Corruption and Illegalities in the Mining Sector in Indonesia: A Ranking of 12 Provinces involved in Korsup Minerba

17 February 2016

Introduction

In 2014, the Corruption Eradication Commission initiated a scheme to resolve problems in Indonesian mining governance as well as to tackle corruption in the sector, which is known as Korsup Minerba (Supervision Coordination of Mineral and Coal Governance). The scheme involves local governments in 12 provinces in the country; all of which possess large numbers of mining permits, and five of which are centres for coal mining. The provinces are Riau, Central Kalimantan, East Kalimantan (including North Kalimantan), Bangka Belitung, Southeast Sulawesi, North Maluku, South Sumatra, Jambi, West Kalimantan, South Sulawesi, Central Sulawesi, and South Kalimantan.

As of early 2014,there were 10,922 locally-issued mining licenses (IUPs) across the country, 69 percent of which were located in the 12 provinces which were the focus of Korsup Minerba.

STATUSMINERALCOALTOTAL
ExplorationProduction ExplorationProduction
C&C1.5242.0561.4739886.041
Non-C&C1.4421.9741.0633984.877
SUB TOTAL2.9664.0302.5361.38610.918
TOTAL6.9963.922

Table of IUP Data Based on Clean and Clear (C&C) Category on 17 Februari 2014

Korsup Minerba was initiated by the KPK in conjuction with 12 national ministries, including the Ministry of Forests, Ministry of Environment and Ministry of Energy and Mines. The aim was to investigate the legality of mining permits in the 12 provinces, taking into account issues such as overlapping concession areas, payment of taxation and royalties and ensuring that mining companies were operating within the law.

To investigate the legalities in mining permits of each provinces, the Korsup Minerba focused on five primary issues including:

Mining permit governance, with a target of no more IUPs that do not meet the documents requirements e.g. Clean&Clear status requirements, Taxpayer Identification Number (NPWP); Forestry Use Permit (IPPKH) divided into two payment types: Non-Tax State Revenue (PNBP) and Land Compensation–if located within forest area. Another target is that the mining corporations must not be involved with land disputes and do not cause any environmental harm.

  1. The implementation of the company’s financial obligation, ensuring all mining companies pay relevant fees, taxes and royalties, including: permanent dues, production dues, tax, reclamation insurance, post-mining insurance, surety indemnity, environmental insurance, and other forms of company’s financial responsibilities.
  2. Monitoring on minerals and coal mining production, with targets of (i) all mining corporations to submit its production report on a regular basis, (ii) all local governments to report regularly on the mining production monitoring in its region, (iii) all local governments to impose sanctions towards mining companies that do not perform good mining practice and or violate the regulations, and (iv) no illegal mining.
  3. The implementation of processing/ refinery obligations, to ensure that those mining operators who are now obliged by law to process or refine minerals before export actually do so, and toenforce punishment for the companies that do not comply.
  4. Supervision of sales and transportation/ mining products shipping, with target: (i) all companies report sales activities and if not, will be sanctioned, (ii) all local governments to gradually submit monitoring reports , and (iii) sanctions for all companies and other related stakeholders who conduct sales of illegal mining products.

The process of investigation for Korsup Minerba was carried out by provincial governments and regents/ mayors since IUPs are issued by local governments, and supervised by the KPK.

Clean and Clear Process

Korsup Minerba was established in order to ensure compliance with the Clean and Clear process that was initiated by the Directorate General of Minerals and Coal in 2009 to ensure that all locally-licensed mines were in compliance with basic laws, such as not overlapping with other mines, conducting environmental impact assessments, and payment of revenues to the state. As a result of the process, around 40% of all permits were found to be non-clean and clear.Yet,  until the Korsup Minerba, no action had been taken to deal with these non-compliant permits.

Key Findings of Korsup Minerba

After a year of implementation, civil society organizations included within the Anti-Mining Mafia Coalition conducted indexing to evaluate the performance of each involved province. The evaluation was based on each province’s performance in administering the components of Korsup Minerba. Key findings from the process included:

  • 721 mining permits were revoked or not extended in 12 provinces; over half of those revoked were coal permits.The permits that were revoked covered around 2 million hectares of land
NOPROVINCETHE NUMBER OF IUP BEING REVOKED/ NOT EXTENDED (2014)
1RIAU93
2SOUTH SUMATERA148
3BANGKA BELITUNG18
4JAMBI84
5WEST KALIMANTAN50
6CENTRAL KALIMANTAN1
7SOUTH KALIMANTAN0
8EAST KALIMANTAN66
9SOUTH SULAWESI13
10CENTRAL SULAWESI160
11SOUTHEAST SULAWESI39
12NORTH MALUKU49
 TOTAL721

Note :The number of the IUP being revoked or not extended throughdecrees of regents/ mayors/ governors

  • The state revenue from minerals and coal sector in 12 provinces improved, gaining Rp10 trillion (around US$770 million).
  • The number of IUPs with non-Clean and Clear status decreased. After Korsup Minerba, Jambi came out as the best performer with non-C&C IUPs falling from 198 to 100 IUPs by the time Korsup Minerba ended. Meanwhile, bad performance were shown by nearly half of those 12 provinces. South Kalimantan came last with zero decrease (performance 0%), South Sulawesi decreased by 6 IUPs out of 242 non-C&C permits, Central Kalimantan 13 out of 311 non-C&C permits, North Maluku 5 out of 108 non-C&C permits,  and West Kalimantan 20 out of 312 non-C&C permits.

 

 

Provinces

IUP During Korsup (2014)IUP After Korsup  (2015)The Decrease of NonC&C Performance of Non-C&C IUP Reduction
TotalNON C&CC&CTotalNON-C&CC&C
JAMBI3981982002641001649849%
SOUTHEAST SULAWESI4981843144541103447440%
SOUTH SUMATERA35983276291512403239%
CENTRAL SULAWESI4371992383491342156533%
RIAU ISLANDS1614711412732841532%
EAST KALIMANTAN1.4434509931.3603561.0049421%
BANGKA BELITUNG1.1096015081.10948462511719%
WEST KALIMANTAN682312370664292372206%
NORTH MALUKU28610822731310321055%
CENTRAL KALIMANTAN866311555867298569134%
SOUTH SULAWESI41424217241523617962%
SOUTH KALIMANTAN84544140486544142400%

 

  • Overlapping permits. Among 12 provinces, only two showed seriousness in administering Korsup Minerba points in relation with overlapping permits: Central Sulawesi (from 299.666,00 hectares of overlapping permits to 5.697,08 hectares)and South Sulawesi (17.159,11 overlapping permit to 5.146,50 hectares). The rest show insignificant decrease and even go higher after the implemention of Korsup Minerba. The increase of overlapping permits within conservation area are found in Riau (0 to 133,60 hectares), South Sumatra (932,64 to 6.292,67 hectares), West Kalimantan (101,31 to 2.531,74 hectares), East Kalimantan (4.299,96 to 97.756,13 hectares), and Southeast Sulawesi (2.224,39 to 2.227,67 hectares).
District/ CityIUP Within Conservation Area (2014) (Ha)IUP Within Conservation Area (2015)  (Ha)Reduction of Overlapped Area (Ha)Governance Percentage. (%)
CENTRAL SULAWESI299.666,005.697,08                   293.968,9298,10%
SOUTH SULAWESI17.159,115.146,50                     12.012,6170,01%
JAMBI7.401,176.300,22                       1.100,9514,88%
CENTRAL KALIMANTAN8.987,708.315,28                           672,427,48%
SOUTH KALIMANTAN12.422,6012.336,79                             85,810,69%
NORTH MALUKU                              8.110,068.055,79                             54,270,67%
BANGKA BELITUNG                              3.268,493.246,65                             21,840,67%
RIAU133,60                                    –0,00%
SOUTH  SUMATERA932,646.292,67                                    –0,00%
WEST KALIMANTAN101,312.531,740,00%
EAST KALIMANTAN4.299,9697.756,13                                    –0,00%
SOUTHEAST SULAWESI2.224,392.227,67                                    –0,00%

 

  • There are some provinces that didn’t conduct supervision of sales and shipments ofmining companies at all. For instance, the coalition evaluated Jambi Province as the worst performance (0%). In contrast, Riau Province indicates the best performance with a score of 30%.

Demands

The Anti-Mining Mafia Coalition urges the KPK, goverment and other related stakeholders to do:

  • Entire revocation of IUPs with non-C&C status. In addition, law enforcers must impose sanctions toward corporations whose permits had been revoked or not extended.
  • Ensuring the compliance of corporation’s financial obligations after being revoked
  • Announcement of blacklisted mining businessman including owners, management, and business groups.
  • Law enforcers prosecute the IUP that operate within conservation area and the entire revocation must follow.
  • Verification of production data for examination of the financial obligation validity
  • Collecting all the state debt and temporary suspension while the debt payment is being processed
  • Reconciliation and verification of the entire data of production, processing, and sales
  • Sanctions towards districts that didn’t conduct the monitoring of production, processing, and sales
  • Improving the number of mining inspectors in local government
  • Continue the process of Korsup Minerba and extending its coverage to Contract of Work (CoW) and Coal Contract of Work (CCoW).