A

n official audit of the tin industry on the Bangka Belitung Islands has found indications of massive foul play in the management and operation of firms in the country’s largest tin-producing region.

A recent Energy and Mineral Resources Ministry audit revealed that there are currently 29 active tin smelters of a total 47 registered facilities in the province. However, the suppliers for the smelters were questionable.

According to a 2015 Trade Ministry regulation on tin exports, which is aimed at minimizing state losses in the industry, tin producers must secure a production operation license (IUP-OP) and may only begin operating after obtaining the so-called “clean-and-clear” (CnC) certification.

Further, tin producers must also pay royalties to the government, which is 3 percent of the tin price, and submit their payment receipt to the ministry’s mineral and coal mining directorate general, before exporting their goods.

In order to obtain certification, a tin producer must prove to government that its activities do not overlap with other concession areas and that it conducts environmentally friendly and sustainable practices. A producer must also prove that it has no outstanding royalties and taxes.

The ministry’s inspector general Mochtar Husein, however, said of the total 755 IUP-OP holders in Bangka Belitung, only 498 have obtained CnC certifications. “Frankly, the producers without CnC certifications are [operating] without regulation. If there is smuggling or illegal mining occurring, it may come from this group,” Mochtar told reporters on Tuesday.

Bangka and Belitung, the two main islands in the province, produce more than 90 percent of the country’s tin, as the world’s biggest exporter of the metal.

A lack of monitoring from local government also contributed to the shady nature of the business, Mochtar said. Tin producers, he added, also failed to provide data of their reserves, thus it was difficult to know whether or not their reserves were legal.

He went on to say firms’ procedures in obtaining tin ore were also undocumented.

Mochtar said that the ministry would further audit tin producers in Bangka Belitung to understand the dynamics of tin production and the capacity of local firms involved. The ministry would also further coordinate with law enforcement authorities to follow up the report, he said.

Previously, the government announced that it would audit private tin smelters in Bangka Belitung in order to determine production costs and the price of tin. The plunge in commodity prices was allegedly “controlled” by private tin firms. Reports of alleged illegal tin exports also irked the government.

According to research by Indonesia Corruption Watch (ICW), illegal tin exports from 2004 to 2013 reached 300,000 tons, and caused up to US$362 million in state losses, and an additional $231 million in losses from potential tax revenues and royalties.

Association of Indonesian Tin Exporters chairman Jabin Sufianto said the government should focus on illegal exports in its audit, which not only causes state losses but also floods the global market with tin, lowering the commodity’s price.