The “Partnership for Sustainable Development” Program in Indonesia:Linking MDGs & the Global Compact

“Extreme poverty and a lack of sustainable development for the world’s poor will constitute the greatest challenge to maintaining peace this century. “

Millennium Declaration

"We must work to underpin the marketplace with solid and stable foundations and open the door to full participation by all people, including and especially the world's poor.“

Secretary-General Remarks, 1st Global Compact Advisory Council, 2002

1) Background

Indonesia For countries like Indonesia, there is good progress towards achieving

the MDGs at the national level, but the challenge remains to effectively address ‘pockets of poverty’ at the sub-national level. Partnership with business will be critical, since business serves as a driver of growth and revenues needed to achieve development goals.

Achieving future development gains in Indonesia will depend on its ability to renew and sustain an adequate level of economic growth. While renewed private investment and a return to growth will be a significant achievement for achieving development goals, the context in for this growth has changed.

Not only must growth translate into development gains for the ‘pockets of poverty’, it must also address greater demands for local autonomy and inclusion of civil society in decision-making. Indonesia’s challenge is to manage globalization and renewed business investments in a way that adapts to this new development context – growth with equity and sustainability.

Targeting Pockets of Poverty – The Challenge in Papua Province

Indonesia’s largest province, Papua (formerly ‘Irian Jaya’) holds the highest levels of poverty - with about 60% of its population in extreme poverty. It also hosts 60% of Indonesia’s biodiversity and has the nations highest rates of HIV/AIDS. Thus, it stands as a priority for MDGs under several Goals.

A watershed in achieving development goals in Papua will be the “Tangguh” Liquefied Natural Gas (LNG) operation. With a US$3 billion investment by British Petroleum (BP) and a consortium of foreign investors, Tangguh stands as Indonesia’s largest Foreign Direct Investment (FDI) since the economic crisis began in 1998. Tangguh is planned to commence exports around 2010, and after several years of cost recovery, is expected to generate approximately $1 billion revenue per year starting in 2015, to be shared between national, provincial and district governments.

Under a Special Autonomy Act for Papua passed in 2001, the province will retain 70% of LNG revenues and major decision-making powers, a major shift from times when the majority of revenues and decision were controlled by the central government. The challenge for local government and partners will be to manage the change associated with Tangguh and autonomy in way that can meet human development goals equitably and sustainably towards 2015 and beyond.

The capacity to change

In July 2004, UNDP is commencing the “Partnerships for Sustainable Development” programme with national and local government, civil society and BP to engage the challenge of building local capacities to manage this process. This is done by finding synergy among the approaches of the MDGs and the Global Compact towards common development objectives among government, business and civil society.

The goal of the programme is to develop new poverty reduction strategies and new models of local development that distinguish themselves from past failures and translates growth into poverty reduction.

The unprecedented levels of local revenues that will flow from Tangguh can be a major boost to local poverty reduction efforts. However, Papua has failed in the past to benefit from commodity export-led growth to improve its rate of progress on development indicators. (Papua hosts the Freeport Copper and Gold Mine – the largest in the world).

The capacity to change

The 2003 UNDP Human Development Report (HDR), shows that economies with a heavy dependence on a commodity exports face hurdles in sustaining growth, many suffering a decline in MDG indicators in recent years. This contrasts with economies that used trade as an engine for growth of a diversified local economy, and enacted measures for preventing distributional conflicts.

Economies that depend solely on commodity-exports have the highest poverty - 80% of people in mineral exporting countries lived on less than $1/day at the end of the 1990s, compared with 43% in service exporters and 25% in manufactured goods exporters.

The HDR also highlights the fact that conflicts are increasingly located within countries rather than between countries, often taking place in regions where commodity exports take centre stage in the local economy and where poverty has become entrenched as a result of distributional inequities. Twenty two of the 34 countries that were furthest away from achieving the MGDs in 2000 were affected by conflict, mostly internal.

2) The BP Natural Gas Investment

Tangguh Project Site

Regional Growth Centers

Babo Airfield

Timika Facility

Fak Fak

SorongManokwari

Bintuni

TangguhBabo

Timika

Bird’s Head Region of Papua Province

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2° 20'

133° 00'

O P E N

BERAU PSC ( ARCO )

WIRIAGAR PSC ( ARCO )

BERAU PSC ( ARCO )BABO PSC ( ARCO )

WIRIAGAR PSC ( ARCO )2° 10'

WIRIAGAR

OFAWERI

VORWATA

0 10 KM2 4 86

BINTUNI BAY

GAS FIELDS

ROABIBA

LOCATION OF GAS FIELDS

OFF-SHORE GAS PRODUCTION FACILITIES AND PIPELINES

Vorwata

Wiriagar

LNG Facility

20.6 Km

31.2 Km

Example of a production facility

Gambar Skematik Rencana Pabrik LNG dan Fasilitas Pendukungnya

BP Management Vision for Tangguh

A World Class Model of Responsible Industrial DevelopmentA World Class Model of Responsible Industrial Development

A Catalyst for Sustainable, Long-Term Expansion and Diversification A Catalyst for Sustainable, Long-Term Expansion and Diversification of the Indonesian Economy with a focus on Papua Province of the Indonesian Economy with a focus on Papua Province

A Partnership between BP, Civil Society, and the Donor communityA Partnership between BP, Civil Society, and the Donor community

Development of Clean Energy for the futureDevelopment of Clean Energy for the future

BP Management Principles

Enhancement of human resources and governmental capacities to Enhancement of human resources and governmental capacities to sustain the economic and social benefits derived from the projectsustain the economic and social benefits derived from the project

Protection of the EnvironmentProtection of the Environment

Equitable treatment of local communitiesEquitable treatment of local communities

Stimulus for Regional Economic and Social DevelopmentStimulus for Regional Economic and Social Development

Efficient production of natural gas resourcesEfficient production of natural gas resources

Creation of Exports and Foreign ExchangeCreation of Exports and Foreign Exchange

BP Tangguh Performance Standards

The BP Tangguh Gas Operations will set an example for others to follow and The BP Tangguh Gas Operations will set an example for others to follow and will build confidence in investing in Papua Provincewill build confidence in investing in Papua Province

All Government of Indonesia Social and Environmental Impacts Assessment All Government of Indonesia Social and Environmental Impacts Assessment procedures, rules and regulations are being scrupulously adhered toprocedures, rules and regulations are being scrupulously adhered to

World Bank development planning and management standards will be World Bank development planning and management standards will be rigorously implementedrigorously implemented

International and National NGO sustainable development standards will be International and National NGO sustainable development standards will be appliedapplied

Tanah Merah Village

Worlds Largest Mangrove Forest

Peat Swamp Forest

Nipah and Sago Palm Forest

Lowland Forest

Savannah

Mountains and Uplands

Artisanal Fishing

i

Commercial Trawling

Sago Production

Timber Production

Mangrove Wood Chip Mill

Oil Palm Estate

Transmigration

AN INTEGRATED SOCIAL STRATEGY

…….delivery on the ground through facilitation and direct action

Consultation Empowerment Partnership Participation Sustainability

Diversified Growth Strategy – help create diversified and sustainable economic development in existing urban areas to prevent uncontrolled migration to the plant site

Revenue Management – help accelerate timing of funds flow to Papua, promote transparency over Tangguh funds to government and build capacity for wise decision making

Community Based Security – bring about a clear environment and role for the community to provide front line protection of the plant, and for the Indonesian military to provide a second line of protection

DAV recognition programme – provide compensation to Directly Affected Villagers by the project, using international best practice to consult and develop community action programmes

Training and workforce management – ensure Papuans are able to take part in opportunities provided by the Tangguh project, seeding overall economic development in the region

Forum and Foundation – establish vehicles for dialogue and development in the broader Bintuni Bay area

Biodiversity – achieve best practices for integrating sustainable biological conservation with sustainable and practical development

AMDAL – an EIA to meet national and international standards, implementing environmental best practice

Village resettlement – in accordance with World Bank standards

Conventional Oil and Gas Development:

LNG

Centralised Growth Model

Fertilizer Plant

PetrochemicalPlant

New Town

Uncontrolled Development

Issues to manage: Uncontrolled in-migration; environmental degradation; disenfranchised local communities.

DIVERSIFIED GROWTH STRATEGY

The DGS manages change by expanding economic The DGS manages change by expanding economic opportunities for opportunities for local villageslocal villages but emphasizes but emphasizes the importance of strengthening sustainable the importance of strengthening sustainable economic and social development in the broader economic and social development in the broader region, and in region, and in other resource sectorsother resource sectors such as such as forestry, fisheries, agriculture and manufacturingforestry, fisheries, agriculture and manufacturing

The DGS thus discourages in-migration to the The DGS thus discourages in-migration to the

Project site – a major management issue for Project site – a major management issue for similar projects elsewhere. similar projects elsewhere.

The disbursement of revenues to the Province The disbursement of revenues to the Province and to Local Government creates the first and to Local Government creates the first opportunity in the outer islands of Indonesia for a opportunity in the outer islands of Indonesia for a diversifieddiversified rather than a rather than a concentratedconcentrated growth growth strategy.strategy.

DGS LOCAL SCALE: PARTNERSHIP WITH VILLAGE COMMUNITIES PurposePurpose is to ensure that local people benefit from is to ensure that local people benefit from

the exploitation of their natural resource; but are the exploitation of their natural resource; but are not overwhelmed by rates of technological, not overwhelmed by rates of technological,   environmental, social and economic changeenvironmental, social and economic change. .

··ActivitiesActivities include support for service providers to include support for service providers to

improve education, health and infrastructure and improve education, health and infrastructure and to promote economic opportunities; establishment to promote economic opportunities; establishment of systems for community based security and third of systems for community based security and third party support for development.party support for development.

OutcomesOutcomes include: needs of directly affected include: needs of directly affected villages met; community-based security successful, villages met; community-based security successful, and mechanisms allowing donor sources and and mechanisms allowing donor sources and investments to fund economic and social investments to fund economic and social development in place; capacity for local development in place; capacity for local involvement in LNG workforceinvolvement in LNG workforce

DGS REGIONAL SCALE – CONSTRUCTION PHASE: PARTNERSHIPS WITH THE PRIVATE SECTOR Purpose:Purpose: To protect environment and the authority of To protect environment and the authority of

local adat land owners through the promotion of local adat land owners through the promotion of sustainable development of industry in existing urban sustainable development of industry in existing urban centrescentres..

   Activities: Activities: assistance through contracts in District assistance through contracts in District

cities and the sub-district towns, for the provision of cities and the sub-district towns, for the provision of goods and services. (e.g. ITB)goods and services. (e.g. ITB)

   Outcomes:Outcomes:

Enhanced capacity of urban centers to provide Enhanced capacity of urban centers to provide goods, support services and training resulting in goods, support services and training resulting in greater employment and social and economic greater employment and social and economic opportunities; andopportunities; and

Minimization of in-migration by non-local people to Minimization of in-migration by non-local people to the Project site during critical early yearsthe Project site during critical early years    

DGS REGIONAL SCALE – CONSTRUCTION AND OPERATIONAL PHASES: PARTNERSHIP WITH THE PUBLIC SECTOR PurposePurpose: : to enhance the capacity of local and provincial to enhance the capacity of local and provincial government to provide essential social services and government to provide essential social services and environmental and resource management as environmental and resource management as implementation of the Tangguh Project drives economic implementation of the Tangguh Project drives economic change. change.

MechanismsMechanisms: : strategic partnerships with Provincial, strategic partnerships with Provincial, Local and National government and other stakeholders for Local and National government and other stakeholders for collaborative work improving planning and revenue collaborative work improving planning and revenue management capacity.management capacity.

OutcomesOutcomes: : Strategic Growth Plan for western Papua prioritising economic, Strategic Growth Plan for western Papua prioritising economic,

social and infrastructure development across a range of sectors; social and infrastructure development across a range of sectors; improved HR capacity in local governments, including career improved HR capacity in local governments, including career

continuity for newly trained staff; continuity for newly trained staff; Identification of potential donor-supported projects for further Identification of potential donor-supported projects for further

capacity building.capacity building.

IMPLEMENTING THE DGS

•BP will not fill a role of de facto government, despite a long term commitment to Papua and Indonesia.

• BP believes that sustainable development can only be produced by the people and their social institutions

•Development of social institutions is appropriately the role of public sector agencies such as the government supported by organisations such as the UN, the development banks and bilaterals

•BP does accept that its role is to implement partnership agreements which facilitate the engagement of these institutions

MILESTONES TOWARDS PARTNERSHIP •May 2001 – socialization and debate of planning concepts in BP and the

State Oil Regulating Body (Pertamina)•July 2001 – introductory meetings of ideas with the Papuan Provincial and districts governments – identification of key Papuan personalities.•August 2001 – initial discussion with UNDP concerning potential partnership opportunities•November 2001 – National Workshop in Papua to endorse DGS with financial support from BP, UNDP and Papuan Government•May 2002 – initial discussions towards an agreement between the national provincial and local governments, BP and UNDP concerning the implementation of the DGS•June 2002 – concept discussed between UNDP Indonesia and UNDP Administrator at WSSD Final Preparatory Committee meeting in Indonesia•September 2002 – National Workshop in Papua to draft an MOU•October 2002 – Papua indigenous people (adat) workshop endorse MOU•November 2002 –MOU signed between Provincial Government of Papua and district governments, UNDP, BP witnessed by National Government.•June 2004 final approvals by Indonesian Government to proceed with 3 vear UNDP-BP Partnership Programme

2) The “Partnership for Sustainable Development” Programme

The Partnership Programme The program reflects a partnership between the local, provincial and

national governments; civil society, UNDP and BP.

The goal of the programme is to ensure that the growth resulting from the Natural Gas investment is sustainable, equitable and can help achieve the Millennium Development Goals. It engages BP’s commitment to corporate responsibility and development, as a lead member of the Global Compact.

Through cooperation between BP, UNDP, civil society and the Government, the “Diversified Growth Strategy” (DGS) has been adopted as Papua’s new policy framework. The partnership project sets out to implement the policy through the production of a strategic development plan, enactment of new regulatory frameworks, and capacity building. The construction of the plan is an exercise in capacity building – learning by doing

An initial three-year Phase I (2004-2006; US$1million) is commencing in July 2004 to reach four specific outputs. This will end with support to design of Phase II (2007-2015) to move towards achievement of MDGs by 2015. The four Outputs of Phase I are:

Output 1: Enhanced partnerships among government, civil society and business:

Dialogues, consultations, research and advice on means to improve role of civil society and indigenous peoples groups, and local business development to serve as a basis for all other outputs.

National Advisory Council with 15 agencies to support roll-out of capacities to local government

Provincial Steering Committee with government, business and civil society to guide programme activities and monitor progress

District Committees to lead execution of programme outputs

Programme outputs and activities

Output 2: A long-term Regional Development Plan (2005-2015) for achieving MDGs through equitable and sustainable growth.

– Developing a basic strategy for development – a “Diversified Growth Strategy” (DGS) focusing on diversification of local economy, equitable revenue sharing, local business development, and manage risks associated with Tangguh such as migration, etc.

– Identify critical development priorities towards 2015 based on a human development perspective and outline a development plan whereby government revenues from the Gas operations go to achieve development objectives.

– Identifying critical ecosystems and conservation areas, Papua holds 60% of Indonesia’s biodiversity) and review land and water use policies to adapt systems to new drivers of change from Tangguh.

Output 3: Develop regulatory systems to manage the social, environmental and economic impacts of Tangguh and compliance with the Social and Environmental Impact Assessment (AMDAL) :

In the context of the new Special Autonomy Regime for Papua, this includes a rights-based approach, focusing on three pillars –

- Access to Participation: inclusive administrative decision- making processes related to local development, land and water use management and delivery of public services (including synergies between state and traditional governance systems),

– Access to Information: public information required to understand the risks and benefits from development activities and public programmes, and capacities needed to meaningfully contribute to decision-making processes, and take part in monitoring impacts of Tangguh,

– Access to Justice: improved dispute resolution mechanisms among government, civil society and business that address issues of compliance with Social and Environmental Impact Assessment (AMDAL), and local customary norms of indigenous peoples.

Output 4: Design of Phase II (2007-2015) capacity building programme to implement the Development Plan:

Based on the issues outlined in the Development Plan, a long-term programme will be designed and launched in 2007 as Phase II to build capacities needed to ensure achievement of MDGs.

This includes integrated approach also covering governance This includes integrated approach also covering governance reform, conflict prevention, and environmental protection reform, conflict prevention, and environmental protection activities. activities.

Includes establishment of Trust Fund with Government Includes establishment of Trust Fund with Government revenues from Tangguh, and support for mobilizing any revenues from Tangguh, and support for mobilizing any supplemental resources needed from the donor community. supplemental resources needed from the donor community.

Thank you

Comments during local consultations, PapuaAnd issues for Break-out Groups?

“BP is being very careful with the community. We know the eyes of the world are on it...so perhaps because of that BP is working very closely with us.” (villager)

“I don’t know yet if the idea of mutual benefit is possible. All that’s clear now is that BP will benefit….Our visions differ from BP, as does our understanding of the issues, so how can we have a constructive relationship?” (NGO)

“There are two very different legal systems at work – the traditional system and the national system. Which one does BP say it is respecting?” (NGO) “If promises are made, it’s taken as legally binding according to our traditional system.” (villager)

“In ten years time, Papuans should be running the project – from the engineering side of things to the social and environmental. That’s enough time to have developed local capacity, and will provide an indicator of success for BP’s approach.” (government official)

Work of Hugh Attwater, Researcher with BP. 2000