Kutai Kartanegara is a district with significant oil and gas production in Indonesia. Not surprisingly, Kukar’s local budget revenue most contributed from Oil and Gas Revenue Sharing Fund. In 2015, for instance, the oil and gas revenue sharing fund reached 5 trillion, or 79% of Kukar regional income. However, the amount of oil and gas not significantly affected the lives of the people in the mining area and its community. One of the effort to optimize the revenue from oil and gas for the people is by making regional regulations regarding the use of local content.
Kutai Kartanegara Regional Regulation number 3 year 2017 concerning the Local Participation in the Regional Oil and Gas Extractive Industry, in fact still not implemented in the field. The local regulation which was an initiative of the local parliament in 2017, requires extractive companies which operated in Kutai Kartanegara to use local products and partner with local companies in providing good and services in the oil and gas business.
Research by Pokja 30 and PWYP Indonesia regarding the local content regulations, found that: first, the absence of a regent regulation and regent decree to form an optimization team which is the supervisor of the implementation of this regional regulation. The optimization team based on the article 24 paragraph 2 of the Kukar Regional Regulation no 3/2017, states that the optimization team consists of elements from the local government, companies/contractors, and partners of the contractors. On the other hand, the component of the supervisory team needs to involve external parties, that are academics and community representatives.
After the issuance of the local content regulation, the local parliament should oversee the implementation of the rule, but the parliament seems to have shed their hand and handed over the application and formation of derivative regulations to the executive. Besides, this regulation has not yet regulated sanctions, if the companies/contractors, or their partner do implement their obligation in using local content.
Second, Local Government Organizations as the technical implementor have no initiative toward the local content regulation. The local government organizations such as the Agency of Industry, Trade, Cooperation, and Small Business Enterprise, Labor Agency, Regional Planning Agency, have not taken the initiative to submit Regent Regulation proposals as the derivative rules. The local government organizations are involved in the local content regulation drafting process.
Third, the socialization of local regulation is not sufficient. Lack of socialization of the law is the reason for the lack of initiative from the government organizations. Also, the contractors who operated in Kukar have not been aware of the existence of this regulation. Meanwhile, this regulation is expected to be a legal basis for the contractor to use local content as the goods and services provider in their work areas.