TRANSFORMING EXTRACTIVE REVENUE INTO SUSTAINABLE DEVELOPMENT
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1) The document discusses strategies for transforming extractive revenue from oil and gas resources into sustainable development in Bojonegoro, Indonesia. 2) It proposes establishing a transparency mechanism involving government, companies, and civil society to increase transparency of revenue collection and spending. 3) Key challenges addressed are building trust between stakeholders, strengthening capacity to understand finances, and ensuring transparency leads to real accountability and responsive institutions. The goal is to avoid volatility and ensure benefits of resource wealth.
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TRANSFORMING EXTRACTIVE REVENUE INTO SUSTAINABLE DEVELOPMENT
- 1. TRANSFORMING EXTRACTIVE REVENUE INTO SUSTAINABLE DEVELOPMENT Presented on Field Study Aspac Hub Joko Purwanto BOJONEGORO INSTITUTE click to start presentation…
- 3. Oil and Gas, where? Exploitation Cepu block, 21.000 bpd (160.000) Exploitation Sukowati block, 40.000 bpd Exploration Blora block Exploration Nona block
- 4. Income Structure 1,000,000,000,000.00 800,000,000,000.00 PAD 600,000,000,000.00 DBH 400,000,000,000.00 DAU 200,000,000,000.00 DAK 2008 INCOME 2009 2010 2011 2012 891.861.096.759,99 928.092.988.283,98 1.228.576.589.782,32 1.508.114.648.941,32 OTHERS 1.861.387.567.942,7 4 PAD 58.690.962.773,99 70.233.938.303,98 79.891.483.832,32 164.585.991.460,32 159.247.616.976,74 DBH 182.845.133.986,00 150.076.354.973,00 297.131.042.726,00 351.733.793.770,00 584.651.305.357,00 DAU 586.814.000.000,00 596.430.263.000,00 593.763.532.000,00 665.218.290.000,00 785.584.826.000,00 DAK 10.042.000.000,00 42.913.000.000,00 57.373.200.000,00 67.916.900.000,00 68.347.170.000,00 Miscellaneous Income 53.469.000.000,00 68.439.432.007,00 200.417.331.224,00 258.659.673.711,00 263.556.649.609,00
- 5. Revenue Sharing, How Much? On Billion Rupiah (source finance agency) 3000 2500 2000 APBD 1500 TAX 1000 DBH 500 0 2009 2010 2011 2012 2013 The amount of revenue sharing which increased sharply from year to year. Base on plan of development (POD), this revenue will continue to rise until 2019 (peak production). In that time, revenue is projected to reach bojonegoro under 4 Trillion Rupiah, with 50% contribution from revenue sharing.
- 6. A study of the oil and gas rich regions in Indonesia indicate specific problems occur: • Income fluctuation, difficult to plan • Neglection of the nonoil sector • Inefficient spending • Corruption • Vulnerable on social & environmental issues (conflict)
- 7. 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 Extraction prosess Trading of commodities Revenue Management and allocation Tax and revenue collection Development project/polici es PROGRAM FOCUS
- 8. Oil and Gas Transparency Mechanism Revenue Management and allocation Tax and revenue collection Development project/policies 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
- 9. 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
- 10. 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)
- 11. • 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.
- 13. 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% -Government take -Dues exploration and production -Pertamina Retention -The Tax (VAT, land tax) -Import Duties -Local tax and retributions -Cost recovery EITI EITI GOVERNMENT REVENUE GENERAL REVENUE ALOCATION EITI GOVERNMENT TAKE (NON TAX REVENUE) LOCAL EITI LOCAL EITI LOCAL GOV 15% 3% province related CENTRAL GOV 85% 6% Cities/distric s related Source: Indonesian Finance Ministry 6% Othet cities/districs related 13
- 14. Company : MCL, Petrochina, Per tamina Government: Department of Natural Resources, DPPKAD, Depart ment of the Environment, Council Civil : NGO, Community Leader, Sector Transparency Team • 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 : counting and projection revenue sharing – Disseminate and publication relating data of revenue collection to public. The team also possible to make policy recommendations to the relevant stakeholders.
- 15. SCOPE OF TRANSPARENCY MECHANISM • • • • Synchronization: Company planning CSR programs VS government planning programs (avoid double budgeting) Socialization: CSR planning program (needs assessment, budget, objec tives and program plans) Monitoring and reporting: implementation of CSR programs Analyst, evaluate and recommendation • • • • • CORPORATE SOCIAL RESPONSIBILITY FUND INFORMATION REVENUE INFORMATION • • SOCIAL & ENVIRONMENT INFORMATIONt • 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
- 16. 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
- 17. 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
- 18. 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, de velopment program
- 19. 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.
Hinweis der Redaktion
- Blokcepuadalahblok yang paling tua di bojonegoro. Ditemukansejak 1880, danmulaikerjakanoleh MCL sejak 2004. blokinimenjadiandalanpemerintah.
- In trying to work towards the Good Governance agenda Revenue Watch Institute uses the “EI Value Chain” model. This ValueChain model is derived from proposals by Oxford economist and RWI advisory board member Professor Paul Collier. The Value Chain is a living concept that has been adapted to reflect RWI’s experience working with various issues in the field – the Value Chain helps us to scrutinize the various critical steps where public officials conduct performances and allocate oil, gas, mineral and metal resources, regulate the extraction processes, collect revenues, and allocate revenues for various purposes.Idealy there needs to be civil society oversight throughout the phases of the entire value chain. Explain all the links briefly: Decision to extract or not to extract: Here it is important that local communities (in many cases Indinegous People) are also included in the decision making process and are facilitated to be able to make prior informed decisions, be their consent of rejection of a project. In this decision making process the government and the companies involved need to be transparent about the environmental and social costs sch a project will entail. Awarding contracts/liscenses = is this process trasparent, are the responsible government officials ensuring the government and the public are getting the best deal, or is the handing out of contracts shrouded by opacity?Fiscal terms – does the government have the ability to negotiate the best fiscal terms for the country?Extraction process – are environmental and social costs being externalized onto the local communities and environment?Trading of commodities = is the government agency responsible for the trading of government shares of commodities doing it in a transparent and accountable way?Tax and revenue collection = are taxes and reveues collected by the government being accounted for in a trasparent manner?Revenue management and allocation = how is the government managing it’s revenues to address the various challenges related to EI revenues? Is it aboe to save prodently in times of great windfall? Does it go on a spending spree on projects that do not contribute to sustainable development?Development projects/policies= is the government carying out development in consideration of the fact that EI resources are finite/ Is it strengthening other sectors of its economy? How is spending on health, infrastructure and education?
- In trying to work towards the Good Governance agenda Revenue Watch Institute uses the “EI Value Chain” model. This ValueChain model is derived from proposals by Oxford economist and RWI advisory board member Professor Paul Collier. The Value Chain is a living concept that has been adapted to reflect RWI’s experience working with various issues in the field – the Value Chain helps us to scrutinize the various critical steps where public officials conduct performances and allocate oil, gas, mineral and metal resources, regulate the extraction processes, collect revenues, and allocate revenues for various purposes.Idealy there needs to be civil society oversight throughout the phases of the entire value chain. Explain all the links briefly: Decision to extract or not to extract: Here it is important that local communities (in many cases Indinegous People) are also included in the decision making process and are facilitated to be able to make prior informed decisions, be their consent of rejection of a project. In this decision making process the government and the companies involved need to be transparent about the environmental and social costs sch a project will entail. Awarding contracts/liscenses = is this process trasparent, are the responsible government officials ensuring the government and the public are getting the best deal, or is the handing out of contracts shrouded by opacity?Fiscal terms – does the government have the ability to negotiate the best fiscal terms for the country?Extraction process – are environmental and social costs being externalized onto the local communities and environment?Trading of commodities = is the government agency responsible for the trading of government shares of commodities doing it in a transparent and accountable way?Tax and revenue collection = are taxes and reveues collected by the government being accounted for in a trasparent manner?Revenue management and allocation = how is the government managing it’s revenues to address the various challenges related to EI revenues? Is it aboe to save prodently in times of great windfall? Does it go on a spending spree on projects that do not contribute to sustainable development?Development projects/policies= is the government carying out development in consideration of the fact that EI resources are finite/ Is it strengthening other sectors of its economy? How is spending on health, infrastructure and education?