Vulnerabilities of Indonesia’s Extractive Industry to Illicit Financial Flows

Article Sidebar

pdf
Published: Dec 10, 2018
DOI: https://doi.org/10.32697/integritas.v4i2.301
Keywords:
industri ekstraktif tata kelola

Main Article Content

Jimmy Daniel Berlianto Oley
The SMERU Research Institute
Yerikho Setyo Adi
Universitas Gadjah Mada

Abstract

This article aims to explain the vulnerabilities of Indonesia’s extractive industry governance to the illicit financial flows. Earlier studies figured out that the company in extractive industry has been found to be one of the prominent actors of illicit financial flows.  In the case of Indonesia during the period of 2004-2013, the data of Global Financial Integrity (GFI) illustrated that Indonesia is among the top 10 developing countries – which have the highest value of illicit financial flows. This article seeks to explain the nature of illicit financial flows on extractive industry, the causation of why Indonesia’s extractive industry is prone to the illicit financial flows, and finally the recommendation in addressing the issue. In doing so, the researchers conduct the qualitative desk research on explanatory methodology. The result explains that at least there are two natures of illicit financial flows on extractive industry, the behavior of rent-seeking and the dynamics of commodity prices. This article also found out that there are three main sources of regulatory vulnerability which may accommodate the rent-seeking behavior – which directly and indirectly influence the illicit financial flow, which are the different sets of revenue data, arm’s length measurement within the vulnerable enforcement, and regarding the cost recovery scheme. Other than that, the multi-level governance context shown by the decentralization policy of natural resources in Indonesia widens the loopholes of Indonesia’s extractive industry illicit financial flows.

Article Details

How to Cite
Oley, J. D. B., & Adi, Y. S. (2018). Vulnerabilities of Indonesia’s Extractive Industry to Illicit Financial Flows. Integritas : Jurnal Antikorupsi, 4(2), 75–98. https://doi.org/10.32697/integritas.v4i2.301
Issue
Vol. 4 No. 2 (2018): INTEGRITAS Volume 04 Nomor 2 Tahun 2018
Section
Articles

References

ACP-EU. ACP-EU Joint Parliament Assembly Resolution. https://www.europarl.europa.eu/intcoop/acp/2016_nairobi/pdf/102060en.pdf. 23 July 2018.
Adi, Y. S. 2017. The Influence of Extractive Industry Transparency Initiative (EITI) on Countries Compliance: The Case of Indonesia. Thesis. Program S1 Ilmu Hubungan Internasional Universitas Gadjah Mada. Yogyakarta.
Aidt, T. S. 2016. Rent-seeking and the Economics of Corruption. Constitutional Political Economy 27(2): 142-157.
Amelia, A. R. BPK Temukan Cost Recovery Empat Blok Migas tak Sesuai Aturan. Katadata. https://katadata.co.id/berita/2018/04/03/bpk-temukan-cost-recovery-empat-blok-migas-tak-sesuai-aturan. 15 July 2018.
Ariyanti, F. 20155. 31 Perusahaan Tambang Mangkir Lapor Data Pajak, Ini Daftarnya!. Liputan 6. https://bisnis.liputan6.com/read/2372772/31-perusahaan-tambang-mangkir-lapor-data-pajak-ini-daftarnya. 31 May 2017.
Bache, I. – Flinders, M. 2005. Multi-level Governance. Oxford University. New York.
Bullough, O. 2018. The Dark Side of Globalization, Journal of Democracy 29(1): 25-38.
Center for Statistical Agency. 2018. Realisasi Penerimaan Negara. https://www.bps.go.id/statictable/2009/02/24/1286/realisasi-penerimaan-negara-milyar-rupiah-2007-2017.html. 15 July 2018.
Central Government. 2018. LKKP Tahun 2017. Retrieved from the Ministry of Finance Website: https://www.kemenkeu.go.id/media/10117/lkpp-2017.pdf.
Collier, P. 2010. The Political Economy of Natural Resources. Social Research 77(4): 1105-1132.
Directorate General of Mineral and Coal. 2018. Laporan Kinerja. Retrieved from The Directorate General of Mining and Coal Website: https://www.minerba.esdm.go.id/library/content/file/28935-Lakin%20dan%20PK%202017/1c91c16e25684db9d5039a874a6748e82018-04-11-10-12-42.pdf.
Directorate General of Mineral and Coal. 2017. Achievement of Sub Sector Mineral and Coal 2017 and Outlook 2018. MEMR. Jakarta.
Directorate General of Oil and Gas. 2018. Laporan Kinerja, Retrieved from The Directorate General of Oil and Gas Website: https://migas.esdm.go.id/uploads/post/LAKIP-2017.pdf.
EITI Indonesia. Pentingnya Transparansi Dana Bagi Hasil (DBH) untuk Daerah. https://eiti.ekon.go.id/pentingnya-transparansi-dana-bagi-hasil-dbh-untuk-daerah/. 21 July 2018.
EITI. 2015. Contextual Report. EITI Indonesia Report. Retrieved from https://eiti.ekon.go.id/en/category/download/laporan/laporan-eiti/.
Global Financial Integrity. Trade Misinvoicing. https://www.gfintegrity.org/issue/trade-misinvoicing/. 12 July 2018.
Hoogstraten, J. V. 2015. Theoretical Framework for Financial Flows in the Extractive Sector. PODER. New York.
Ilyas, F., Primayogha, E., and Wasef, M. Tata Kelola Batubara Belum Maksimal, Kerugian Negara Diindikasikan Capai 133.6 Triliun Rupiah Pemerintah RI dan KPK Mesti Beri Perhatian Serius. Indonesia Corruption Watch. https://www.antikorupsi.org/id/kajian/tata-kelola-batubara-belum-maksimal-kerugian-negara-diindikasikan-capai-1336-triliun-rupiah. 15 July 2018.
International Monetary Fund. 2011. Supporting the Development of More Effective Tax Systems. Retrieved from https://www.imf.org/external/np/g20/pdf/110311.pdf
Kar, D. – Spanjers, J. 2015. Illicit Financial Flows to and from Developing Countries: 2004-2013. Global Financial Integrity. Washington, DC.
Keen, M. – Mullins, P. 2017. International Corporate Taxation and the Extractive Industries: Principles, Practice, Problems. Philip Daniel et al (Eds.). Routledge. New York.
Le Billon, P. 2011. Extractive Sectors and Illicit Financial Flows: What Role for Revenue Governance Initiatives?. U4 Issue. No. 13.
Lukito. A. – Watson, T. 2017. Gross-split PSCs – a spur for investment?. Indonesia Energy, Utilities, & Mining News Flash. No.60.
Malik, A. 2018. Why Indonesia’s Energy Sector is so Corrupt. The Diplomat. https://thediplomat.com/2018/04/why-indonesias-energy-sector-is-so-corrupt/. July 17, 2018.
Mbaku, J.M. 1998. Corruption and Rent-Seeking. Palgrave Macmillan. London.
McCharty, J. F. Changing to Gray: Decentralization and the Emergence of Volatile Socio-Legal Configurations in Central Kalimantan, Indonesia. World Development 32(7): 1199-1223.
Nasir, A. 2014. Sejarah Sistem Fiskal Migas Indonesia. Grasindo. Jakarta.
Natural Resource Governance Institute. 2015. Indonesia (Country Strategy Note). Natural Resource Governance Institute. Jakarta.
OECD. Base Erosion and Profit Shifting. https://www.oecd.org/tax/beps/. 12 July 2018.
Perkasa, A. 2017. DJP Akui ‘Kekacauan’ Data Pajak Pertambangan Minerba. CNN Indonesia. https://www.cnnindonesia.com/ekonomi/20170124173657-85-188620/dpr-dan-kkks-tetap-pilih-cost-recovery-ketimbang-gross-split. 15 July 2018.
Prabantoro, AM. P. 2014. Migas The Untold Story. Gramedia. Jakarta.
Prakarsa. 2016. Calculating Illicit Financial Flows to and from Indonesia: a Trade Data Analysis, 2001-2014. Perkumpulan Prakarsa. Jakarta.
Saputra, W. – Abdullah, M. 2015. Illicit Financial Flows and Tax Crime in Mining Sector. Brief Note. Publish What You Pay Indonesia. Jakarta.
Salomon, M. – Spanjers, J. 2017. Illicit Financial Flows to and from Developing Countries: 2005-2014. Washington, DC: Global Financial Integrity.
The Regulation of the Minister of Energy and Mineral Resources number 18/2017, Gross Split Production Sharing Contract, Jakarta.
Williams, A. 2011. Shining a Light on the Resource Curse: An Empirical Analysis of the Relationship between Natural Resources, Transparency, and Economic Growth. World Development 39(4): 490-505.
Zucman, G. 2015. The Hidden Wealth of Nations: The Scourge of Tax Havens. The University of Chicago Press. Chicago.