Image placeholder

Indonesia: Disclosure Regarding Mining Contracts, Licenses Essential

This article originally appeared in the Jakarta Post.

Indonesian mining contracts and licenses — the documents detailing the government’s agreements with companies for the exploitation of minerals — remain out of public view despite legislation and court orders that support their publication.

While Indonesian civil society groups strongly support publication, the government has defended its nondisclosure of mining contracts and licenses on the basis that they include confidentiality clauses or that disclosure will hurt the commercial competitiveness of the companies.

Yet, 44 other countries have already started disclosing extractive industry contracts and licenses. This is a shame for Indonesia considering that national legal provisions mean it could be a leader in this global trend.

Contract disclosure benefits not only governments and citizens, but also the private sector. Industry players, including mining giants like Freeport McMoran and Rio Tinto, which have operated in Indonesia, have expressed their support for the practice.

President Joko “Jokowi” Widodo’s government has made clear that it wishes to combat corruption. Publication of contracts and licenses is a crucial part of fighting graft as it allows government employees and the wider public access to the deals that government negotiators have secured and to hold them to account.

Agreeing to publish contracts adds an important dimension of ex-post accountability to negotiation processes. As noted by the Organization for Economic Cooperation and Development, when parties know that contractual terms will be made public, they are more likely to negotiate and draft in a manner to ensure that terms are able to withstand public and commercial scrutiny.

The legal basis to publish mining contracts and licenses in Indonesia has existed for over 10 years. Article 11 of the 2008 Central Information Commission (KIP) Law mentions that public bodies must make accessible “at any time any agreement between public bodies and third parties.”

This law complements Article 33 of the 1945 Constitution, which stipulates that natural resources “[…] shall be under the powers of the state and shall be used to the greatest benefit of the people”. In this sense, the government reaches agreements with companies on the people’s behalf and it is therefore only right that the people know what is on the table.

Disclosing contracts under these laws has been approved by the courts. In a non-litigation adjudication case in 2012, the KIP ordered the Energy and Mineral Resources Ministry to share copies of three mining contracts requested by the Foundation of Publication Information Development (YP2IP).

Three years later, the Supreme Court handed down a similar verdict, this time involving 700 East Kalimantan mining licenses sought by the Network for Mining Advocacy (Jatam) from the provincial administration.

The most common arguments against contract and license disclosure do not hold up. My colleagues at the Natural Resource Governance Institute and I reviewed the terms generally included in Indonesian mining contracts and licenses and found that they are unlikely to contain commercially sensitive information. Freeport Indonesia demonstrated this by making its contract publicly available on the United States' Security and Exchange Commission website.

Likewise, legal language on confidentiality in legislation and the Freeport contract suggests that confidentiality requirements in Indonesia are not intended to extend to contract or license documents.

In a relatively positive step, the Energy and Mineral Resources Ministry established a request system for contract and license documents, but the system is hardly ideal. Petitioners must go through the bureaucratic hassle of submitting documents and waiting for the ministry to come to a decision, in violation of the KIP Law that mandates the information to be provided "at any time". Doubled with a rather bad experience when requesting contracts to be disclosed, this situation discourages citizens and groups seeking contracts, therefore killing the spirit of transparency.

As noted in the latest Indonesia Extractive Industries Transparency Initiative report, the Energy and Mineral Resources Ministry system has in practice not resulted in public disclosure of contracts or licenses. It would be far better for the government to proactively disclose contracts on a public information portal. Not only would this make it easier for citizens to access these important documents, it would spare the government time spent processing citizen requests.

The existing Mineral One Data Indonesia (MODI) portal would be a natural place for the government to proactively disclose contracts and license documents. Of course, there will be challenges along the way, but officials addressing these challenges can learn from other countries that have published extractive industry contracts, such as Mexico, Mongolia and Sierra Leone.

The question facing the Jokowi government is clearly not whether they should make contracts and licenses public, but rather how the government can move to implement disclosure of contracts and licenses. Disclosure is both crucial and feasible.

Fikri Zaki Muhammadi is an Asia-Pacific associate at the Natural Resource Governance Institute (NRGI). Rob Pitman is a senior governance officer at NRGI.