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.