TRANSFORMASINEWS.COM, PALEMBANG. The Natural Resource Curse is a paradox known in economics when countries that have a wealth of natural resources actually have poor social welfare and lower economic growth than other countries.
One important cause of this paradox is mismanagement of natural resource revenues, which gives rise to various other sectoral impacts. Several academic studies, including Sachs Warner (1995, 1997 abc, 1999 a,b. 2001) and Auty and Miksell (1998) found a negative relationship between natural resource wealth and economic growth.
Apart from the country level, the phenomenon of the curse of natural resources is also suspected to befall regions. Several studies have proven the hypothesis that natural resource wealth owned by a region is in fact negatively correlated with the regional economy.
In a global context, the curse of natural resources has also been confirmed by several studies. The findings will certainly complicate the country's economic position in facing the real scenario of depletion of natural resources in the coming years, considering the position of mining as one of the non-renewable resources.
The country will be increasingly cursed when it runs out of natural resources with the decline in primary revenues. In Indonesia, many regions have large natural resource wealth, not just oil and gas and coal, even other minerals such as copper, gold, nickel and tin.
Indonesia has the largest oil reserves in Southeast Asia with potential reserves of 43.7 billion barrels (Chevron 2014). Apart from that, Indonesia's gas reserves reach 103.3 trillion cubic feet (TCF), which places Indonesia in 14th position in the world (BP Statistics 204).
In terms of alternative energy potential, Indonesia is also the champion with the largest geothermal reserves in the world, the proportion reaching 40% of world geothermal reserves.
In the mineral sector, Indonesia is the 8th largest gold producing country in the world, with average production reaching 100 tons/year (US Geological Survey 2013).
Apart from gold, Indonesia is also in the world's top 5 copper and nickel producing countries and in the world's top 10 for producers of liquefied natural gas and tin refining (Ministry of Industry 2013).
In the New Order era, Indonesia was thought to be able to avoid the curse of natural resources (Rossser 2004), this is supported by facts, for example looking at the comparison between Indonesia and Nigeria, which both have dependence on oil and gas sales. Currently, Indonesia's per capita income is relatively greater than Nigeria's (Ross 2003).
This success is also reflected in the significant reduction in various development indicators such as poverty rates, infant mortality and illiteracy rates.
Indonesia's success was achieved by investing from natural resource revenues, especially oil and gas, into infrastructure development, education, industry and agriculture (BPS et al. 2001:2 in Feryawan 2011).
However, the phenomenon of the curse of natural resources has resurfaced in Indonesia, especially in the era of regional autonomy, when several regions that are considered to have regional revenues that are greater than natural resource wealth have several relatively poor development indicators and low Gross Regional Domestic Product (GRDP). One example of this region is Musi Banyuasin district, South Sumatra Province.
Muba Regency has regional revenues of 2.58 trillion (ranked 13th nationally) and GRDP of 34.5 trillion (ranked 38th nationally). In terms of human quality development, looking at the HDI indicators, the HDI level of Musi Banyuasin district is only 72.44 or ranked 205th nationally.
The poverty rate in Musi Banyuasin district of 18.99 is also relatively higher than the national average. Another example is Bojonegoro district in East Java province, which is considered one of the national energy reservoirs, recorded as having total regional revenues reaching 1.5 trillion (ranked 42nd nationally).
Even though the economic indicators are quite good with a GRDP value of 27.6 trillion at rank 40, Bojonegoro district has an HDI of 67.32 or rank 428 nationally. It is quite far below the national average and the poverty rate of 17,47% is higher than the national average.
There is a tendency for Regional Governments that receive high DBH SDA to have poor government performance and accountability. Natural resource revenues do not have a significant correlation with overall economic growth.
Natural resource revenues also do not have a significant correlation in reducing the overall poverty level. Even for the richest 20% regions, the impact is increasing poverty levels. Natural resource reserve funds do not have a significant correlation with the overall human development index and for 20% the richest regions.
We can see this in the graphic image below. The amount of DBH SDA has a positive but not significant impact on economic growth in the region. However, the higher the DBH-SDA, the slower the economic growth. Meanwhile, the graph below shows that the higher the DBH SDA, the higher the poverty level. In 20%, the richest regions, poverty rates tended to increase compared to regions that were relatively less rich in natural resources.
Estimation results fixed-effects model that at the level of all districts and cities nationally, it turns out that natural resource wealth does not have a significant impact on economic growth.
EFFORTS TO OVERCOME THE NATURAL RESOURCE CURSE
The consequences of problems that arise often become the starting point for new breakthroughs to overcome these problems.
To avoid the curse of natural resources, several countries in the Middle East and states in the United States have implemented Natural Resource Fund (NRF) policies and mechanisms earmarking Natural resource recipients who are part of the Sovereign Wealth Fund (SWF), namely reserve funds and/or savings that are set aside from natural resource revenues in a country, to then be invested in other sectors with minimal risk, which in the future will produce capital returns for the country. (Bauer, 2014).
The oil and gas sector is a primary energy source with a large investment value whose supply chain is maintained as well as possible through long-term contract mechanisms, so that the state can predict the sustainability of revenues based on ongoing contracts, including facilitating space to tie up revenues from the oil and gas sector.
Whereas earmarking not institutionalized but rather juxtaposed with the framework of regulatory structures implementing the implementation level of the government's financial sector. The problem is that in Indonesia there are no regulations governing this earmarking.
The mechanism for using DBH SDA is managed based on political will Regional government and its use are also based on subjectivity and the principle of one-sided regional government technocracy. Considering that the effectiveness of DBH SDA faces many obstacles, in the future it is necessary to think about opportunities for new mechanisms in the public budgeting system, both APBN and APBD, in order to accommodate these interests.
As one example, in Musi Banyuasin Regency, which has implemented ADD through Perbup Number 15 of 2013 concerning general guidelines and technical instructions for implementing ADD/K, this Perbup has regulated allocations for producers and non-producers.
However, the mechanism is not designed based on indicators of long-term needs of producing villages and affected villages. The Musi Banyuasin district government should not only be enthusiastic about allocating it but also directing the use of what is allocated for long-term interests.
NOTES:
1. Natural resource revenues do not have a significant correlation with overall economic growth.
- Natural resource revenues also do not have a significant correlation in reducing the overall poverty level. Even for the richest 20% regions, the impact is increasing poverty levels
- Natural resource reserve funds do not have a significant correlation with the overall human development index and for 20% the richest regions
- In the 40 % richest regions, natural resource revenues are negatively correlated with the regional tax ratio, so it is hypothesized Tax Laziness confirmed.
- Mineral and coal natural resources are non-renewable, the backbone of state revenue (tax and non-tax) and the mainstay of exports from 1983 to 2014. However, the opportunity to capitalize on mineral and coal will end when reserves run out.
- Central and regional governments need to think about alternatives to dependence on mineral and coal natural resource revenues. Special policies are needed that are innovative and adaptable in terms of limited mineral and coal resources and large targets for state revenue.
- The energy and natural resources sector is completely withdrawn to the province except for geothermal affairs and grand forest parks in district/city areas. Because the management of energy and natural resources in the regions gives rise to corrupt practices, while high externalities have an impact on the ecology.
Author: Nunik Handayani/FITRA SUMSEL Coordinator
Report: Boni Belitong
Editor: Amrizal Aroni
Posted by: Admin Transformasinews.com
EN 
ID