Papua's autonomy test: The Tangguh LNG project

Papua's autonomy test: The Tangguh LNG project

Ignas Kleden, Sociologist, The Center for East Indonesian Affairs,
Jakarta

Part 1 of 2

The messages of Law no. 22/1999 and Law no. 25/1999 regarding
political decentralization (regional autonomy) and economic
deconcentration (fiscal balance) has been, over the past year,
hanging in the air. There has been considerable criticisms of the
two laws, both in regard to their logical consistency as well as
to their related legal products needed to guide their
implementation.

There are also still many other problems, including
conflicting perceptions concerning what regional autonomy is
actually all about. What is still obviously lacking, however, are
political and economic initiatives at the national and regional
levels which aim to translate the spirit of decentralization and
deconcentration into political decisions and economic policy.

Needless to say, the two laws have acquired more serious
attention from foreign foundations and foreign companies
operating in Indonesia. Concerns about the attitude of regional
government towards business contracts or economic cooperation
which have been made between the central government and foreign
companies operating in the regions, cannot be overestimated.

In that connection any attempt by big companies -- national or
multinational -- which aims to put economic deconcentration and
political decentralization into reality should be attended to,
appreciated and supported. A good case in point is the
construction of LNG Tangguh Project in Berau Bay, in the Bird's
Head region of Papua.

Processing facilities will be built on the southern shoreline,
between the two rivers, Saengga and Manggosa. The site for
processing facilities covers no less than 3,266 hectares with
construction planned to begin late next year. Construction
preparations have already started with LNG production expected to
start in late 2005.

Some 5,000 mainly local workers, will be employed in its
construction. To that extent the question of employment for the
people from local communities is partly resolved.

The real problem, however, will arise during the operational
stage (2005 - 2025), in which the whole production and
maintenance staff will comprise just 500 skilled people. This is
the case because the project will be a world class plant equipped
with highly automated facilities. The question is: What to do
with the local people especially those living in Bintuni and
Berau Bays which will be directly affected by the industrial
plant?

This question seems to concern those who are responsible for
the project because of some related reasons. First, we cannot
forget the case of mining company PT Freeport Indonesia which is
faced with a number of serious social problems. The people of
Papua do not want to have the same problems with any other big
companies which want to operate in the province.

Some intellectuals from the University of Cendrawasih,
Jayapura, and the University of Papua, Manokwari, say that if
Freeport is a phenomenon of economic concentration and political
centralism, LNG Tangguh Project should become a benchmark of
economic deconcentration and political decentralization. This
opinion was made explicitly clear during a two-day workshop in
Sentani, on Nov. 27-28.

Second, the project resulted from a collaboration of nine
partners, comprising Pertamina, British Petroleum (Indonesia) or
BP (Indonesia), British Gas Plc (BG), Mitsubishi Corporation,
Kanematsu Corporation (KG), Nippon Mitsubishi Oil (Nisseki
Mitsubishi), Nissho Iwai, Genting Berhad Cairns Ltd, and the
Provincial Government of Papua. Among them Pertamina and BP
(Indonesia) become the Tangguh Project operators.

The operators seem fairly aware of the social changes which
will be driven by the project and the social costs which they
will likely have to pay if locals are not integrated in the
results of the project, if not in the workings of the project.

This becomes all the more urgent for the people of Papua who
have abundant natural resources and yet still live in relatively
poor conditions. Papua is one of the four provinces in Indonesia
which are ready for regional autonomy as far as natural resources
are concerned. The other three are Aceh, Riau, and East
Kalimantan. However, the per capita gross regional domestic
product of Papua in 1997, for example, was no more than Rp 4.3
million.

Third, the operators of LNG Tangguh want to see how political
decisions on political decentralization and economic
deconcentration can be translated into corporate governance. In
that connection, Pertamina and BP (Indonesia) have worked out a
development strategy which is expected to better fit local needs.

It is called the diversified growth strategy, or sometimes the
distributed growth strategy. The first term refers to the
expected effects in terms of sectors, whereas the latter refers
to the regions.

Some related aims of the strategy as propounded in its
conception are as follows.

First, it aims to prevent economic concentration, this being
done by means of multiplying growth centers in terms of both
territory as well as sectors. In order to reach this aim, policy
will be made whereby job seekers are only allowed to apply for
work at the project if they live in the same area they are
applying to work.

People from, say Tanimbar or Ternate island, who want to look
for a job are only allowed to apply in Sorong, Manokwari or Fak
Fak, and if they succeed they will be employed in one of these
towns. In the same way other dependent employment and economic
activities will be carried out by people from local communities.
Cultivation of vegetables, food stalls, small shops and the like
are expected to be run by locals.

Needless to say, this idea can be realized if two
prerequisites are met. On the one hand local human resources
should have sufficient technical and managerial know-how. On the
other, local officials should stick to this policy. In other
words, the plan and policy will not work if the old practices of
corruption, collusion and nepotism are able to distort all the
procedures so much so that the local government officials allow
outsiders to work on the project in exchange for bribes.

The writer attended the above mentioned workshop in Hotel
Sentani, Jayapura, held by BP Indonesia and Pertamina in
cooperation with locals on Nov. 27-28.