its mandate in a satisfactory manner? Government
How satisfied is the mining industry with the way in which the unit issuing Interview
50 2.74
exploration and mining licenses is fulfilling its mandate? Industry
What percentage of licenses are subject to boundary disputes between license Interview
51 2.33
holders due to the ambiguity of boundaries? Government
Are mining contracts and agreements signed and approved by the authority or Interview
52 ...
authorities defined in the law? Government
Interview
53 In practice, how often do license cancellations or denials result in appeals? 3.50
Government
If mining-related standard contracts and/or development agreements are used, are Interview
54 …
they used to modify the law? Government
B1.5 Managing and Transferring Licenses Effectively
Is the government effectively managing compliance with exploration license Interview
55 4.00
conditions? Government
66
Interview
56 Is the government effectively managing compliance with mining license conditions? 4.00
Government
In practice, does the unit managing the monitoring of licenses have the capacity to Interview
57 2.30
fulfill its mandate in a satisfactory manner? Government
How satisfied is the mining industry with the way in which the unit managing the Interview
58 2.74
monitoring of licenses is fulfilling its mandate? Industry
How satisfied is the mining industry with the authorities' practices regarding the Interview
59 2.70
extension of exploration licenses? Industry
How satisfied is the mining industry with the authorities' practices regarding the Interview
60 2.70
extension of mining licenses? Industry
In practice, are license holders able to transfer their licenses to companies which Interview
61 2.00
meet the same qualification criteria? Government
In practice, does a company have an automatic first priority to obtain a mining
Interview
62 license in an area for which it holds an exploration license providing it is in 3.56
Industry
compliance with license conditions?
C Accountability and Inclusiveness
C1 Rules on Transparency and Independence of the Licensing Process
C1.1 Openness and Transparency of Licensing Process
Are there legally binding provisions that an applicant be informed if a license
63 Primary 3.43
application is denied and, if so, are they consistent with good practice?
Are there legally binding provisions that provide a process for license cancellations
64 Primary 4.00
and, if so, are they consistent with good practice?
Are there legally binding requirements that exploration and mining licenses,
65 Primary 1.00
contracts and agreements be made publicly available?
Are there legally binding provisions, such as state secrecy laws, that contain barriers
66 Primary 1.00
to the disclosure of mining sector information?
Are there legally binding provisions that require license holders to provide the
67 Primary 4.00
government with details of the beneficial ownership of the license?
D1 Openness, Transparency and Independence of the Licensing Process--Implementation
D1.1 Openness and Transparency of Licensing Process--Implementation
Interview
68 In practice, is the information required for license applications publicly available? 3.75
Industry
Interview
69 In practice, when licenses are denied, are the procedures followed? 4.00
Government
Interview
70 In practice, when licenses are cancelled, are the procedures followed? 4.00
Government
In practice, are exploration and mining licenses, contracts and agreements made Interview
71 2.83
publicly available? Government
If the answer to the question above is "No", are key details of exploration and Interview
72 …
mining license readily accessible? Government
In practice, does the agency or ministry responsible for awarding licenses for
Interview
73 exploration and mining operate independently from the mining ministry (without 3.59
Industry
undue influence from the mining ministry)?
In practice, does the agency or ministry responsible for awarding licenses for Interview
74 3.83
exploration and mining award licenses in a rules-based manner? Industry
67
2 Operations
A2 Clarity and Harmonization of Sector Rules
A2.1 Clarity of Legislation, Rules and Timeframes
Are there legally binding regulations which cover exploration, mining and mine
75 Primary 4.00
closure and reclamation activities?
Are timeframes for the approval of mine development plans and the approval of
76 Primary 4.00
extensions of mining operations set out in the regulations?
A2.2 Harmonization of Legislation and Government Coordination
Are the laws and regulations governing exploration and mining operations available
77 Primary 4.00
from a single and up-to-date online government source?
Are there instances where mining sector legislation (including rules and regulations)
78 Primary 4.00
conflicts with other relevant legislation (including rules and regulations)?
Does mining or other legislation assign clear authorities and responsibilities
79 Primary 4.00
between government ministries/agencies in the mining sector?
Does mining or other legislation assign non-overlapping authorities and
80 Primary 4.00
responsibilities ("roles") between government ministries/agencies?
A2.3 Provisions for Artisanal and Small-Scale Mining (ASM)
Are there legally binding provisions that provide for the legal operations of artisanal
81 Primary 4.00
and small-scale mining (ASM) activities?
Are there legally binding provisions that permit ASM activities to take place, with
82 the consent of the (non-ASM) license holder, on land for which an exploration or Primary 1.00
mining license has been issued?
Are there legally binding provisions that provide for the settlement of disputes
83 Primary 4.00
between ASM and exploration and mining license holders?
Are there legally binding provisions for ASM that safeguard from potential
84 Primary 4.00
environmental and other harm?
A2.4 Occupational Health and Safety
Are there legally binding Occupational Health and Safety (OHS) standards and
85 procedures, and, if so, do they include related education and training requirements Primary 3.23
and are they in line with internationally used standards?
Is there a a grievance mechanism for non-compliance with Occupational Health and
86 Safety (OHS) standards and procedures, and, if so, does it include penalties in case Primary 1.00
of non-compliance?
B2 Sector Management and Intragovernmental Coordination
B2.1 Support to Artisanal and Small-Scale Mining
Is there a dedicated unit within the mining authority dealing with artisanal and
87 Primary 1.00
small-scale mining (ASM)?
In practice, does the government provide technical training to ASM miners to help Interview
88 1.15
improve their mining activities and, if so, is the training effective? Civil Society
Interview
89 In practice, are small scale miners able to coexist with other mining activities? 1.62
Civil Society
Interview
90 In practice, are large-scale mining operations able to coexist with ASM activities? 1.32
Industry
Interview
91 In practice, are artisanal and small-scale miners operating in the formal market? 2.00
Government
In practice, are the mechanisms for the settlement of disputes between ASM and Interview
92 1.15
other mining operations being used? Civil Society
68
B2.2 Intra-Governmental Coordination

In practice, are there disagreements between government ministries/agencies over Interview
93 1.75
the roles and responsibilities regarding the mining sector? Government
Are there formal mechanisms for sharing information between government
94 Primary 4.00
ministries/agencies working on the mining sector?
In practice, is there regular sharing of information between government agencies Interview
95 1.00
that have regulatory responsibilities for the mining sector? Government
B2.3 Occupational Health and Safety
In practice, is the implementation of Occupational Health and Safety (OHSA)
Interview
96 standards and procedures including any related education and training 3.60
Industry
requirements enforced?
Is the grievance and complaints mechanism for operational health and safety Interview
97 3.00
working well in practice? Government
In practice, does the government track the number of injuries and fatalities related Interview
98 4.00
to mining activities? Government
In practice, is the right to refuse entry to unsafe working places protected and Interview
99 4.00
enforced? Government
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
Does the holder of a mineral right have legally guaranteed access rights to surface
100 Primary 1.00
land?
Is there a legally binding established procedure for the resettlement of communities
101 displaced by mining activities and, if so, does it follow internationally accepted Primary 2.50
principles such as the Equator Principles or the IFC Performance Standards?
Is there a legally binding procedure for the payment of compensation when
102 Primary 4.00
exploration and/or mining activities interfere with land ownership or land use?
Is there a legally binding process to appeal decisions by mining authorities and, if so,
103 Primary 4.00
is the process outside and independent of the mining authorities?
104 Is there an association that represents artisanal and small-scale miners? Primary 4.00
Is there a government-run program that ASM workers and their families can access
105 Primary 1.00
to get basic health and education services in the area where they work?
D2 Compensation, Resettlement and Artisanal and Small-Scale Mining Voice--Implementation
D2.1 Compensation, Resettlement and Artisanal and Small-Scale Mining Voice--Implementation
In practice, does the government enforce the legal requirements to resettle Interview
106 1.20
communities affected by mining activities? Civil Society
In practice, does the government enforce the legally binding payments of
Interview
107 compensation when exploration and/or mining activities interfere with land 1.24
Civil Society
ownership or land use?
Does the legislative branch of government carry out an oversight role regarding the Interview
108 3.00
mining sector beyond the consideration and approval of legislation? Government
Does the legally binding appeals process have the legal standing to overturn Interview
109 4.00
decisions by mining authorities? Government
In practice, do artisanal and small-scale miner associations participate in the Interview
110 2.13
monitoring, advocacy and protection of ASM mining and property rights? Civil Society
In practice, are ASM workers and their families able to access basic health and Interview
111 1.30
education services in the area where they work? Civil Society
69
3 Taxation and State Participation

A3 Tax Policy and State-Owned Enterprise Rules
A2.1 Tax Policy and Instruments
Are there legally binding provisions that prescribe which government agencies have
112 Primary 4.00
the authority to collect taxes and payments from mining companies?
Are income and withholding tax payments and royalties from mining companies to
113 Primary 4.00
government required by law to be placed in the national treasury?
Are the rates, formulae and bases for the main fiscal instruments (such as income
114 taxes, withholding taxes, indirect taxes and royalties) that apply to mining Primary 4.00
prescribed by law?
Are there legally binding provisions for the granting of tax incentives to mining
115 companies and, if so, do they require that a cost-benefit analysis be conducted Primary 2.50
before granting the tax incentives?
Can the government negotiate fiscal provisions with mining companies that differ
116 from those provided in the law and, if so, are these fiscal provisions being made Primary 4.00
public?
Are there legally binding provisions that ensure that the government has an
117 adequate minimum revenue stream (relative to sales revenue) in all production Primary 3.50
periods?
Does the country employ an adequate mix of progressive and regressive fiscal
118 Primary 2.00
instruments with respect to revenues from mining?
In cases where the government holds equity shares in resource companies, are the
119 Primary 4.00
expected benefits from equity holding greater than the costs for acquiring equity?
A3.2 Mining Tax Administration
Are there legally binding provisions that specify which agency/agencies collect
120 Primary 2.00
mining sector payments and is the number of agencies involved relatively small?
Are there legally binding provisions for mining sector payment processes and, if so,
121 Primary 4.00
are they consistent with good practice?
122 Does the government have a simplified tax collection system for ASM? Primary 1.00
Are there legally binding provisions that require regular tax, cost and physical audits
123 to be conducted of mining operations and, if so, do the provisions apply to all Primary 3.00
mining taxpayers (excluding ASM) and are the audits risk-based?
Are there legally binding provisions that require an annual disclosure of related
124 Primary 4.00
party transactions?
Are there legally binding provisions regarding transfer pricing and, if so, are they
125 Primary 4.00
Are there legally binding provisons that limit the risk from thin capitalization and, if
126 Primary 2.85
so, do they include interest rate caps and debt to equity caps?
Are there legally binding provisions that identify profits from the indirect or
127 offshore transfer of exploration and mining assets/rights so that they are taxable in Primary 4.00
the host country?
A3.3 State-Owned Enterprise Governance Rules
Are there legally binding provisions regarding the Board composition of mining
128 sector State Owned Enterprises (SOEs) and, if so, are they consistent with good Primary 3.43
practice?
70
Are there legally binding provisions that set out the roles and responsibilities of
129 mining SOEs when engaging in quasi-fiscal activities such as providing subsidies to Primary 1.00
other parties or undertaking social expenditures?
Are there legally binding provisions that set out the roles and responsibilities of the
130 SOE Board and, if so, does the SOE Board have the authority to appoint and remove Primary 1.80
the CEO?
Are there legally binding provisions that give the SOE Board authority over the
131 Primary 1.60
dividend and debt policy?
B3 Mining Tax Administration and State-Owned Enterprise Governance
B3.1 Mining Tax Administration
In practice, does the taxation authority issue guidance notes which meet the needs
Interview
132 of mining sector taxpayers and, if so, how satisfied is the mining industry with these 2.76
Industry
guidance notes?
In practice, are the bases on which taxes are levied subject to disputes between
Interview
133 taxpayers and the tax authorities and if there are such disputes are they resolved 3.50
Government
through active tax tribunals?
Does the tax administration have a large taxpayer unit/office or one specialized in
134 Primary 4.00
natural resources/mining?
In practice, does the large taxpayer unit/office or the one specialized in natural Interview
135 4.00
resources/mining have the capacity to fulfill its mandate in a satisfactory manner? Government
In practice, how satisfied is the mining industry with the way in which the large
Interview
136 taxpayer unit/office or the one specialized in natural resources/mining is fulfilling its 2.71
Industry
mandate?
In practice, are taxes and payments by mining sector tax payers only collected by Interview
137 4.00
the mandated agency/agencies? Government
In practice, are income and withholding tax payments and royalties from mining Interview
138 4.00
companies to government placed in the national treasury? Government
In practice, are the fiscal terms, including provisions for tax incentives in the law Interview
139 3.00
followed? Government
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
Interview
140 regulations and, if so, does the government have well experienced and qualified 4.00
Government
representative to negotiate fiscal terms and fiscal incentives with mining companies
and are the negotiated terms publicly available?
B3.2 Mining Tax Auditing
In practice, are tax, cost and physical audits of mining companies conducted Interview
141 4.00
systematically? Government
In practice, are the legally binding provisions regarding transfer pricing being Interview
142 3.00
implemented? Government
In practice, are there regular audits for domestic and international related party Interview
143 4.00
transfer pricing transactions? Government
In practice, are advanced pricing rules used for regularly occurring domestic and Interview
144 1.00
international related party transactions? Government
In practice, are there regular audits of mining companies for compliance with thin Interview
145 ...
capitalization rules? Government
B3.3 State-Owned Enterprise Governance
In practice, does the Board composition of mining sector SOEs conform to good Interview
146 3.25
practice? Government
71
Does the internal audit department of mining sector SOEs review the effectiveness Interview
147 4.00
of internal audit controls annually? Government
In practice, do mining sector SOEs follow the legally binding provisions that set out
Interview
148 their roles and responsibilities when engaging in quasi-fiscal activities such as 4.00
Government
providing subsidies to other parties or undertaking social expenditures?
In practice, do mining sector SOEs or state equity partners honor their financial Interview
149 4.00
obligations to their private partners in joint ventures? Government
C Accountability and Inclusiveness--De Jure
C3 Rules on Transparency of Mining Taxation and State-Owned Enterprise Management
C3.1 Accountability of Mining Taxation
Are there legal provisions for independent agencies to exercise oversight of the
150 Primary 4.00
administration of the fiscal regime?
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
151 Primary 1.00
interests in any extractive activity or project (NB: These could be general, e.g. not
mining-specific provisions)?
C3.2 State-Owned Enterprise Financial Management and Accountability
Are there legally binding provisions that require mining sector SOEs to prepare
152 annual financial accounts and, if so, do they require that the annual financial Primary 4.00
accounts be published?
Are mining sector SOEs required to have an audit committee reporting to the
153 Primary 4.00
Board?
154 Are mining sector SOEs required to have an internal audit department? Primary 4.00
Is the internal audit department required to report periodically to the audit
155 Primary 1.00
committee?
Are there legally binding provisions that require annual financial audits of mining
156 SOEs by an independent external auditor or at least a state auditor and, if so, do the Primary 4.00
provisions require that the annual financial audits be published?
Are there legally binding provisions that require mining SOEs to use the latest
published version of internationally recognized accounting standards (IFRS) such as
157 Primary 4.00
those maintained by the International Accounting Standards Board (IASB) or the
Generally Accepted Accounting Principles (GAAP)?
D3 Mining Taxation and State-Owned Enterprise Financial Management--Implementation
D3.1 Accountability of Mining Taxation--Implementation
In practice, are changes to mining tax legislation undertaken through a consultative Interview
158 1.16
process and, if so, how satisfied is the mining industry with the process? Industry
In practice, does the country disclose details relevant to mining sector revenues,
Interview
159 such as data on production, sales, reported profits and payments by fiscal 4.00
Government
instruments, through EITI or another disclosure process?
In practice, do government officials with a role in the oversight of the mining sector
Interview
160 disclose information about their financial interests in any extractive activity or 1.00
Government
project?
D3.2 State-Owned Enterprise Financial Management and Accountability--Implementation
Interview
161 In practice, do mining sector SOEs prepare and publish annual financial accounts? 4.00
Government
In practice are annual audits of mining SOEs financial accounts undertaken by an Interview
162 4.00
independent external auditor and are they published? Government
72
In practice, do mining SOEs use internationally recognized accounting standards

Interview
163 (IFRS) such as those maintained by the International Accounting Standards Board 4.00
Government
(IASB) or the Generally Accepted Accounting Principles (GAAP)?
In practice, are there outstanding financial obligations between the mining SOEs Interview
164 4.00
and the Government? Government
4 Revenue Distribution and Management
A4 Public Financial Management and Revenue Sharing Rules
A4.1 Public Financial Management and Revenue Sharing
Are all government spending and revenues (or at least government spending from
resource revenues), including revenues from the mining sector, appropriated
165 Primary 4.00
through the national budget and, if not, are off-budget funds that manage resource
revenues audited and subject to external oversight?
Are there legally binding provisions regarding arrangements for resource revenue
sharing between central and sub-national governments that clearly articulate the
166 Primary 4.00
objectives of resource revenue sharing and do they specify how much should be
transferred to sub-national governments?
Does the Ministry of Finance have written guidelines regarding when and how
167 Primary 4.00
yearly budget allocations to sub-national governments should be disbursed?
Are there legally binding provisions for line ministries to produce costed strategic
168 Primary 4.00
plans which are then aligned with the annual budget?
A4.2 Fiscal Management Rules and Stabilization
169 Are there legally binding provisions that require a medium-term fiscal framework? Primary 4.00
Does the government have a debt-management strategy designed to lower

170 Primary 4.00
borrowing costs that is mandated by law or codified in regulation?
Are there legally binding provisions for a mechanism to protect budget
171 Primary 1.00
expenditures from revenue volatility?
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
In practice, are the arrangements for resource revenue sharing between central and Interview
175 3.00
sub-national governments being followed? Government
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
ln practice, does the Ministry of Finance follow its guidelines regarding when and
Interview
180 how it disburses budget allocations to sub-national governments and do sub- 3.50
Government
national governments receive their entire yearly budget allocations?
B4.2 Public Investment Management
In this country, how efficiently does the government spend public resources - WEF
181 Secondary 4.00
GCI
In practice, does the government adhere to the legally binding process for screening
Interview
182 ministries' public investment project proposals for consistency with government 4.00
Government
policy (including the overall procurement plan) and strategic guidance?
73
In practice, does the government use a formal cost benefit appraisal process for Interview
183 4.00
public investment project proposals? Government
In practice, are the project appraisals of public investment projects undertaken by Interview
184 1.00
an external agency or expert? Government
In practice, do ministries follow established procurement procedures for public Interview
185 ...
investment projects? Government
In practice, are project time and/or cost overruns monitored and reported on a
Interview
186 regular basis (e.g., twice annually) and are actions initiated on projects that have 1.00
Government
time and/or cost overruns?
In practice, are there delays in project completion relative to the initial estimated Interview
187 2.00
time on major public investment projects? Government
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 …
In practice, does the government follow a debt management strategy that Interview
191 4.00
minimizes non-concessional borrowing and borrowing costs? Government
In practice, is the mechanism to protect budget expenditures from revenue Interview
192 1.00
volatility being applied? Government
C4 Rules on Budget Transparency and Public Investment Integrity
C4.1 Budget Transparency and Accountability
Are there legally binding provisions for the audit for general government
193 Primary 4.00
expenditures?
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
194 Primary 4.00
hearings made available to the public through a website or other easily accessible
means?
C4.2 Public Investment Integrity and Accountability
Is the government required to prepare strategic guidance for public investment
195 decisions and, if so, is the strategic guidance publicly available, detailed, and Primary 4.00
updated on a regular basis?
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
196 Primary 1.00
projects, do the guidelines differ by project value and do they reflect environmental
and social costs?
Is there a legally binding process for screening ministries' public investment
197 proposals to be consistent with government policy as indicated in the overall Primary 1.00
procurement plan?
Are there legally binding provisions for implementing agencies to report on project
198 Primary 4.00
implementation progress and cost overruns to the Ministry of Finance?
Are there legally binding provisions that require public investment projects to be
199 Primary 1.00
evaluated by an independent auditor?
D4 Accountability and Inclusiveness--De Facto
D4.1 Budget Transparency and Accountability--Implementation
200 Open Budget Index - Open Budget Survey Secondary 3.00
In practice, are the assets and liabilities of mining sector SOEs included in the public Interview
201 1.00
sector accounts as reported by the Ministry of Finance? Government
74
In practice, are the assets and liabilities of any natural resource funds included in Interview
202 …
the public sector accounts as reported by the Ministry of Finance? Government
203 Central Government Operations outside Financial Reporting (PEFA PI-6) Secondary 3.00
D4.2 Public Investment Integrity and Accountability
Interview
204 In practice, are public investment projects evaluated by an independent auditor? 1.00
Government
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
Is there a legally binding requirement for community stakeholder consultation
207 throughout the mine life with affected communities and, if so, is it consistent with Primary 3.23
good practice?
Does this legally binding requirement for community stakeholder consultation
208 conform with good practice in terms of record keeping, access, and use of Primary 1.00
information?
Is there a legally binding requirement that the results of community stakeholder
209 Primary 2.28
consultations be used in preparing and updating EIAs, EMMPs, SIAs and SMMPs?
Is there a legally binding requirement for Community Development Agreements
210 between mining companies, government and affected communities and, if so, is it Primary 1.00
Is there a national policy on Corporate Social Responsibility (CSR) that applies to
211 mining and is publicly available and is there an agency that is responsible for Primary 4.00
oversight of the policy and its application in different sectors including mining?
A5.2 Environmental Impact Management, including Combating Climate Change Requirements
Is there a legally binding requirement that the clearance of the agency or ministry
responsible for environmental protection be obtained before an exploration or
212 Primary 4.00
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?
Is there a legally binding requirement for companies to prepare and submit EIAs,
EMMPs (or combined ESIAs and ESMMPs) and related reports including
213 Primary 4.00
implementation and monitoring reports for review and approval by the concerned
government agencies?
Is there a legally binding requirement for EIAs and EMMPs (or combined ESIAS and
214 ESMPS) and related implementation and monitoring reports to address mining's Primary 1.00
environmental impacts on women separately from the impacts on men?
Are there legally binding requirements for pollution prevention and management of
215 air pollution, hazardous and non-hazardous wastes, chemicals and hazardous Primary 4.00
materials and pesticides?
Are there legally binding requirements for the protection of surface and ground
216 water quality and the review and balancing of water allocations and are they Primary 3.43
Is there a legally binding requirement for structures such as tailings dams and
impoundments that hold mine wastes to be designed, operated and maintained
217 Primary 4.00
according to internationally recognized standards that is consistent with good
practice?
75
Is there a legally binding requirement for mining operations to identify, manage and
218 Primary 2.28
protect biodiversity that is consistent with good practice?
Is there a legally binding requirement for mining operations to identify, manage and
219 Primary 2.28
protect natural habitat that is consistent with good practice?
Is there a legally binding requirement that mine design and operations reflect
220 anticipated trends in weather event severity and frequency related to climate Primary 1.00
change that is consistent with good practice?
Is there a legally binding requirement for mining operations to have an Emergency
221 Preparedness and Response Program (EPRP) prior to commencement of mining Primary 2.47
operations that is consistent with good practice?
Is there a legal provision for a simplified Environmental Permit for artisanal and
222 Primary 1.00
small-scale mining (ASM)?
A5.3 Social Impact Management Requirements
Are there provisions that identify which institution or institutions are responsible
for approving SIAs and SMMPs (or combined ESIAS and EMMPS) as well as
223 Primary 1.70
monitoring and enforcing compliance with legal requirements related to managing
social impact?
Is there a legally binding requirement for companies to prepare and submit SIAs and
SMMPs (and related reports including Implementation and Monitoring reports) for
224 Primary 4.00
review and approval by the concerned government agencies and is the requirement
Does this legally binding requirement support local and national employment,
225 Primary 4.00
supply of goods and services, and business development?
Are there legally binding requirements for local governments and companies to
226 work together to manage the effects of the potentially rapid and disruptive in- Primary 1.00
migration around mining operations?
Is there a legally binding requirement for companies to collect data on, report on,
227 Primary 1.00
and address the impacts of mining on women separately from the impacts on men?
A5.4 Mine Closure and Financial Sureties for Decommissioning Requirements
Is there a legally binding requirement for a Mine Closure and Reclamation Plan
228 Primary 3.43
(MCRP) to be prepared and is it consistent with good practice?
Are there legally binding provisions that outline what the MCRP must cover
229 Primary 4.00
regarding environmental protection, remediation and reclamation?
Are there legally binding provisions that outline what the MCRP must cover
230 Primary 4.00
regarding managing and mitigating potentially harmful social impacts?
Is there a legally binding requirement for the MCRP to be prepared in consultation
231 with the affected communities and local government and is it consistent with good Primary 4.00
practice?
Is there a legally binding requirement for mining companies to include progressive
232 Primary 4.00
rehabilitation in the mining plan?
Is there a legally binding requirement for the posting of environmental bonds or
233 similar financial assurance methods to cover the cost of environmental Primary 4.00
rehabilitation and reclamation post-mining?
Are there legally binding provisions regarding the financial assurance mechanism
234 which require that financial securities be issued and held only by government or Primary 4.00
approved, qualified financial institutions?
76
235 for mine closure which clearly stipulate the conditions under which the company or Primary 4.00
the government can access the funds?
for mine closure which ensure that the funds can only be used for mine closure and
236 Primary 4.00
environmental rehabilitation and reclamation costs?

B5 Environemental and Social Impact and Mine Closure--Management
B5.1 Impact and Community Consultation Effectiveness
In practice, are the consultations that take place between mining companies and Interview
237 2.40
affected communities meaningful and comprehensive? Civil Society
In practice are the consultations that take place between mining companies and Interview
238 2.87
affected communities comprehensive? Civil Society
Are the results of the mining company-community stakeholder consultations used Interview
239 3.50
in the preparation of relevant documents? Government
In practice are community development agreements negotiated between mining Interview
240 1.54
companies and affected communities and local governments? Civil Society
B5.2 Environmental Impact Management Effectiveness, including Combating Climate Change
Is the institution tasked with monitoring and enforcing environmental laws and
Interview
241 regulations carrying out its task in a satisfactory manner regarding the mining sector 1.50
Government
from exploration to post-mine closure?
How satisfied is civil society with the way the institution tasked with monitoring and Interview
242 1.82
enforcing environmental law is carrying out its task? Civil Society
How satisfied is the mining industry with the way the institution tasked with Interview
243 2.89
monitoring and enforcing environmental law is carrying out its task? Industry
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 Interview
244 2.50
are the documents updated and approved on a regular basis with specified Government
timeframes?
In practice is the implementation of EMMPs and other environmental impact
Interview
245 management and mitigation requirements and compliance with legal requirements 2.60
Government
monitored and enforced systematically?
In practice is surface and ground water quality being protected and water Interview
246 2.20
allocations reviewed and balanced? Government
In practice are structures such as tailings dams and impoundments that hold mine
Interview
247 wastes desgined, operated and maintained according to internationally recognized 3.71
Industry
standards?
Interview
248 In practice is biodiversity being identified, managed and protected? 2.18
Industry
How satisfied is the government with the mining companies' design, operation and
Interview
249 maintenance of structure such as tailings dams and impoundments that hold mine 2.25
Industry
wastes?
Interview
250 In practice is natural habitat being identified, managed and protected? 2.18
Industry
In practice do mine design and operations reflect anticipated trends in weather Interview
251 2.13
event severity and frequency related to climate change? Industry
77
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 Interview
252 1.75
regular basis with reporting to the Govenrment and is prepared and updated in Industry
close collaboration with the local community?
In practice is the government monitoring and enforcing compliance with Interview
253 1.80
environmental requirements for artisanal and small-scale miners? Government
B5.3 Social Impact Management Effectiveness
Are the institutions tasked with monitoring and enforcing social mitigation
Interview
254 measures and requirements carrying out their tasks in a satisfactory manner 2.00
Government
regarding the mining sector from exploration to post-mine closure?
How satisfied is civil society with the way the institutions tasked with monitoring
Interview
255 and enforcing social mitigation measures and requirements are carrying out their 1.94
Civil Society
tasks?
How satisfied is the mining industry with the way the institutions tasked with
Interview
256 monitoring and enforcing social mitigation measures and requirements are carrying 2.52
Industry
out their tasks?
In practice are SIAs and SMMPs (or other key social impact related documents)
Interview
257 approved by the mining authority before a mining right is granted and are the …
Government
documents updated and approved on a regular basis with specified timeframes?
In practice is the implementation of SMMPs and other social impact management
Interview
258 and mitigation requirements and compliance with legal requirements monitored 2.20
Government
and enforced systematically?
In practice are the effects of the potentially rapid and disruptive in-migration Interview
259 2.20
around mining operations adequately managed? Civil Society
In practice are the health services in mining communities similar to or better than Interview
260 1.95
nearby non-mining communities? Civil Society
In practice are the education services in mining communities similar to or better Interview
261 1.88
than in nearby non-mining communities? Civil Society
In practice, do mining communities depend on regular support from mining Interview
262 2.59
companies for the provision of basic services? Civil Society
B5.4 Mine Closure Effectiveness, Financial Sureties for Decommissioning, and Abandoned Mines
In practice is an initial Mine Closure and Reclamation Plan (MCRP) prepared and Interview
263 1.00
approved prior to the commencement of production? Government
In practice is a final MCRP prepared and approved prior to the commencement of Interview
264 4.00
mine closure activities and is it audited by independent experts? Government
How satisfied is the mining industry with the way the institutions tasked with
Interview
265 monitoring and enforcing the environmental and social obligations associated with 2.77
Government
mine closure are carrying out their tasks?
How satisfied is civil society with the way the institutions tasked with monitoring
Interview
266 and enforcing the environmental and social obligations associated with mine 1.95
Civil Society
closure are carrying out their tasks?
In practice do mining companies consult communities and local government when Interview
267 3.32
developing and updating the Mine Closure and Reclamation Plan (MCRP)? Industry
How satisfied is civil society with the way mining companies consult with
Interview
268 communities when developing and updating the Mine Closure and Reclamation 1.88
Civil Society
Plan (MCRP)?
How satisfied is local government with the way mining companies consult with Interview
269 ...
communities when developing and updating the MCRP? Government
78
In practice does progressive rehabilitation take place to reduce the scope and cost Interview
270 3.00
of work needed for mine closure and reclamation once production ceases? Industry
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 Interview
271 3.58
premature closure as well as the cost of closure by third party contractors in the Industry
event this becomes necessary?
Are adequate procedures in place regarding the funds being set aside for mine Interview
272 2.50
closure? Government
Are mining companies satisfied with the procedures in place regarding the funds Interview
273 3.20
being set aside for mine closure? Industry
In practice is government working to inventory abandoned mine sites, and Interview
274 3.50
determine the most effective way forward? Government
In practice, is the approved plan for moving forward with abandoned mine sites Interview
275 4.00
being implemented? Government
C5 Rules on Human Rights, Employment Equity and Environmental and Social Impact Transparency
C5.1 Human Rights and Employment Equity--International Conventions
Is the government a signatory to any regional or global Human Rights charters or
276 similar and if so, is there an agency designated to implement the charter and have Primary 3.23
monitoring and corrective procedures been put in place?
Is there an agency designated by law to protect human rights (Pillar I of the UN
277 Guiding Principles on Business and Human Rights, UNGP) and has the agency put in Primary 4.00
place monitoring procedures and developed a National Action Plan?
Is the government a signatory to the Voluntary Principles on Security and Human
278 Rights (VPSHR), has an agency been designated to implement the Principles and has Primary 1.00
the agency put in place monitoring and corrective procedures?
Is the government party to the UNESCO Convention Concerning the Protection of
279 the World Cultural and Natural Heritage, has an agency been designated to enforce Primary 4.00
compliance and has the agency put in place monitoring and corrective procedures?
C5.2 Human Rights and Employment Equity--National Measures
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
280 Primary 1.00
designated to enforce compliance and has the agency put in place monitoring and
corrective procedures?
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
281 Primary 2.85
resulting from human rights violations and has the Commission put in place
procedures for hearings as well as corrective procedures?
Are there legally binding rules that require employment equity, has an agency been
282 designated to enforce the rules and has the agency put in place monitoring Primary 4.00
procedures and enforcement mechanisms?
Are there legally binding provisions that prohibit child labor including ASM child
283 Primary 4.00
labor?
Is there a legally binding requirement for free, prior and informed consent, has an
284 agency been designated to enforce the requirement and has the agency put in place Primary 1.00
monitoring procedures and enforcement mechanisms?
79
C5.3 Environmental and Social Impact Transparency Requirements

Is there a legally binding requirement for EIAs and EMMPs (or other key
285 environmental impact related documents such as monitoring reports) to be made Primary 1.70
public and is the requirement consistent with good practice?
Is there a legally binding requirement for SIAs and SMMPs (or other key social
286 impact related documents such as monitoring reports) to be made public and is the Primary 3.43
requirement consistent with good practice?
Is there a legally binding requirement for Emergency Preparedness Plans are
287 Primary 1.00
required to be made public and is the requirement consistent with good practice?
Is there a legally binding requirement for Mine Closure and Remediation Plans to be
288 Primary 1.00
made public and is the requirement consistent with good practice?
Is there a legally binding provision establishing a grievance and complaints
289 mechanism for environmental and social mitigation issues and is the complaints Primary 2.85
mechanism consistent with good practice?
Is there an authority with whom a grievance or complaint can be filed and has the
290 Primary 2.85
authority put in place procedures for hearing as well as corrective procedures?
C5.4 Gender Equity
Are there government commitments to provide women with equal employment
291 Primary 4.00
opportunities and conditions?
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
Is the regional or global Human Rights Charter or similar being implemented in Interview
292 4.00
practice including monitoring and corrective measures? Government
Is the National Action Plan to protect human rights (Pillar I of the UN Guiding
Interview
293 Principles on Business and Human Rights, UNGP) being implemented in practice 4.00
Government
including monitoring and corrective measures?
If the government is a signatory to the Voluntary Principles on Security and Human
Interview
294 Rights (VPSHR), are the Principles being implemented in practice including …
Government
monitoring and corrective actions?
Is the UNESCO Convention Concerning the Protection of the World Cultural and Interview
295 …
Natural Heritage being implemented in practice? Government
D5.2 Human Rights and Employment Equity--National Measures--Implementation
Is the legally binding requirement that companies undertake due diligence that they
Interview
296 operate in line with human rights conventions being implemented in practice …
Government
including monitoring and corrective measures?
In practice is the Independent Human Rights Commission or equivalent institution Interview
297 1.75
fulfilling its mandate? Government
How satisfied is civil society with the way in which the Independent Human Rights Interview
298 2.50
Commission (or its equivalent) is fulfilling its mandate? Civil Society
Interview
299 Is employment equity being implemented in practice? 3.00
Government
Interview
300 Are the laws prohibiting child labor, including ASM child labor, enforced? 2.57
Civil Society
Does the government recognize indigenous people on its territory and, if so, does it Interview
301 2.44
safeguard their rights in relation to mining? Civil Society
If the Government has a policy of free, prior and informed consent, is it Interview
302 …
implemented in practice? Government
80
D5.3 Environmental and Social Impact Transparency Effectiveness--Implementation

In practice, are mining rights issued without the approval of the agency or ministry Interview
303 3.30
responsible for environmental protection? Government
Are Environemntal Impact Assessments (EIAs) and Environmental Management and

Interview
304 Mitigation Plans (EMMPs) (or other key environmental impact related documents 1.30
Government
such as monitoring reports) made public in practice and are they widely available?
Are Social Impact Assessments (SIAs) and Social Management and Mitigation Plans
Interview
305 (SMMPs) (or other key social impact related documents such as monitoring reports) 1.50
Government
made public in practice and are they widely available?
Are Emergency Preparedness Plans made public in practice and are they widely Interview
306 1.50
available? Government
Are Mine Closure and Remediation Plans made public in practice and are they Interview
307 1.30
widely available? Government
How satisfied is civil society with the public availability of mining-related
Interview
308 documentation (e.g. EIAs, EMMPs, SIAs, SMMPs, EPPs, Emergency Preparedness 2.09
Civil Society
Plans, and Mine Closure and Remediation Plans)?
In practice, are mining community representatives satisfied with how industry,
government and civil society collaborate in the planning and implementation of Interview
309 1.64
Community Social Responsibility (CSR) activities and with the participation of Civil Society
women in these activities?
In practice, is the mining industry satisfied with the planning and implementation of Interview
310 2.86
CSR activities? Industry
Is the grievance and complaints mechanism for environmental and social mitigation Interview
311 1.65
issues working well in practice? Civil Society
D5.4 Gender Equity--Implementation
In practice do women consider that mining companies and government are doing a Interview
312 2.06
satisfactory job addressing women's concerns and issues? Civil Society
How satisfied is civil society with the government's actions to provide women with Interview
313 2.25
equal employment opportunities and conditions? Civil Society
In practice are mining companies providing equal employment opportunities and Interview
314 3.01
conditions for women? Industry
Interview
315 In practice do mining companies value and respect their female employees? 2.74
Industry
In practice do women who are land users but not land owners receive adequate Interview
316 1.75
compensation for loss of land taken for mining? Civil Society
In practice does the government provide support to improve the productivity and
Interview
317 incomes of female subsistence farmers who have had to relocate their agricultural ...
Government
activities due to mining development taking place?
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
How burdensome is it for businesses to comply with governmental administrative
322 Secondary 4.00
requirements (e.g., permits, regulations, reporting)? - WEF GCI
81
Perceptions index measuring effectiveness of civil law system - World Justice

323 Secondary 2.00
Project (WJP)
324 Rule of Law - BTI Secondary 3.00
Is the country a signatory to the International Center for the Settlement of
325 Primary 4.00
Investment Disputes (ICSID) Convention?
Does the country provide in its domestic law for the international arbitration of
326 foreign investment disputes and, if so, are awards granted through international Primary 4.00
arbitration enforceable in domestic courts?
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
Are there post-secondary educational institutions that offer mining-related
341 Primary 4.00
certifications and/or degrees?
342 Are there vocational training programs that provide mining-sector related skills? Primary 4.00
Does the government work with the mining industry to develop relevant technical Interview
343 1.78
capacity in tertiary education at the national level? Industry
Is there a legally binding requirement that requires mining companies to provide on-
344 Primary 4.00
the-job training?
Interview
345 In practice, is your company providing on-the-job training for your employees? 3.89
Industry
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
Death caused by communicable diseases and maternal, prenatal, and nutrition
350 Secondary 3.00
conditions (percentage of total) - World Bank WDI
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
82
355 Property Rights - BTI Secondary 2.00

356 Protecting Investors - Doing Business Indicator Secondary 3.00
Are there legally binding provisions that ensure fair and equitable compensation for
357 Primary 1.00
owners in case of expropriation?
F2 Political Stability
358 Political Stability - WGI Secondary 2.00
Order and security (control of crime, civil conflict, and violence) + World Justice
359 Secondary 2.00
Project
Security Situation (includes physical security due to the threat of attack by
360 Secondary 1.00
terrorists, criminals, guerilla groups, etc.) - Fraser
361 Conflict Intensity BTI Secondary 2.00
If mining is taking place in areas where armed conflict is taking place, are there
362 legally binding requirements for a diagnostic review for appropriate actions Primary 1.00
regarding existing mineral rights in such areas?
If mining is taking place in areas where armed conflict is taking place, does the
Interview
363 government take appropriate actions in practice regarding existing mineral rights in 4.00
Government
such areas?
If mining is taking place in areas where armed conflict is taking place, how satisfied
Interview
364 is the mining industry with the actions taken by government regarding existing 2.50
Industry
mineral rights in such areas?
F3 Predictable Mining and Tax Policy
How satisfied is the mining industry with the stability over time of the fiscal terms Interview
365 2.30
for mining? Industry
How satisfied is the mining industry with the stability over time of the mining Interview
366 1.97
legislation? Industry
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
Interview
370 Do you perceive corruption as having a negative impact on mining-sector activities? 1.27
Industry
Interview
371 Is your company aware of the payment of bribes in the mining sector? 1.11
Industry
G Sustainable Development
G1 Development Planning
Is there a current multi-year national development plan that has a section on the
372 Primary 4.00
mining sector and that is publicly available?
Did an informed and meaningful national consultation take place during the Interview
373 4.00
preparation of the national development plan? Government
Interview
374 Is the multi-year national development plan on track to meet its targets? 2.50
Government
Are plans to leverage the mining sector as a driver of development within the Interview
375 1.00
national development plan being implemented? Government
Does the country prepare spatial development plans that recognize mining and
376 Primary 4.00
investment locations?
Are the spatial development plans to support mining regional development meeting Interview
377 2.50
the targets set? Government
378 Is there an approved mining development policy that is publicly available? Primary 1.00
Did an informed and meaningful national consultation take place during the Interview
379 4.00
preparation of the mining development policy? Government
83
G2 Local Supplier Development

Does your government have a policy for the promotion of opportunities for local,
380 regional and national supply of goods and services to the mining industry that is Primary 3.54
Has the government sought the views of a wide range of stakeholders in preparing Interview
381 4.00
the local content policy for goods and services within the mining value chain? Government
Are there site-specific agreements with mining companies that promote
382 opportunities for local, regional and national supply of goods and services to the Primary 2.00
mining industry?
What percentage of goods and services is your company sourcing from local Interview
383 3.97
suppliers? Industry
How satisfied is the mining industry with the support provided for domestic Interview
384 3.00
suppliers in attaining local content goals? Industry
Is there an agency in the government whose mandate includes tracking demand
385 and supply of goods and services needed by the mining sector and does this agency Primary 2.50
periodically conduct this assessment?
In practice, is there an agency in the government that is tracking demand and
Interview
386 supply of goods and services needed by the mining sector and does this agency 2.50
Government
periodically track demand and supply?
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
How would you rate the level of efficiency of customs procedures related to the
393 Secondary 3.00
entry and exist of merchandise? WEF GCI
394 Trade Barriers - Fraser Secondary 1.00
In practice, does the Investment Promotion Agency (IPA) or similar organization Interview
395 3.25
have the capacity to fulfill its mandate in a satisfactory manner? Government
G4 Shared Infrastructure
Are there examples of shared infrastructure in the transport sector and, if so, how
Interview
396 satisfied is the mining industry with the shared infrastructure in the transport 1.63
Industry
sector?
Are there examples of shared infrastructure in the energy sector and, if so, how Interview
397 1.25
satisfied is the mining industry with the shared infrastructure in the energy sector? Industry
Are there legal provisions that provide a framework for the private financing of
398 Primary 4.00
infrastructure?
Are there government units which are responsible for negotiating the private
399 Primary 4.00
financing of infrastructure?
84
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iupB{

HIV Human Immunodeficiency Virus

VPSHR Voluntary Principles on Security and Human Rights

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

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

• Supporting sub-national governments in resource-rich regions to manage resource wealth,

• Public Work Services (Dinas Pekerjaan Umum);

INDONESIA’S MINING SECTOR

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

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

Resources (million tons) Reserves (million tons)

Table 2 Resources and Reserves for Coal of Indonesia for 2017

Quality Resources (million tons) Reserves (million tons)

Table 3 Indonesia Historic Mine Production for Select Commodities

Production (tons) World Ranking for 2017

Mining Sector Contribution to GDP (%)

Source: Badan Pusat Statistik (2018).

Table 4 Mining Sector Contribution to Total Exports

Total Exports Mining Sector Mining Sector to Total Exports

Figure 3 Mining contribution to tax state revenue 2018.

Mining Contribution to Tax State Revenue

Figure 4 Mining contribution to nontax state revenue.

Mining Contribution to Nontax State Revenue

Figure 5 Employment in the mining sector.

Employment in the Mining Sector

2. Mining Sector Management

5 “Mining in Indonesia,” PwC (2017).

• The Forestry Agency is responsible for the monitoring and enforcement of

9 “Indonesia Mining Report Q3 2012,” Business Monitor International (2012).

e. Artisanal and Small-scale Mining

11Article 33 (2) of the 1945 Constitution.

Figure 6 Dashboard of mining sector in Indonesia.

Contracts, Licences and Revenue Distribution and

Rules on Human Rights,

Context and Enabling Environment

The dashboard shows that:

De Facto Performance De Jure Performance

Accountability and Inclusiveness

Figure 8 Accountability and inclusiveness—implementation gap

De Facto Performance De Jure Performance performance is mainly caused by the weak

PERFORMANCE ALONG THE EI

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

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

Rules (2.69) Openness and Transparency of Licensing Process (2.69)

Policy Efficiency—De Jure (2.91)

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)

Policy Efficiency—De Facto (2.53)

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)

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

Managing and Transferring Licenses Effectively (3.00)

Accountability and Inclusiveness—De Jure (2.69)

Accountability and Inclusiveness—De Facto (3.67)

2. Value Chain Stage 2: Operations

Figure 10 Value chain stage 2— indicators

Policy Efficiency—De Jure (3.34)

Harmonization of Legislation and Government Coordination (4.00)