RESPONSE TO THE

REPORT OF THE EXTERNAL MONITORING PANEL ON LARAP IMPLEMENTATION PERFORMANCE TANGGUH PROJECT

JULY 2006

Tangguh Project Response to External Monitoring Panel on LARAP Implementation The Tangguh Project would like to express its sincere appreciation to Professor Michael Cernea for the report on the projects progress concerning the implementation of the Land Acquisition and Resettlement Action Plan (LARAP). This report is based on a visit to the Tangguh project site in March 2006 that was focused on reviewing LARAP implementation activities between November 2004 and December 2005. We appreciate the independent counsel which has been provided by the external monitoring panel to the project, beginning in 2002 with the development of the LARAP and now with its implementation1. The objective of Tangguhs LARAP is to achieve resettlement with development and thereby ensure that resettled households achieve better livelihoods than they would have if resettlement had not taken place. It addresses the compensation and development of new settlements (including houses, public infrastructure and services) and a livelihood reconstruction program that considers the re-establishment and development of agriculture, fisheries, and micro-enterprise. In addition, education, vocational training, project-related employment, and health are addressed in the LARAP. The LARAP contains detailed information including specific plans and commitments, which is available on the Asian Development Bank website, www.adb.org/Resettlement/plans.asp#ino.2 We are pleased that Professor Cernea has acknowledged the advances made to date in the implementation of the LARAP, including the virtual completion of construction activities and relocation of villagers, and the initial implementation of livelihood reconstruction activities, deemed by the Professor Cernea to be an overall success.

This is the third LARAP review of the external monitoring panel. In addition to the input of Professor Michael Cernea, the first two reviews of the LARAP also comprised Dr. Ayse Kudat. 2 The Asia Development Bank is providing financing for the Tangguh project, as described in the External Monitoring Report on LARAP Implementation Performance by Professor Cernea. A link to the LARAP is also available on www/bp.com/tangguh.

The Tangguh project also recognizes that over the next two to three years the key challenge will be to convert these successes into sustainable livelihood development opportunities. Livelihood development programs will continue to be implemented, recognizing the need to avoid dependency but also the reality that the project will be a key contributor to the on-going economic development and activity in Kabupaten (regency) Teluk Bintuni. The Tangguh project has developed this response to Professor Cerneas report. It focuses on the four key areas of Professor Cerneas external review efforts and corresponding recommendations, namely: 1. Completion of villages physical construction and host population relocation; 2. Income restoration and improvement in the resettled and host communities; 3. Post-relocation reconstruction and social development; and 4. LARAP Monitoring and Tangguh projects effectiveness in managing implementation (including integration with the Integrated Social Program). Our response addresses these four key areas. Completion of Physical Village Construction in Saengga and Onar Lama During 2005, much effort went into physical reconstruction within the two designated host villages: Saengga and Onar Lama. We are pleased that Professor Cernea noted that the reconstruction efforts were carried out in an adequate manner. He also acknowledged the high satisfaction expressed by the residents of these villages. We agree with the Professors recommendation to respond to any construction or technical problems impacting the functionality of the new houses over the next several months. This is already part of the projects arrangement, and any problems will be addressed either through the construction contractor or the engineer that sits within the projects Resettlement team. We have gained valuable experience with regard to the design and potential for appropriate housing projects. The Saengga and Onar Lama projects enabled testing of innovative methods with respect to reconstruction & renovation. In

particular, the Onar Lama housing renovation project was carried out as a community initiative in which the project provided materials and technical expertise while working together with the villagers. As BP stated in its response to the March 2006 report of the Tangguh Independent Advisory Panel (TIAP), the project hopes that this self-help model will gain momentum and can see that it may have the potential for a government-sponsored housing program in other villages that could pilot similar types of approaches3. The project looks forward to exploring ways we can contribute our knowledge and support, as appropriate, to the new Bupati (head of regency) of Teluk Bintuni as the local government defines it development strategy for the Bintuni area. We do acknowledge that some challenges remain, namely in the areas of inmigration control, handover & management of village facilities, and government issuance of ownership titles. Professor Cerneas recommendations for these areas are addressed in later sections of this paper. Income Restoration and Improvement In order to ensure development and the restoration and improvement of incomes and livelihood standards, the LARAP describes the projects support in a number of program areas, including: Training and employment associated with Tangguh project activities Savings & loans and small enterprise development Vocational training Agroforestry development Fisheries access and development

As Professor Cernea points out, the initiation of these programs has laid out an economic and infrastructural base to build upon. We agree with his recommendations to continue efforts in these areas and highlights are noted below in our response. These programs and project commitments are described
The TIAP is an independent advisory panel established by BP to provide external advice to BP on the non-commercial aspects of the Tangguh project. Further information about the panel, and its March 2006 report and BPs response is available on www.bp.com/tiap. [Note: BP is the operator of the Tangguh project on behalf of its co-venturers, which include China National Offshore Oil Corporation, Mitsubishi Corporation-INPEX Corporation, Nippon Oil Corporation and Japan National Oil Corporation, Kanematsu Gas, and LNG Jpan Corporation]. Further information on Tangguh is available on www.bp.com/tangguh.
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in more detail in the LARAP and in the Integrated Social Program (ISP) document4. Training and employment associated with Tangguh project activities: We are pleased that Professor Cernea recognized the early major accomplishments in implementing the projects income restoration strategy via the Tangguh Workforce Management program, which prioritizes the provision of projectrelated employment opportunities to the residents affected by Tangguh resettlement. The employment statistics for the resettlement-affected villages are significant in that they confirm high levels of employment on constructionrelated activities and consequently high income flows into the village. We agree with the Professors recommendations to continue our efforts and to monitor the employment rate, which is on-going. With regard to the Professors recommendation to monitor revenues gained through project-related employment, the upcoming planned household survey will be a source of such information. With respect to the Professors recommendation to reassign project-employed resettlers that may have completed a short-term job, the project recognizes that almost all of the construction jobs are short-term in nature, and that therefore discontinuities in employment are inevitable. As highlighted below, the projects aim is to foster the development of jobs outside of the Tangguh project, through support for programs described in the LARAP and ISP on micro-enterprise, vocational training, and local business empowerment. Small enterprise, savings & loans, vocational training: We agree with Professor Cerneas recommendations that the project should promote savings, vocational training and micro-enterprise, and as mentioned above, these programs are described in greater detail in both the LARAP and ISP documents. While the significant increase in construction-related wage employment is welcomed by all, the project is conscious of the inevitable post-construction employment down-turn and to this end is supporting a vocational training program. The vocational training is aimed at developing skills for people in the villages that may be required by LNG facilities operations and that can be used outside of the Tangguh project. Similarly the micro-enterprise program aims to promote the
A description of the 14 programs that comprise the Tangguh Integrated Social Program (ISP) is available on www.adb.org/Documents/IndigenousPeoples/INO/38919-01-PS-IPDP.pdf, as well as via a direct link via www.bp.com/tangguh.
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development of enterprises that may provide wage employment. Finally the project continues to explore bay-wide microfinance options that would allow the population greater access to savings vehicles. Although the community bank once considered was not granted a license to operate, a locally-based churchoperated savings scheme has started, allowing people to save money. Agroforestry and Fisheries Development: The immediate focus of the resettlement program was to support re-establishment of agricultural activities. Going forward, the development of household agricultural systems will continue, progressively moving its focus from re-establishment to the management of issues associated with (i) more intensive gardening (management of pests and diseases, erosion and fertility management) (ii) diversification of smallholder subsistence based agricultural systems (e.g., livestock). As before, this work will be implemented by bringing agricultural extension officers (including university specialists and government staff) to the resettlement affected villages and the organization of farmer groups through which such extension work can occur. We are pleased that Professor Cernea noted the villagers satisfaction with the agricultural extension services provided to date. Like agriculture, the immediate focus of the fisheries program was to reestablish fishing activities, much of which had been reduced even prior to relocation as more villagers were employed on project-related activities. Professor Cernea noted the incentive scheme provided for the relocated villagers of Tanah Merah whereby villagers building boats on their own initiative would be provided with motors. This approach has encouraged the reestablishment of fisheries activities and simultaneously addressed constraints to accessing fishing grounds imposed by the establishment of marine safety exclusion zones associated with the Project. The motors have allowed villagers to by-pass the marine safety exclusion zones, access more distant fishing grounds, and also move between fishing grounds. We share Professor Cerneas view that there may be opportunities to further increase the financial returns from fishing. However, as the Professor points out, the key constraints to further development of artisanal fisheries in the Bay (including the resettlement affected villages) lie in the availability of equipment, processing and storage, transport and marketing. The role of the project is limited however, as it is up to the villagers and to commercial entities and to

local governments to work together to create the market opportunities. Through the projects ISP, we recently agreed to provide financial support to an Indonesia-based university Institute Pertanain Bogor - that has expertise in coastal resource management. IPB will explore ways to support the local governments and villages in their efforts to develop fishing and fish cultivation in an environmentally sustainable manner. Post-relocation reconstruction and social development Professor Cerneas review included the implementation of programs addressing community health, nutrition, food security, education and other social services, cultural risks, and community cohesion and institutions. These programs are described in the LARAP. Much has been learned in the start-up of these programs, with an important element being the need to develop the time and resources toward developing capacity at all levels including with our staff, our implementing partners, the villagers, and local government. Professor Cernea kindly acknowledged the efforts taken by the projects resettlement team. The agreement executed with the three clans, referred to in the report as the Sacred Sites Agreement, was another milestone for the project during 2005 and provided resolution to a number of outstanding issues concerning recognition and the relocation of sacred stones, while being sensitive to cultural claims and adat customs. At the same time, we acknowledge the Professors observations regarding the challenges, particularly with respect to handover and facilities management, and to controlling risks associated in in-migration, as highlighted later in this section of our response. Education: During 2005, the project contracted three non-governmental organizations (NGOs) to support the villagers and local government efforts to address basic and secondary schooling in the resettled villages and local area. We share Professor Cerneas views that greater involvement from the regency government and from the village families themselves would foster further quality improvements in the level of education services provided, and agree with his recommendation to pursue this with the local government and with our implementing partners, which we are already doing. The project recently signed a Memorandum of Understanding with the new Bupati that delineates the local governments lead role in the provision of education (and other social services) in the Bintuni Bay area, including the resettled villages. In addition, the project

plans to award a contract for a basic education program that will work with the local government and the NGOs referred to above to develop a strategic plan, to build capacity, and to improve community participation and hence, we hope will lead to higher completion rates from primary school. Handover and Facilities management, delivery of ownership titles: The handover of newly constructed villages to the resettlement-affected communities involves both the handover of communal facilities and utilities (e.g., government buildings, schools, places of worship, water and electrical systems) and the issuance of land titles for individual households. At the outset, the planned handover of communal facilities and utilities involved a phased handover of ownership and management responsibilities that would ensure: (a) delivery of ownership to appropriate parties; (b) that handover occurs within the context of national, provincial and district laws; (c) that handover occurs with appropriate permitting of facilities and utilities; and (d) the development of village management and technical capacity. This process would result in the progressive transfer of ownership and on-going obligations of operation, maintenance and repair of such houses, facilities, infrastructure and utilities and associated costs thereof. The project has made substantial progress in a number of these areas, including for example development and capacity building of a village management cooperative and support for training of villagers in basic operation & maintenance of electrical and water supply systems. The capacity-building programs, which are still on-going, have taken longer than anticipated, but we agree with Professor Cerneas recommendation to focus efforts during 2006 to better enable the villages and local government to accept the hand-over of these facilities. We agree with Professor Cerneas recommendation that the government agree with the villages the technical services they will provide in the areas of water and power, however, the project can only encourage the government to do so. With regard to land titling, the project can only facilitate applications as the process of granting land title is the responsibility of the National Lands Office. To address Professor Cerneas recommendation to prioritize this issue in 2006, the project will do what it can to facilitate the process, e.g., helping to collate documentation (settlement agreements, maps, etc), collecting villagers

documentation as required by the National Lands Office and discussing the process for issuance of the land titles with the National Lands Office. In-migration and induced impacts: In-migration and induced impacts associated with the development of the Tangguh project are a concern and is addressed specifically as one of the fourteen programs of the ISP. The projects Resettlement team, working together with other project staff, has sought to build awareness so that village and local government can better control and manage any in-migration and associated induced impacts. With the planned start-up of a Bay-wide district and village level governance program in 2006 that is described in further detail in the ISP, we believe further development of monitoring and management capacity in the resettlement-affected villages will be possible. Although decisions pertaining to in-migration and associated risks are outside of the projects direct control, the project continues to recognize the risks posed by high levels of uncontrolled in-migration and will continue to work to build awareness and monitor developments so that villages and local governments are better equipped to control and respond to such developments. We agree with Professor Cerneas recommendation to intensify our efforts in building awareness with the villages and local government. LARAP Management and Monitoring Professor Cernea noted the fact that the management of the projects resettlement and LARAP activities lies with the projects Integrated Social Program (ISP) organization, which comprises 14 distinct but interlinked development programs5. While the LARAP is focused on the resettlement areas and the people living in these areas, Professor Cernea recognizes the benefits of greater integration and inter-linkages with the broader ISP program. At the same time, we agree with Professor Cerneas recommendation to provide distinct project management attention to the resettlement area and the programs laid
The 14 ISP programs are: 1) Governance and revenue management; 2) Birds Head business empowerment; 3) Mitigation of in-migration and adverse impacts; 4) Workforce management; 5) Vocational training; 6) Integrated community based security; 7) Community-driven plans in directly affected villages; 8) Community health; 9) Education; 10) Governance and capacity building at district (regency) government and village government levels; 11) Womens empowerment; 12) Microfinance and microenterprise; 13) LARAP; and 14) Foundation and forum. See the ISP reference in footnote 3.
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out in the LARAP. A Resettlement Supervisor and Resettlement team has already been established, and focused management reviews will continue. The project also agrees with Professor Cerneas observations regarding the need for regular monitoring and evaluation activities and will establish such a system. Furthermore in relation to the resettlement-affected villages, in the postconstruction scenario the project will maintain regular records of vulnerable groups, workforce, in-migration and induced impacts and grievances. The planned biannual survey (starting 2005) has been delayed and will be implemented in the second half of 2006.

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