Comval BK: O&G Revenue for Sustainable Welfare in Bojonegoro

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MAKING OIL & GAS REVENUE WORKS FOR SUSTAINABLE WELFARE IN BOJONEGORO REGENCY Presented at the discussion on Natural Resources & Extractive Industry Revenues in Province of Compostela Valley Republic of the Philippines August 22-24, 2013 Drs. H. SUYOTO, M.Si Major of Bojonegoro Regency

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Making Oil & Gas Revenue Works for Sustainable Welfare In Bojonegoro Regency Drs. H. SUYOTO, M.Si Major of Bojonegoro Regency Compostela Valley - Bantay Kita - Article 33 Indonesia SUBNATIONAL CONFERENCE ON EXTRACTIVE INDUSTRY TRANSPARENCY INITIATIVE Davao City, The Philippines, August 22-23, 2013

Transcript of Comval BK: O&G Revenue for Sustainable Welfare in Bojonegoro

Page 1: Comval BK: O&G Revenue for Sustainable Welfare in Bojonegoro

MAKING OIL & GAS REVENUE WORKS FOR SUSTAINABLE WELFARE IN

BOJONEGORO REGENCY

Presented at the discussion on

Natural Resources & Extractive Industry Revenues

in Province of Compostela Valley

Republic of the Philippines

August 22-24, 2013

Drs. H. SUYOTO, M.SiMajor of Bojonegoro Regency

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Introduction

Thank you for the invitation, trust, and honor given to me, to share information and experience in developing Oil Transparency Mechanism in Bojonegoro, East Java Province, Indonesia.

We all are faced with the same challenges and responsibility on preserving the earth future, finding solutions on global, regional and local issues related to exploitation of our natural resources.

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Background

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Challenges in Oil/Gas business The whole oil and gas business and

operations are not only stewarded by the state, but also by oil companies, politicians, bureaucrats, and civil society (FROM-INCLUSIVE-TO-EXCLUSIVE PROCESS)

Transparancy will be the main key to ensure the management of environmental impacts, social conflicts, and revenue sharing is not held hostage by company, politicians, and bureaucrats (FROM-EXCLUSIVE-TO-INCLUSIVE PROCESS)

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OIL AND GAS POTENTIAL IS LIKE “TWO SIDES” OF COIN

BENEFITS:• THE INCREASE IN LOCAL GOVERNMENT INCOME FROM

OIL AND GAS SECTOR WILL HAVE AN IMPORTANT EFFECT IN DEVELOPMENT OF BOJONEGORO

• HIGH EXPECTATIONS ON OIL AND GAS REVENUE TO TRANSFORM FROM POOR TO RICH DISTRICT

• A LARGE OF EMPLOYMENT OPPORTUNITIES

• ENVIRONMENTAL DAMAGE, INFRASTRUCTURE DAMAGE, HAS THE POTENTIAL TO CAUSE A DISASTER

• PEOPLE LOST THEIR LANDS FOR THE PROJECT, CONFLICT ON EMPLOYMENT OPPORTUNITIES, CAN BE VULNERABLE TO CAUSE SOCIAL CONFLICT

• CREATING NEWLY RICH GROUP BUT ALSO NEWLY VULNERABLE/POOR GROUP

MUST BE MAINTAINED BY THE GOOD PLANNING,

ACCOUNTABLE AND TRANSPARENT SYSTEM

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NEED TO ADDRESS SEVERAL KEY ISSUES

1.How to minimize bad impacts of extractive industries on the ecology

2.How to use the revenues from extractive industries that could significantly strengthen the capability of the local community to improve their welfare and happiness, and sustainable development.

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The current population is a little over 1.2 million --80% of whom live on agriculture

Bojonegoro covers an area around 235,000 hectares – 30% of which is farm land, while 44% is state-owned teak forest

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CHALLENGES IN BOJONEGORO:

Bojonegoro’s past history had been identical with severe poverty. C Penders, an Australian historian wrote “A Story of Endemic Poverty in North-East Java”, in which he described Bojonegoro’s history of poverty. During the period of 1900 – 1920 poverty in Bojonegoro was very concerning, where about half of hospital patients died of malnutrition

Ironically, the highest number of people lives from teak forest, but mostly enggage with illegal logging, no significant wealth

The area is flood prone from the nearby Solo River during rainy season

Subject to severe drought during dry season Unstable surface land ormation, causing poor road conditions in

the regency

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HOWEVER, SOME PROGRESS..

TWO IMPORTANT MILESTONES, WHICH IMPROVED THE WELFARE OF THE PEOPLE IN BOJONEGORO: THE CONSTRUCTION OF PACAL IRRIGATION DAM BY THE DUTCH COLONIAL

GOVERNMENT IN 1933 INTENSIFICATION OF RICE PLANTING AND IMPROVEMENT OF IRRIGATION

SYSTEM BY THE INDONESIAN GOVERNMENT DURING PRESIDENT SUHARTO ERA IN 1968 TO 1998

ALTHOUGH STILL BELOW THE MILLENIUM DEVELOPMENT GOALS (OR MDG’S), INDEXES IN VARIOUS SECTORS DURING THE REGIONAL AUTONOMY ERA HAVE SHOWN SOME PROMISING PROGRESSES

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67.29 77.35 98.88 61.90 102.65

67.35 77.25 99.11

71.77 102.50

20112012

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2008 2009 2010 2011 2012

10.24 10.44

11.84

9.19

5.68

5.82 5.936.456.60 7.40

ECONOMIC GROWTH

Economic growth in oil and gas sectors

Economic growth in non-oil and gas sectors

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2008 2009 2010 2011 2012

13.7 16.8

22.2

27.6

30.0

9.1 10.2

11.5 12.8 13.5

Regional Gross Domestic Product (Trillion)

Regional Gross Domestic Product Per Capita (Million)

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OIL AND GAS REVENUE: •A NEW HOPE•STRATEGIC ISSUES IN MANAGING OIL AND GAS OPERATIONS

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MAJORITY IN THE HOST COMMUNITIES AROUND PROJECT AREAS ARE FARMERS / FARM WORKERS WHO LOST THEIR LANDS FOR THE PROJECT

I DID NOT USE OIL AND GAS AS A MAIN TOPIC DURING MY CAMPAIGN DURING THE GENERAL ELECTION FOR THE REGENT OFFICE, AS I STRONGLY SENSED THE HIGH EXPECTATIONS THAT OIL AND GAS WOULD BE THEIR VEHICLES FROM RAGS TO RICHES… JUST LIKE IN BRUNEI OR MIDDLE EAST COUNTRIES

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The year I took the office

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IMPORTANT INDICATORSOUR UNDERLYING SPIRIT

SUSTAINABLE DEVELOPMENT

PILLARS

ENVIRONMENT

ECONOMIC

STRENGTHENED INCOME FROM NON-OIL/GAS SECTORS

SOCIAL

CLEAN AND GOOD GOVERNANCE

HAPPINESS INDEX SOCIAL HAPPINESS

PERSONAL HAPPINESS

A WAY OUT OF THE MIDDLE

INCOME TRAPDEVELOPMENT OF INFRASTRUCTURE AND ENERGY, EQUITY CAPITAL, INNOVATION AND TECHNOLOGICAL DEVELOPMENT

PROVISION OF SOCIAL SECURITY

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Addressed in a holistic and synergetic approach

4 KEYS TO SUCCESS

TECHNICAL ASPECT

BUSINESS ASPECT

SOCIAL ASPECT

LEGAL ASPECT

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SOME EXPERIMENTS TO ENSURE OIL & GAS REVENUE

TRANSFORM INTO SUSTAINABLE DEVELOPMENT IN BOJONEGORO

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Alignment of Plan of Development (of oil and gas fields) with Regency Spatial Layout Plan (Zoning) and Detailed Sub-District Zoning Plan

Operator’s commitment to manage socio-economic issues is put forward as a condition before Location and Construction permits are issued

On going program to build 1,000 water ponds for irrigation, as an effort to increase agricultural productivity to compensate the massive land conversion for oil and gas operations

PROBLEM: ENVIRONMENTAL DEGRADATION, DECLINE OF

AGRICULTURAL YIELD DUE TO MASSIVE LAND CONVERSION

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PROBLEM: THE ISSUE OF SOCIAL CONFLICT IN VILLAGES AND RURAL PRODUCTION AREAS, LOCAL

UNEMPLOYMENT

LOW SKILLS &COMPETENCIESPOVERTY

DAMAGE TO INFRASTRUCTURE

UNEMPLOY-MENT

THE GOVERNMENT TOOK THE INITIATIVE TO ENACT BOJONEGORO LOCAL REGULATION NUMBER 23/2011

ON ACCELERATION OF REGIONAL ECONOMIC GROWTH IN RELATION TO OIL AND GAS EXPLORATION AND

EXPLOITATION

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Local Regulation Number 23/2011 on Regional Economic Growth Acceleration in the Implementation of Oil and Gas Exploration and Exploitation

Local Regulation Number 26/2011 on Spatial Planning Bojonegoro Year 2011-2031, including the detailed plan

Strengthening strategic policy on Agriculture and Oil/Gas in the Long Term Development Plan (2005-2025) and Intermediate (2013-2018) -- currently in the final stage of completion

Local regulation number 11/2011 on Participating Capital Investment within the Regency of Bojonegoro

Local regulation number 29/2012 on the System for Regency Development Planning

SOLUTION: SUSTAINABLE & PARTICIPATORY PLANNING, BETTER INVESTMENT STRATEGY

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Related to Employment Opportunities.

HIGHLIGHTS OF THE LOCAL REGULATION NUMBER 23/2011 :

PROVIDE TRAINING FOR SEMI-SKILLED /

SKILLED WORKERS

UNSKILLED JOB OPPORTUNITIES

ARE THE PRIVILEGE OF

HOST COMMUNITIES

ASSIST LOCAL BUSINESSES TO

QUALIFY FOR AVAILABLE BUSINESS

OPPORTUNITIES

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Related to Business Opportunities

HIGHLIGHTS OF THE LOCAL REGULATION NUMBER 23/2011 :

GIVE PREFERRENCE AND PRIORITY FOR

LOCAL BUSINESSES

MANDATORY BUY-LOCALLY

POLICY, IF GOODS AND

SERVICES ARE AVAILABLE

ESTABLISH REPRESENTATIVE

OFFICES IN BOJONEGORO

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Related to Development Zone

HIGHLIGHTS OF THE LOCAL REGULATION NUMBER 23/2011 :

MULTIPLIER EFFECT AND

TRIGGER LOCAL ECONOMIC

DEVELOPMENT

PROHIBIT SUPPORTING /

NON-TECHNICAL FACILITIES WITHIN THE

PROJECT AREA

DECREE NUMBER 27/2012 WAS

ISSUED AS THE GUIDELINES FOR IMPLEMENTATION

OF THE DEVELOPMENT

ZONE

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The spirit is captured well in our vision… “Building the foundation of Bojonegoro Regency to be National Food

and Energy silos, which are Productive, Competitive, Prosperous and Sustainable”

TRANSFORMING OIL AND GAS REVENUE FOR SUSTAINABLE WELFARE

PARTICIPATORY PLANNING

FINE TUNING THE ACTION

PLANS WITHIN THE ANNUAL,

MID-TERM, AND LONG-TERM

REGENCY DEVELOPMENT

PLANNING

CAPITAL INVESTMENT

(ENDOWMENT FUNDS)

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Benefits of this oil is not only felt the current generation but also future

Bojonegoro society does not want to experience “Oil Curse"

Creating economic growth

INVESTMENT STRATEGY

SOCIAL INVESTMENT OF EDUCATION AND HEALTH SECTOR

REGIONAL INVESTMENT (CREATED LOCAL

ENTERPRISES, CAPITAL INVESTMENTS IN LOCAL

ENTERPRISES, EMPOWER-MENT OF UMKM)

CAPITAL INVESTMENT (ENDOWMENT FUNDS)

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CONSOLIDATION OFREGIONAL PLANNING SYSTEM

INTENDED TO FURTHER

IMPROVE THE QUALITY OF

PUBLIC PARTICIPATION IN

LOCAL DEVELOPMENT

PLANNING

TO BUILD A MORE

PARTICIPATORY LOCAL

PLANNING BY INVOLVING ALL

STAKEHOLDERS IN THE EARLY

STAGES

TOWARDS SUSTAINABLE PROSPERITY AND SOCIAL HAPPINESS

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SUBSTANCE DEVELOPMENT PLANNING

1. POLITICAL APPROACH

2. PARTICIPATORY APPROACH

3. PROFESSIONAL APPROACH

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POLITICAL APPROACH

1. PLANNING (MEDIUM-TERM) IS A TRANSLATION OF VISION AND MISSION OF REGENT

2. LONG TERM AND INTERMEDIATE DEVELOPMENT PLAN DEFINED BY LOCAL REGULATION

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PARTICIPATORY APPROACH

1

2

3

development priorities

(APPLIED IN MEETING OF DEVELOPMENT PLANNING AT THE VILLAGE, SUB-DISTRIC AND DISTRICT)

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PROFESSIONAL APPROACH

Operational Tools :

Tools to formulate the appropriate programs and activities of the main tasks function

Visionary Tools :

Tools to formulate the vision, mission and direction of regional policyManagement

Tools :Tools to manage regional development

Strategic Planning Tools :Tools to facilitate regional development planning

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Regent decree number 31/2009 on Allocation of Funds for Villages

SOLUTION: CAPACITY BUILDING AT VILLAGES AND AROUND PRODUCTION SITES

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REGENT DECREE NUMBER 31/2009 ON THE ALLOCATION OF VILLAGE FUNDS

HIGHLIGHTS OF THE LOCAL REGULATION NUMBER 31/2009

TO EMPOWER VILLAGES BASED

ON ADMINISTRATIVE AND IMPACTED

AREAS

12.5% OF REGENCY OIL & GAS REVENUE IS ALLOCATED FOR VILLAGE

FUNDS

PARTICIPATORY FAIRNESS AND DISTRIBUTIVE

FAIRNESS

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Local regulation number 28/2012 on Transparancy of Governance in Extractive Industries

SOLUTION: TRANSPARENCY AND ACCOUNTABILITY OF THE USE OF OIL AND

GAS REVENUE

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HIGHLIGHTS OF THE LOCAL REGULATION NUMBER 28/2012

OPEN PUBLIC ACCESS (PUBLIC

SPACE), INCLUDING DURING WEEKLY

PUBLIC DIALOG AT THE TOWN HALL EVERY FRIDAY

MADE THE REGENCY

DEVELOPMENT PLANNING AND ANNUAL WORK PROGRAM AND

BUDGET AS PUBLIC

DOCUMENTS

LOCAL REGULATION

NUMBER 28/2012 ON TRANSPA-RANCY OF

GOVERNANCE IN EXTRACTIVE

INDUSTRIES

Note: next presentation will explain further about this innovation

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LESSON LEARN & CLOSING REMARKS

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LESSON LEARNT:Ensure sustainability of the host community

welfare and happiness index is an integral part of the plan for exploitation of natural resources in Bojonegoro

This should be reflected in formulating related policies, utilization of local resources and capability, and the use of oil and gas revenue to optimally build the foundation for sustainability, local capability and competitive advantage, fairness, prosperity and happiness

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We also recognize to need to improve the investment climate, particularly for oil and gas industry, improve public funds management process to ensure transparency and accountability, and last but not least, anticipate the negative ecological impact from oil and gas operations

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THANK YOU...

DATA ENERGY AND MINERAL RESOURCES BOJONEGORO REGENCY – CLICK : http\\www.sda.bojonegorokab.go.id