event Published at: 2016-08-11

Natural resources, particularly oil –gas and mining, will provide a positive contribution to the welfare of people only when it is managed well. Therefore, team of Resource Governance in Asia Pacific (RegINA) – PolGov FISIPOL Universitas Gadjah Mada and Asia Pacific Senior Officer of Natural Resource Governance Institute (NRGI) Emanuel Bria discussed the design of good governance of extractive resource in the local region with the Chief of Presidential Staff Teten Masduki at Bina Graha, Thursday (11/8). RegINA proposed the memo of key ideas in front of the Chief of KSP and also deputies Yanuar Nugroho and Deni Puspa Purbasari.

Board of Expert of RegINA Hasrul Hanif highlighted the most of local authorities in Indonesia are exhausted to negotiate the central-regional revenue sharing but then being likely to ignore how to manage the revenue well. Besides fiscal revenue from oil, gas, and mining, is actually very volatile due to price fluctuation and dynamic production of mining commodities. In addition, absorption capacity or capability to transform from revenue into productive and sustainable goods and services vary from one area to another. The revenue from oil, gas, and mining sector is not sustaining since its nature of the non-renewable resource.

Henceforth, RegINA stressed the importance of regional development design that does not reliant on resource extraction as well as transforming revenue of extractive resources to a more sustainable economics. In collaboration with NRGi, RegINA proposed the breakthrough on Sovereign Wealth Funds (SWF), in which revenue of extractive sector is invested to various forms of investment that the income from these investments are used for various purposes in public spending and investment in economic sectors that are more sustainable, while principal funds remain permanently invested and transcend the cycle of exploitation of resources extraction itself. SWF also will help local authorities to carry out "soft spending" in their public spending so as not to be affected by the volatility of commodity prices extractive resources. At this time, only Bojonegoro that the district who are trying experiment to implement this idea. Obviously, RegINA enhanced also the importance of greater transparency of funding and an independent external watchdog to elude the fund into a channel of corruption or patronage.

The meeting was ended with an agreement to conduct more formal cooperation between RegINA and KSP in formulating the design of Regional Development and Good Governance of Extractive Industries in Indonesia. (YIC)