MAKING OIL & GAS REVENUE WORKS
FOR SUSTAINABLE WELFARE IN
BOJONEGORO REGENCY
Presented at the discussion on
Natural Resour...
Introduction
 Thank you for the invitation, trust, and honor given to
me, to share information and experience in developi...
Background
Challenges in Oil/Gas business
 The whole oil and gas business and
operations are not only stewarded by the
state, but al...
OIL AND GAS
POTENTIAL IS LIKE
“TWO SIDES” OF COIN
BENEFITS:
•THE INCREASE IN LOCAL GOVERNMENT INCOME FROM OIL
AND GAS SECT...
NEED TO ADDRESS SEVERAL KEY ISSUES
1.How to minimize bad impacts of extractive
industries on the ecology
2.How to use the ...
The current population is a little over 1.2 million --
80% of whom live on agriculture
Bojonegoro covers an area around ...
CHALLENGES IN BOJONEGORO:
 Bojonegoro’s past history had been identical with severe
poverty. C Penders, an Australian his...
HOWEVER, SOME PROGRESS..
 TWO IMPORTANT MILESTONES, WHICH IMPROVED THE WELFARE
OF THE PEOPLE IN BOJONEGORO:
 THE CONSTRU...
Life Expectancy
(Years) Index Poverty
(thousand
families)
Index of
Participation in
Primary Schools
Index of
Participation...
10.24 10.44
11.84
9.19
5.68
5.82 5.93
6.45 6.60 7.40
2008 2009 2010 2011 2012
ECONOMIC GROWTH
Economic growth in oil and g...
13.7
16.8
22.2
27.6
30.0
9.1
10.2
11.5
12.8
13.5
2008 2009 2010 2011 2012
Regional Gross
Domestic Product
(Trillion)
Regio...
OIL AND GAS REVENUE:
•A NEW HOPE
•STRATEGIC ISSUES IN
MANAGING OIL AND GAS
OPERATIONS
 MAJORITY IN THE HOST COMMUNITIES AROUND
PROJECT AREAS ARE FARMERS / FARM WORKERS
WHO LOST THEIR LANDS FOR THE PROJECT
 ...
The year I took
the office
IMPORTANT INDICATORS
OUR UNDERLYING SPIRIT
SUSTAINABLE
DEVELOPMENT
PILLARS
ENVIRONMENT
ECONOMIC
STRENGTHENED INCOME FROM
N...
Addressed in a holistic
and synergetic approach
4 KEYS TO SUCCESS
TECHNICAL
ASPECT
BUSINESS
ASPECT
SOCIAL
ASPECT
LEGAL ASP...
SOME EXPERIMENTS TO ENSURE OIL &
GAS REVENUE TRANSFORM INTO
SUSTAINABLE DEVELOPMENT IN
BOJONEGORO
 Alignment of Plan of Development (of oil and gas
fields) with Regency Spatial Layout Plan (Zoning)
and Detailed Sub-Dist...
PROBLEM: THE ISSUE OF SOCIAL CONFLICT IN VILLAGES
AND RURAL PRODUCTION AREAS, LOCAL
UNEMPLOYMENT
LOW SKILLS &
COMPETENCIES...
 Local Regulation Number 23/2011 on Regional Economic
Growth Acceleration in the Implementation of Oil and Gas
Exploratio...
Related to Employment Opportunities.
HIGHLIGHTS OF THE LOCAL
REGULATION NUMBER 23/2011 :
PROVIDE
TRAINING FOR
SEMI-SKILLED...
Related to Business Opportunities
HIGHLIGHTS OF THE LOCAL
REGULATION NUMBER 23/2011 :
GIVE PREFERRENCE
AND PRIORITY FOR
LO...
Related to Development Zone
HIGHLIGHTS OF THE LOCAL
REGULATION NUMBER 23/2011 :
MULTIPLIER
EFFECT AND
TRIGGER LOCAL
ECONOM...
The spirit is captured well in our vision… “Building the
foundation of Bojonegoro Regency to be National Food
and Energy s...
 Benefits of this oil is not only felt the current generation
but also future
 Bojonegoro society does not want to exper...
CONSOLIDATION OF
REGIONAL PLANNING SYSTEM
INTENDED TO
FURTHER
IMPROVE THE
QUALITY OF
PUBLIC
PARTICIPATION IN
LOCAL
DEVELOP...
SUBSTANCE DEVELOPMENT PLANNING
1. POLITICAL
APPROACH
2. PARTICIPATORY
APPROACH
3. PROFESSIONAL
APPROACH
POLITICAL APPROACH
1. PLANNING (MEDIUM-
TERM) IS A
TRANSLATION OF
VISION AND MISSION
OF REGENT
2. LONG TERM AND
INTERMEDIA...
PARTICIPATORY APPROACH
1
2
3
development
priorities
(APPLIED IN MEETING OF DEVELOPMENT PLANNING AT THE
VILLAGE, SUB-DISTRI...
PROFESSIONAL APPROACH
Operational Tools :
Tools to formulate
the appropriate
programs and
activities of the
main tasks fun...
 Regent decree number 31/2009 on Allocation of
Funds for Villages
SOLUTION: CAPACITY BUILDING AT VILLAGES
AND AROUND PROD...
REGENT DECREE NUMBER 31/2009
ON THE ALLOCATION OF VILLAGE FUNDS
HIGHLIGHTS OF THE LOCAL
REGULATION NUMBER 31/2009
TO EMPOW...
 Local regulation number 28/2012 on
Transparancy of Governance in Extractive
Industries
SOLUTION: TRANSPARENCY AND
ACCOUN...
HIGHLIGHTS OF THE LOCAL
REGULATION NUMBER 28/2012
OPEN PUBLIC
ACCESS (PUBLIC
SPACE), INCLUDING
DURING WEEKLY
PUBLIC DIALOG...
LESSON LEARN &
CLOSING REMARKS
LESSON LEARNT:
Ensure sustainability of the host community
welfare and happiness index is an integral part of
the plan fo...
 We also recognize to need to improve the
investment climate, particularly for oil and gas
industry, improve public funds...
THANK YOU...
DATA ENERGY AND MINERAL RESOURCES BOJONEGORO REGENCY – CLICK : httpwww.sda.bojonegorokab.go.id
Comval BK: O&G Revenue for Sustainable Welfare in Bojonegoro
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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
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

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

  1. 1. 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
  2. 2. 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.
  3. 3. Background
  4. 4. 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)
  5. 5. 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
  6. 6. 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.
  7. 7. 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
  8. 8. 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
  9. 9. 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
  10. 10. Life Expectancy (Years) Index Poverty (thousand families) Index of Participation in Primary Schools Index of Participation in High Schools Farmers’ Economic Exchange Value 67.29 77.35 98.88 61.90 102.65 67.35 77.25 99.11 71.77 102.50 2011 2012
  11. 11. 10.24 10.44 11.84 9.19 5.68 5.82 5.93 6.45 6.60 7.40 2008 2009 2010 2011 2012 ECONOMIC GROWTH Economic growth in oil and gas sectors Economic growth in non-oil and gas sectors
  12. 12. 13.7 16.8 22.2 27.6 30.0 9.1 10.2 11.5 12.8 13.5 2008 2009 2010 2011 2012 Regional Gross Domestic Product (Trillion) Regional Gross Domestic Product Per Capita (Million)
  13. 13. OIL AND GAS REVENUE: •A NEW HOPE •STRATEGIC ISSUES IN MANAGING OIL AND GAS OPERATIONS
  14. 14.  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
  15. 15. The year I took the office
  16. 16. IMPORTANT INDICATORS OUR 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 TRAP DEVELOPMENT OF INFRASTRUCTURE AND ENERGY, EQUITY CAPITAL, INNOVATION AND TECHNOLOGICAL DEVELOPMENT PROVISION OF SOCIAL SECURITY
  17. 17. Addressed in a holistic and synergetic approach 4 KEYS TO SUCCESS TECHNICAL ASPECT BUSINESS ASPECT SOCIAL ASPECT LEGAL ASPECT
  18. 18. SOME EXPERIMENTS TO ENSURE OIL & GAS REVENUE TRANSFORM INTO SUSTAINABLE DEVELOPMENT IN BOJONEGORO
  19. 19.  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
  20. 20. PROBLEM: THE ISSUE OF SOCIAL CONFLICT IN VILLAGES AND RURAL PRODUCTION AREAS, LOCAL UNEMPLOYMENT LOW SKILLS & COMPETENCIES POVERTY 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
  21. 21.  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
  22. 22. 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
  23. 23. 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
  24. 24. 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
  25. 25. 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)
  26. 26.  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)
  27. 27. CONSOLIDATION OF REGIONAL 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
  28. 28. SUBSTANCE DEVELOPMENT PLANNING 1. POLITICAL APPROACH 2. PARTICIPATORY APPROACH 3. PROFESSIONAL APPROACH
  29. 29. 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
  30. 30. PARTICIPATORY APPROACH 1 2 3 development priorities (APPLIED IN MEETING OF DEVELOPMENT PLANNING AT THE VILLAGE, SUB-DISTRIC AND DISTRICT)
  31. 31. 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 policy ManagementTools : Tools to manage regional development Strategic Planning Tools : Tools to facilitate regional development planning
  32. 32.  Regent decree number 31/2009 on Allocation of Funds for Villages SOLUTION: CAPACITY BUILDING AT VILLAGES AND AROUND PRODUCTION SITES
  33. 33. 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
  34. 34.  Local regulation number 28/2012 on Transparancy of Governance in Extractive Industries SOLUTION: TRANSPARENCY AND ACCOUNTABILITY OF THE USE OF OIL AND GAS REVENUE
  35. 35. 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
  36. 36. LESSON LEARN & CLOSING REMARKS
  37. 37. 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
  38. 38.  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
  39. 39. THANK YOU... DATA ENERGY AND MINERAL RESOURCES BOJONEGORO REGENCY – CLICK : httpwww.sda.bojonegorokab.go.id

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