[KataData] High Poverty in Oil and Gas Rich Areas

Of the 20 cities/districts that receive the largest oil and gas revenue sharing funds, 60 percent have a Human Development Index (HDI) lower than the National HDI. In addition, almost half have high levels of poverty.

Being an area blessed with natural resource wealth is not completely directly proportional to the welfare of its population. A number of cities and regencies that are known as oil-rich areas still face the problem of high poverty with a low human development index.

Based on 2016 oil and gas profit sharing fund data obtained from the Ministry of Finance, it can be seen that oil and gas rich areas are dominated by areas in Riau province and a small part of South Sumatra. Others are spread across the provinces of Jambi, East Java, East Kalimantan and West Papua.

At least, there are almost 20 districts that annually receive revenue sharing funds of more than IDR 100 billion. Bojonegoro Regency in East Java is the district with the largest oil and gas revenue sharing fund in Indonesia. No less than IDR 728 billion went into the district's APBD. Furthermore, the second and third positions are filled by Bengkalis Regency (Riau) and Musi Banyuasin Regency (South Sumatra) with profit sharing funds of IDR 723 billion and IDR 641 billion respectively.

However, obtaining high oil and gas profit sharing does not mean bringing prosperity to the population. The results of our analysis found that most of the oil and gas rich regions actually have a Human Development Index (HDI) that is lower than the National HDI. In addition, if we look at the poverty level, many of these areas have poverty levels higher than the national average.

HDI is usually a benchmark for the development results of a region in obtaining income, health and education for each community. A low HDI figure in a region indicates that development and human quality in that region are still lagging behind. Nationally, Indonesia's HDI reached 70.2 with a high predicate in 2016.

Meanwhile, dozens of districts known to be rich in oil and gas actually have HDIs below the national average. Some of them are Bojonegoro, Musi Banyuasin and Rokan Hilir with scores of 66.7, 66.5 and 67.5 respectively. Even though these three districts are part of the five districts that receive the largest oil and gas revenue sharing funds.

Judging from the perspective of poverty, in this oil and gas rich area there are also interesting findings. Almost half of the 20 regencies/cities receiving the largest oil and gas revenue sharing funds have poverty levels above the national aggregate. This fact shows that the injection of funds from natural resource exploration has not been able to reduce poverty rates in the region.

Bojonegoro and Musi Banyuasin districts, which are in first and third place, actually have quite high poverty. The poverty rates in these areas are 15.7 and 18.4 percent respectively. The highest poverty is in Teluk Bintuni Regency, West Papua province. Ranked 19th, this area has a poverty rate of 36.7 percent or three times the national poverty average. Furthermore, the Meranti Islands in Riau province have a poverty rate of 34.1 percent.

There needs to be further investigation into what is the cause of high poverty in oil and gas rich regions because each region has different conditions, both in terms of geography and demographics.

However, in terms of APBD fund allocation in each region, it can be seen that almost 40 percent of the expenditure budget in oil and gas rich regions is channeled to personnel expenditure, both direct and indirect expenditure. In fact, the highest portion for employee spending is 61.7 percent, namely Dumai City, Riau Province. This region is in 14th place on the list of oil and gas rich regions.

In fact, budget allocation is one of the keys to successful development, including poverty alleviation. If the budget allocation for human development and poverty alleviation is increased, the poverty rate in a number of areas can be reduced.

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Nazmi Haddyat Tamara is Data Analyst And Statistician Dataword. Currently, he fills the position in the Data team in Katadata's Research and Data division. Studied majoring in Statistics and has experience in data processing and analysis on various topics.

Notes:

Oil and Gas Profit Sharing (DBH) data was obtained from the 2016 Ministry of Finance release. Other supporting data are APBD details from the Ministry of Finance, 2016 Human Development Index (HDI) Values and 2015 Poverty Levels (the latest data available only until 2015) obtained from the Central Statistics Agency (BPS) of each province.

http://databoks.katadata.co.id/datablog/2017/06/02/kemiskinan-tinggi-di-daerah-kaya-migas