LESSONS LEARNED FROM BOJONEGORO’S
ON TRANSPARENCY MECHANISM
Good Governance for Sustainable Development
BY :
BOJONEGORO REGENT
H. S U Y O T O
Presented in the Ford Foundation Meeting on
“Reversing the Resources Curse” Initiative
Ghana, 26 August 2013
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.
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
OIL AND GAS
POTENTIAL IS LIKE
“TWO SIDES” OF COIN
MUST BE MAINTAINED BY THE
GOOD PLANNING,
ACCOUNTABLE AND
TRANSPARENT SYSTEM
• 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
The year I took the
office
A study of the oil and gas
rich regions in Indonesia
indicate specific problems
occur:
• Income fluctuation,
difficult to plan
• Neglect of the non-oil
sector
• inefficient spending
• Corruption
• Vulnerable on social &
environmental issues
(conflict)
BOJONEGORO
INNOVATION
SHARE ON WHAT THE
CHALLENGES THAT WE
FACE?
WHAT WE HAVE BEEN
DOING NOW?
THE FUTURE AND
SUSTAINABLE
SOLUTIONS
TRANSFORMING OIL AND GAS REVENUE FOR
SUSTAINABLE WELFARE
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
FINE TUNING
THE ACTION
PLANS WITHIN
THE ANNUAL,
MID-TERM, AND
LONG-TERM
REGENCY
DEVELOPMENT
PLANNING
PARTICIPATORY
PLANNING
CAPITAL
INVESTMENT
(ENDOWMENT
FUNDS)
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
Fiscal Terms
Awarding of
contracts/
licenses
BOJONEGORO
INNOVATION
Extraction
prosess
Trading of
commodities
Revenue Management
and allocation
Tax and
revenue
collection
Development
project/polici
es
PROGRAM FOCUS
CONSOLIDATION OF
REGIONAL PLANNING SYSTEM
TO BUILD A
MORE
PARTICIPATORY
LOCAL
PLANNING BY
INVOLVING ALL
STAKEHOLDERS
IN THE EARLY
STAGES
INTENDED TO
FURTHER
IMPROVE THE
QUALITY OF
PUBLIC
PARTICIPATION IN
LOCAL
DEVELOPMENT
PLANNING
TOWARDS
SUSTAINABLE
PROSPERITY
AND SOCIAL
HAPPINESS
HIGHLIGHTS OF THE LOCAL
REGULATION NUMBER 31/2009
REGENT DECREE NUMBER 31/2009
ON THE ALLOCATION OF VILLAGE FUNDS
12.5% OF
REGENCY OIL &
GAS REVENUE IS
ALLOCATED FOR
VILLAGE FUNDS
TO EMPOWER
VILLAGES BASED
ON
ADMINISTRATIVE
AND IMPACTED
AREAS
PARTICIPATORY
FAIRNESS AND
DISTRIBUTIVE
FAIRNESS
HIGHLIGHTS OF THE LOCAL
REGULATION NUMBER 28/2012
MADE THE
REGENCY
DEVELOPMENT
PLANNING AND
ANNUAL WORK
PROGRAM AND
BUDGET AS
PUBLIC
DOCUMENTS
OPEN PUBLIC
ACCESS (PUBLIC
SPACE), INCLUDING
DURING WEEKLY
PUBLIC DIALOG AT
THE TOWN HALL
EVERY FRIDAY
LOCAL
REGULATION
NUMBER
28/2012 ON
TRANSPARANCY OF
GOVERNANCE
IN EXTRACTIVE
INDUSTRIES
! Note: next presentation will explain further about
this innovation
Oil and Gas Transparency Mechanism
Revenue Management
and allocation
Tax and revenue
collection
Development
project/policies
Oil and Gas Transparency
Mechanism
BOJONEGORO
INNOVATION
• 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
WHY I NEED TRANSPARENCY
• To full fill the citizen right
• To reach out public participation from multi
stake holder
• To eliminate assimetric information as
obstacle of development. (Such us the of
judgement and the voice of sinical)
• I don't want make a corruption, and making
clean government
• I don't want get losses trust from public
Participatory Planning & Sustainable
Development
• Sustainable Development
and Participatory Planning
are use for:
Revenue
Management
and allocation
Tax and
revenue
collection
Development
project/policies
Sustainable
Development
Planning
– Ensure revenues are invested
properly (ensure sustainable
development)
– Taming income fluctuations
– Minimize conflicts, prevent
social problems /
environmental
The Regulation (Policy)
• 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.
• 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
BOJONEGORO
INNOVATION
Net Split 85/15
Tax Rate 44%
(tax article 2000)
EQUITY TO BE SPLIT
CONTRACTOR ENTITLEMENT
26,7857%
GOVERNMENT ENTITLEMENT
73,2143%*
CORPORATE TAX
35%
18,75%
BRANCH PROFIT TAX
20%
NET CONTRACTOR SHARE
15%
EITI
EITI
GOVERNMENT
REVENUE
GENERAL
REVENUE
ALOCATION
Source: Indonesian Finance Ministry
BOJONEGORO
INNOVATION
-Government take
-Dues exploration and production
-Pertamina Retention
-The Tax (VAT, land tax)
-Import Duties
-Local tax and retributions
-Cost recovery
EITI
GOVERNMENT TAKE (NON TAX
REVENUE)
LOCAL
EITI
LOCAL GOV
15%
3%
province
related
LOCAL
EITI
CENTRAL GOV
85%
6%
Cities/distric
s related
6%
Othet
cities/districs
related 19
Company : MCL,
Petrochina,
Pertamina
Government: Department of
Natural Resources, DPPKAD,
Department of the
Environment, Council
Civil : NGO,
Community Leader,
Sector
Multistakeholder
Transparency
Team
• Designated by the Regents, funded by government
• Local transparency mechanism is expected to be integrated
and mutually inline with a model of transparency in national
income (Extractive Industries Transparency Initiative / EITI)
• The 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.
BOJONEGORO
INNOVATION
SCOPE OF TRANSPARENCY MECHANISM
•
•
•
•
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
•
•
CORPORATE
SOCIAL
RESPONSIBILITY
FUND
INFORMATION
REVENUE
INFORMATION
& OPERATION
(POD, WP&B, AFE)
•
•
SOCIAL &
ENVIRONMENT
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 projection
: 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
(contingency plan) from oil and gas operations
Strengthening local communities on handling danger situation and
handling industrial accidents
Policy recommendations related to the Public Agency
CHALLENGES AND GOOD PRACTICES
• Strong Leadership on the
implementation
• Consistently on policy and regulationand its law enforcement (such us in
development planning & budgeting)
• Building strong foundation and trust
between multi-stakeholders
BOJONEGORO
INNOVATION
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 and executing its programs.
BOJONEGORO
INNOVATION
CHALLENGES AND GOOD PRACTICES
• Establish the innovation is easy, but
building its institutionalization is the
real challenge:
– Mechanism is easy to set up, but
preserving the changing in behaviour such
us the central government public officer,
company operators, is a challenging.
Bojonegoro endorse institutionalization
through regulation and build broad
awareness stakeholders.
BOJONEGORO
INNOVATION
BOJONEGORO
INNOVATION