Publish What You Pay !

What Next in the Revenue Transparency

FISCAL AND REGULATORY POLICIES IN INDONESIA

Maryati Abdullah | National Coordinator of PWYP Indonesia

Manila, March 26 th, 2014 | Publish What You Pay Asia Pacific Conference

Including Development of Downstream Industry

and EITI Context

Background

• Basic Instrument of Fiscal Policy : (1) Tax (and non-Tax)

Revenue and (2) Expenditure

• History :

• (1) New Orde/Suharto’s Era (1996-1999) : equal and dynamic policy (loan was included as part of revenue) >> domestic revenue was spent for operational expenditure and foreign revenue was spent for development expenditure; internal saving as counterpart of Rupiah Currency;

• (2) Reformation Era (1999-now) : Performance Based Budget Policy >> Planning and decision process with parliament, defining macroeconomic indicators as variable of allocation and calculation, policy on revenue sharing-including on natural and extractive resources based, and expenditure was allocated based on priority and need of development expenditure.

Fiscal Policy on Revenue Management of Extractive Resources

Macroeconomic Indicators

1. Economic Growth

2. Inflations

3. Exchange Rates

4. BI Rates

5. Oil Production/Lifting >> Revenue from Crude Oil, Rev.Sharing to SN, Fuel Subsidies

6. Indonesia Crude Price (ICP) >> Revenue from Crude Oil, Rev. Sharing to SN, Fuel Subsidies

Flow of Revenue of Oil & Gas (PSC Models)

Main Principle :

- First Trance Petroleum (FTP)

- Split in the Custody Transfer Point

- Recoverable Cost

- Assume & Discharge

+

Local Retributions

Revenue Sharing from Extractive Resources (OIL, Gas, Mineral and Coal, Forestry, Fisheries and Geothermel)

Local Tax Tax Revenue

- Corporate Tax, Income Tax,

VAT, Divident Tax, Interest

Tax, Charge & Services Tax,

Import Tax, etc t

- Dll

Non-Tax Revenue

- Land rent) - Royalty - Other Compnesation on Data & Information

Sub-National Revenue

State Revenue

Flow of Revenue of Mineral & Coal (Law No.4/2009)

Revenue Sharing to the Sub-National (Law No.33/2004)

No Specific Allocations Yet on Expenditure of Revenue from Extractive Industries, except in some local areas such us in Special Autonomy of Aceh, and in the Forestry Sectors on Utilizations of Reforestation Funds

The Expenditure

There are a problematic policy on Fuel Subsidies Where the Number of Budget were used for Fuel subsidies was bigger than the revenue from oil & gas, and its caused the deficit on balance of payment (BOP) > Its vulnerable for increasing of debt and decreasing subsidies for the poor

There are no Inter-generations Policy on on Extractive Industries Revenue Allocation in specific models such us Sovereign Wealth Funds, Endowment Funds, Natural Resources Funds, and etc ; Unless general policy on saving and investment of revenue.

Developing Downstream Industry

Downstream Policy on Oil & Gas

• Mid-Stream : Crude Oil Trading >> Transparency on Government entitlement data – included in EITI Report, which is from all of Government Entitlement, just 70 % – 80% of crude oil was processing by NOC for Domestic purposes; 30% - 20% was rendered by SKK Migas >> bribery case of RR that was arrested by Anticorruptions Commissions

• Downstream activities on Processing, Transportation, Storage and Trading >> Problem on capacity of national industries, competitiveness, absorption of domestic market and generating multi-flier economic effect.

• Law on Mineral and Coal (No.4/2009) was obligated to all of Licenses owner on Mineral and Coal to make value added on their mining operations through processing, refinery and on the utilization.

• Policy and Regulatory Framework on Downstream Industry :

• Policy on Obligation for Mineral and Coal Company to Build Smelter Factory

(Individually or join operations)

• Policy on export ban of mineral ore

• Policy on increasing export tax for certain material

• Renegotiations for Contract of Work Mineral (COW) and Coal (CCOW)

Downstream Policy on Mineral & Coal

Civil Society Engagement

• Making public statement on endorsing of consistency policy for downstream industry of mineral ore

• Making Intervention as stakeholders on Constitutional Court when the Association of Mining enterprises making Juditial review in the Court

• Broadening civil society network and strategic coalitions

• Raising public awareness through Media

Terima kasih....

THANK YOU