The document discusses Bojonegoro Regency's efforts to ensure oil and gas revenues are used to promote sustainable welfare. It outlines 4 keys to success - technical, business, social, and legal aspects. Some experiments include aligning development plans with zoning, building water ponds to increase agriculture, and enacting regulations providing training/jobs for locals and prioritizing local businesses. The goal is to build long-term prosperity through participatory planning and investing in education, health, local enterprises, and endowment funds. Transparency regulations require open access to plans and budgets. The lesson is sustainability must be central to resource exploitation plans to optimize local capabilities and prosperity.

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. 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. Background

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

15.  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

16. The year I took
the office

17. 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

18. Addressed in a holistic
and synergetic approach
4 KEYS TO SUCCESS
TECHNICAL
ASPECT
BUSINESS
ASPECT
SOCIAL
ASPECT
LEGAL ASPECT

19. SOME EXPERIMENTS TO ENSURE OIL &
GAS REVENUE TRANSFORM INTO
SUSTAINABLE DEVELOPMENT IN
BOJONEGORO

20.  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

21. 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

22.  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

23. 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

24. 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

25. 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

26. 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)

27.  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)

28. 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

29. SUBSTANCE DEVELOPMENT PLANNING
1. POLITICAL
APPROACH
2. PARTICIPATORY
APPROACH
3. PROFESSIONAL
APPROACH

30. 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

31. PARTICIPATORY APPROACH
1
2
3
development
priorities
(APPLIED IN MEETING OF DEVELOPMENT PLANNING AT THE
VILLAGE, SUB-DISTRIC AND DISTRICT)

32. 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

33.  Regent decree number 31/2009 on Allocation of
Funds for Villages
SOLUTION: CAPACITY BUILDING AT VILLAGES
AND AROUND PRODUCTION SITES

34. 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

35.  Local regulation number 28/2012 on
Transparancy of Governance in Extractive
Industries
SOLUTION: TRANSPARENCY AND
ACCOUNTABILITY OF THE USE OF OIL AND
GAS REVENUE

36. 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

37. LESSON LEARN &
CLOSING REMARKS

38. 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

39.  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

40. THANK YOU...
DATA ENERGY AND MINERAL RESOURCES BOJONEGORO REGENCY – CLICK : httpwww.sda.bojonegorokab.go.id