LESSON LEARN FROM BOJONEGORO SOCIAL INNOVATION: TRANSFORMING
EXTRACTIVE REVENUE INTO SUSTAINABLE DEVELOPMENT
JOKO PURWANTOBOJONEGORO INSTITUTE
BOJONEGORO INNOVATION
A study of the oil and gas rich regions in Indonesia indicate specific problems occur:• Income fluctuation,
difficult to plan• Neglection of the
non-oil sector• inefficient spending• Corruption• Vulnerable on social
& environmental issues (conflict)
Extractive Sector Value Chain
• Good governance should be implemented in the whole process from the extraction of natural resources.
• Advocacy choose 2 focus : transparency of income/revenue and development plans
Decision to extract/not to extract
Awarding of contracts/licenses
Fiscal Terms
Extraction prosess
Trading of commodities
Tax and revenue collection
Development project/policies
Revenue Management and allocation
PROGRAM FOCUSBOJONEGORO INNOVATION
Oil and Gas Transparency Mechanism
• Revenue transparency (and related information) oil and gas will make:– Maximize the revenue comes
from oil and gas– Facilitate planning (usage
revenues, designing policies)– preventing corruption– minimize conflicts
Tax and revenue collection
Development project/policies
Revenue Management and allocation
Oil and Gas Transparency MechanismBOJONEGORO INNOVATION
Participatory Planning & Sustainable Development
• Sustainable Development and Participatory Planning are use for:– Ensure revenues are invested
properly (ensure sustainable development)
– Taming income fluctuations – Minimize conflicts, prevent
social problems / environmental
Tax and revenue collection
Development project/policies
Revenue Management and allocation
Sustainable Development Planning
The Regulation
• Transparency in oil and gas extractive governance (2012)
• Planning System and regional development (2012)• Equity / investment / savings (2011)• Optimization of the local economic potential / Local
content (2011)• Distribution of revenue-sharing funds to the village
(2011)• CSR governance (2011)
BOJONEGORO INNOVATION
• The lack of public access to basic information related to revenue sharing, such as: production rate, the amount of investment credit, cost recovery, DMO, and the Gas Tax and Document PSC / PSC (contracts.
• Weak capacity of local governments to understand the mechanism of the calculation flow and the oil and gas revenues sharing. This, resulted in a lack of awareness and the desire of local governments to make predictions for their own share.
• Lack of capacity and bargaining power of local governments in the lifting reconciliation forum, organized by the Ministry of Energy-SKK Migas and by the Ministry of Finance.
• Late payment / transfer revenue from center gov to the regions : making delays in some development programs at the local level, which impacted to bad public services
• Volatility of oil and gas extraction which depends on the market price is a challenge for local governments : make development planning in managing oil and gas revenues for the foreseeable future and ongoing needs.
BOJONEGORO INNOVATION
THE
PRO
BLEM
S
REVE
NU
E FL
OW
BOJONEGORO INNOVATION
TRAN
SPAR
ENCY
, WH
ERE?
BOJONEGORO INNOVATION
- Government take- Dues exploration and production- Pertamina Retention- The Tax (VAT, land tax)- Import Duties- Local tax and retributions- Cost recovery
Net Split 85/15Tax Rate 44%(tax article 2000)
EQUITY TO BE SPLIT
CONTRACTOR ENTITLEMENT26,7857%
GOVERNMENT ENTITLEMENT
73,2143%*CORPORATE TAX
35%
BRANCH PROFIT TAX20%18,75%
NET CONTRACTOR SHARE15%
GOVERNMENT REVENUE
GOVERNMENT TAKE (NON TAX REVENUE)
LOCAL GOV15%
CENTRAL GOV85%GENERAL
REVENUE ALOCATION
Source: Indonesian Finance Ministry9
3 % province related
6 % Cities/districs related
6 % Othet
cities/districs related
LOCAL EITILOCAL
EITI
EITIEITI
EITI
BOJONEGORO INNOVATION
Transparency Team
Company : MCL, Petrochina, Pertamina
Government: Department of Natural Resources, DPPKAD,
Department of the Environment, Council
Civil : NGO, Community Leader,
Sector
• Designated by the Regents, funded by government• Local transparency mechanism is expected to be integrated and
mutually supportive with a model of transparency in national income (Extractive Industries Transparency Initiative / EITI
• Team have duties and functions:– requesting information/data, collecting, verification and analysis– Disseminate and publication relating data of revenue collection to public. The team
also possible to make policy recommendations to the relevant stakeholders.
THE
INST
ITU
TIO
N
SCOPE OF TRANSPARENCY MECHANISM
REVENUE INFORMAT
ION
SOCIAL & ENVIRONMENT INFORMATIONt
CORPORATE SOCIAL
RESPONSIBILITY FUND
INFORMATION
• Access to document / information related to oil and gas revenues : production / lifting, cost recovery, revenue sharing, profit sharing participating interest, oil taxes.
• Local oil and gas revenue projections : 1-5 years
• Analysis and policy recommendations related to oil and gas revenues
• Publications/reports oil and gas revenues to public
• Socialization environmental impact of oil and gas operations to the public in the affected area
• Socialization implementation of security standards and safety environment (HSE Standard) and standard to handling dangerous situations (contigency plan) from oil and gas operations
• Strengthening local communities on handling danger situation and handling industrial accidents
• Policy recommendations related to the Public Agency
• Synchronization: Company planning CSR programs VS government planning programs (avoid double budgeting)
• Socialization: CSR planning program (needs assessment, budget, objectives and program plans)
• Monitoring and reporting: implementation of CSR programs
• Analyst, evaluate and recommendation
BOJONEGORO INNOVATION
CHALLENGES AND GOOD PRACTICES• Need to build a strong foundation of trust
between stakeholders– Different stakeholder, different interest:
companies, governments, civil society. Trust was built by awareness of the common goal: avoid resource curse, reap the blessing of oil revenue
– More working outside of table: informal meeting, maintain relationship
– Need to maintain neutral position, and perceived to be neutral
BOJONEGORO INNOVATION
LESS
ON
LEA
RNT
CHALLENGES AND GOOD PRACTICES• Building an effective Multistakeholder
Group:– Need to find the right champion with the
right power to lead MSG. Continuous actor mapping would be important.
– Need to increase the capacity of all member of MSG to understand the nature and business of extractive
– Need to strengthen the demand for transparency
BOJONEGORO INNOVATION
LESS
ON
LEA
RNT
CHALLENGES AND GOOD PRACTICES• Transparency is easy, only the first step,
but the final aim is accountability, responsive government/company/society:– Revenue transparency issue is only the first
entry step. Bojonegoro case advance the innovation into other issue: employment, environment, investment, development program
BOJONEGORO INNOVATION
LESS
ON
LEA
RNT
CHALLENGES AND GOOD PRACTICES• Establish the innovation is easy, but
preserving it through institutionalization is the real challenge:– Mechanism is easy to set up, but preserving
the changing in behaviour, practice, is challenging. Bojonegoro endorse institutionalization through regulation and broad awareness stakeholders.
BOJONEGORO INNOVATION
LESS
ON
LEA
RNT
Thank You
BOJONEGORO INNOVATION
Top Related