The "Partnership for Sustainable Development" Program in Indonesia

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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


  • 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


BP Management Vision for Tangguh

  • A World Class Model of Responsible Industrial Development

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

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

  • Development of Clean Energy for the future

BP Management Principles

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

  • Protection of the Environment

  • Equitable treatment of local communities

  • Stimulus for Regional Economic and Social Development

  • Efficient production of natural gas resources

  • Creation of Exports and Foreign Exchange

BP Tangguh Performance Standards

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

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

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

  • International and National NGO sustainable development standards will be applied

Tanah Merah Village

Worlds Largest Mangrove Forest

Peat Swamp Forest

Nipah and Sago Palm Forest

Lowland Forest


Mountains and Uplands

Artisanal Fishing


Commercial Trawling

Sago Production

Timber Production

Mangrove Wood Chip Mill

Oil Palm Estate



Conventional Oil and Gas Development:


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

  • The DGS thus discourages in-migration to the Project site – a major management issue for similar projects elsewhere.

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


  • Purpose is to ensure that local people benefit from the exploitation of their natural resource; but are not overwhelmed by rates of technological,  environmental, social and economic change.

  • ·Activities include support for service providers to improve education, health and infrastructure and to promote economic opportunities; establishment of systems for community based security and third party support for development.

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


  • Purpose: To protect environment and the authority of local adat land owners through the promotion of sustainable development of industry in existing urban centres.


  •  Activities: assistance through contracts in District cities and the sub-district towns, for the provision of goods and services. (e.g. ITB)


  • Outcomes:

    • Enhanced capacity of urban centers to provide goods, support services and training resulting in greater employment and social and economic opportunities; and
    • Minimization of in-migration by non-local people to the Project site during critical early years  


  • Purpose: to enhance the capacity of local and provincial government to provide essential social services and environmental and resource management as implementation of the Tangguh Project drives economic change.

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

  • Outcomes:

    • Strategic Growth Plan for western Papua prioritising economic, social and infrastructure development across a range of sectors;
    • improved HR capacity in local governments, including career continuity for newly trained staff;
    • Identification of potential donor-supported projects for further capacity building.



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

Programme outputs and activities

  • 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

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

  • 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 reform, conflict prevention, and environmental protection activities.

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

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