SAKHALIN ENERGY INVESTMENT COMPANY Ltd

SAKHALIN ENERGY INVESTMENT COMPANY Ltd. SAKHALIN INDIGENOUS MINORITIES DEVELOPMENT PLAN 2

SECOND EXTERNAL MONITOR REPORT August 2011

Gregory Eliyu Guldin www.crossculturalconsult.com Second SIMDP 2 External Monitor Report August 2011

Table of Contents

ABBREVIATIONS ...... II SECOND SIMDP 2 EXTERNAL MONITOR REPORT ...... 1 I. OVERVIEW ...... 1 A. Introduction ...... 1 B. External Monitor Report Methodology...... 3 C. Sakhalin Energy and SIMDP Partners’ Follow-up to Previous EM Report Recommendations ...... 3 D. Stakeholders’ Overall Evaluations of the SIMDP ...... 4 E. External Monitor Overall Evaluation ...... 6 II. SIMDP PARTNERS ...... 8 A. The Three-way Partnership ...... 8 B. RCAR and SOG in the SIMDP...... 8 C. SIMDP in SEIC ...... 9 D. Role of the Districts in the SIMDP 2 ...... 10 III. GOVERNANCE ...... 12 A. Committees/governing bodies ...... 12 B. Information Disclosure ...... 14 C. Governing Board ...... 15 D. Executive Committee ...... 16 IV. MITIGATION MEASURES, GRIEVANCES, AND INTERNAL MONITORING ...... 17 A. Mitigation Measures ...... 17 B. Grievances ...... 17 C. Internal Monitoring ...... 18 V. SIMDP COMPONENTS ...... 20 A. Traditional Economic Activities Support Program (TEASP) ...... 20 B. Social Development Fund ...... 28 VI. PLANNING ...... 34 A. Action Items ...... 34 B. Second SIMDP 2 EM Visit and Report ...... 34 APPENDIX: RECOMMENDATIONS ARRANGED INTO ACTION ITEMS FOR RESPONSIBLE PARTIES ...... 35

Second SIMDP 2 External Monitor Report August 2011

Abbreviations

BF Batani Fund BP Business Plan CCCS Cross-Cultural Consulting Services, PLLC EC Executive Committee EG Experts Group EM External Monitor GB Governing Board IPO Indigenous Peoples Organization MGF Mini-Grant Fund PCR Plan Completion Report RCAR Regional Council of the Authorized Representatives of the Indigenous Minorities of the North of Sakhalin RAIPON Russian Association of Indigenous Peoples of the North RUB Russian Rubles SDP Social Development Program SDF Social Development Fund SEIC Sakhalin Energy Investment Company, Ltd SIM Sakhalin Indigenous Minorities SIMDP Sakhalin Indigenous Minorities Development Plan SOG Sakhalin Oblast Government TEASP Traditional Economic Activities Support Program

Second SIMDP 2 External Monitor Report

I. Overview

A. Introduction

This report is the second in a series of periodic External Monitor Review Reports which will cover the life of the Second Sakhalin Indigenous Minorities Development Plan (SIMDP 2). This review covers months one to five of Plan implementation, from February through June 2011. It follows the EM Inception Report prepared in April 2011.

The Sakhalin Indigenous Minorities Development Plan 2 succeeds the first SIMDP which was implemented between May 2006 and December 2010. The SIMDP 1 was introduced by Sakhalin Energy Investment Company Ltd. (“Sakhalin Energy;” SEIC) with the support of Sakhalin Island’s Indigenous Minorities and the Sakhalin Oblast Government (SOG). By 2010, Sakhalin Energy, the Regional Council of Authorised Representatives of Sakhalin Oblast (RCAR), and the Sakhalin Oblast Government had established a smooth working relationship to supervise and implement the SIMDP. Multiple rounds of consultations with Indigenous Minorities communities and other stakeholders were held and a new SIMDP developed by the fall of 2010.

The draft SIMDP 2 was distributed in the areas of traditional indigenous residence during the first week of November to be considered by the indigenous population, followed by a special conference in Yuzhno-Sakhalinsk on November 17 called by the RCAR to approve and/or amend the draft SIMDP 2.

At that conference the indigenous delegates declared that they gave their free, prior and informed consent to the Plan and to their representatives’ signing of a new Tripartite Agreement to implement the Plan. This signing took place at a ceremony in Moscow in mid-December with Sakhalin’s Governor Alexander Khoroshavin, Sakhalin Energy’s CEO Andrei Galaev, and the RCAR’s Chair Sergey Kurmanguzhinov. All were personally representing their SIMDP partner organization in a public pledge of support to the renewal of the SIMDP.

First SIMDP

The first SIMDP incorporated measures to mitigate negative effects on the lives and livelihoods of Sakhalin Indigenous Minorities (SIM) in the project area of the Sakhalin-2 oil and gas Project, as well as measures to share project benefits with Indigenous Minorities throughout the Island. The latter was delivered by way of programs of economic development (the Traditional Economic Activities Program [TEASP]), health, education, culture, and training (the Social Development Program [SDP]), along with a

1 stand-alone, indigenous-directed Mini-Grant Fund (MGF). Yearly funding of the Plan was approximately USD$300,000, which added up to a 5-year US$1.5 million commitment by the Company. In addition, administrative costs for the Plan (including staff salaries and costs for the operation of governance bodies) as well as other SIM-related projects were supported by Sakhalin Energy from non-SIMDP allocated funds.1

SIMDP 2

With the successful completion of SIMDP 1, the SIMDP partners prepared the SIMDP 2 to build upon the collective experience of the Plan and its implementers.

The key objectives of this second Five Year Plan are:  Improving the lives and livelihoods of the Indigenous Minorities of Sakhalin Oblast through support for the delivery of benefits (social development programmes) in a culturally appropriate and sustainable manner  Enhancing the capacity of indigenous communities and individuals to actively participate in the management of the SIMDP and, by extension, similar socio-cultural and economic intervention strategies  Assisting Sakhalin’s Indigenous Minorities to prepare for the eventual establishment of an independent Indigenous Minorities development fund  Avoiding or mitigating in an environmentally sustainable manner any potential negative effects caused by the operation of oil and natural gas pipelines and associated Sakhalin-2 Project facilities

Key innovations of the SIMDP 2 are:

 The application of the positive experiences of the Mini-Grants Fund of SIMDP 1 to extend indigenous-only programme committee membership to the Social Development Fund [SDF] Council and Traditional Economic Activities Support Programme (TEASP) Committee of SIMDP 2  The application of the positive experiences of the Mini-Grants Fund (MGF) and the Social Development Program (SDP; now SDF) of SIMDP 1 with the use of an Experts Group (EG) to initiate a similar assessment process for grant applications for the TEASP  Incorporation of the MGF’s focus on direct application for small grants by community groups into the SDP (now SDF), as the MGF—having fulfilled successfully its experimental purpose---is eliminated as a separate Plan component  Increased indigenous communities’ representatives on the Plan’s governing bodies

1 See SIMDP 2, Annex 3, for a listing of SIM-related projects supported by Sakhalin Energy beyond the SIMDP between 2004 and 2010. 2

 Internal monitoring of the Plan undertaken jointly by representatives of the three Plan partners  An increase in annual funding from Sakhalin Energy from USD300,000 to USD312,000 for five years for SIMDP programmes

B. External Monitor Report Methodology

The External Monitor (EM) visited Sakhalin between 13 June and 1 July, 2011. Sakhalin Energy’s Indigenous Peoples Unit shared key documents with the EM (most importantly, the Company’s SIMDP Semi-Annual Report, updates on the Mitigation Matrix, grievances, and committee and other governance entity meeting minutes) and arranged a series of meetings with key stakeholders, including:

 Sakhalin Energy employees (personnel running the program and others involved with management support of the SIMDP)  Indigenous Minorities (including RCAR, individual community members, and indigenous community organizations [e.g. rodovoye hozaitsva and rodovoye obschini])  Authorities in the Sakhalin Oblast Government, including the Indigenous Peoples Department  Authorities in various District governments  SIMDP governance participants, including those on the SIMDP Governing Board (GB), the Executive Committee (EC), the TEASP Committee, the SDF Council, the two committee Experts Groups

The EM visited Sakhalin Indigenous Minority communities around the island, including those in Nogliki, Okha, Nekrasovka, Val, Chir-Unvd, Tymovsk, Alexander- Sakhalinsk, Smyrnikh and Yuzhno-Sakhalinsk.

C. Sakhalin Energy and SIMDP Partners’ Follow-up to Previous EM Report Recommendations

In the Inception Report, three recommendations were made, with all receiving a direct response from the SIMDP governing bodies. These recommendations called on Sakhalin Energy to clarify the funding for the administrative expenses to implement the TEAS Program micro-credit component and to conduct training for the new committee members, while the Plan was advised to review community preferences for TEASP and SDF programs.

D. Stakeholders’ Overall Evaluations of the SIMDP The three SIMDP2 partners (RCAR, SOG, SEIC) evaluated positively the opening performance of the SIMDP 2. The assessment from the indigenous communities was also quite positive with exception of a mixed review by some people from Nogliki District.

Indigenous Minorities Organizations’ Evaluation of the SIMDP 2

The Regional Council of Authorized Representatives of the Indigenous Minorities of the North of Sakhalin (RCAR) is the preeminent Indigenous Peoples Organisation (IPO) on Sakhalin. Its members are represented on all SIMDP 2 governance bodies while the RCAR’s head chairs the SIMDP 2 Governing Board. The RCAR believes that the SIMDP 2 has begun very positively, with especial commendations given to the SDF. The only hesitation regarding the Plan surrounds the self-sufficiency component of the Traditional Economic Activities Program. It is noted that, compared to the first Plan, funding for this component has doubled from 20% to 40% of the TEASP budget, a trend which the RCAR chair finds troubling as the self-sufficiency component’s distribution of goods “can make us dependent on charity.”

Also represented on the SIMDP 2 Governing Board is the Russia-wide IPO, the Russian Association of Indigenous Peoples of the North (RAIPON). RAIPON appreciates the SIMDP 2 as a model of cooperation between an industrial company, the local government, and indigenous communities. Its representative believes that the SIMDP 2 has gotten off to a smooth start and continues to introduce new ideas and new programs as Sakhalin-2 serves as the first such project in Russia to fully comply with international standards with regards to Indigenous Peoples.

Government Evaluation of the SIMDP

The Sakhalin Oblast Government also believes the second Plan has started well, efficiently producing Plan documents and organizing meetings efficiently. It also appreciates the fact that new people have been brought into the Plan and thus expanded the Plan’s presence in the indigenous community.

Sakhalin Energy’s Evaluation of the SIMDP

Sakhalin Energy management believes that the SIMDP 2 has begun very well, with increased transparency (including a dedicated SIMDP webpage: www.simdp.ru) and increasing emphasis on benefits-sharing with less need to focus on mitigation

4 issues. They note with satisfaction the greater professionalism of the Company’s SIMDP Unit and the Plan’s emphasis on building indigenous capacities. Sakhalin Energy staff also see challenges presented with the new Plan, including the new micro-credit initiative, and the need to train the new people brought onto the Plan’s governance bodies.

Indigenous Communities’ Evaluation of the SIMDP

A good majority of indigenous respondents spoke very highly of the Plan. They appreciated particularly the delivery of health and educational services as well as support for traditional lifestyles and subsistence activities. One member of the TEASP committee also spoke of the SIMDP having a “moral effect,” i.e., that the Plan shows Indigenous Minorities, that others consider their development important and so raise indigenous expectations for their own future. Another member of the same committee spoke of how the SIMDP is helping to integrate Indigenous Minorities on Sakhalin: encouraging them to become more active in their community, to come to the Oblast capital of Yuzhno-Sakhalinsk and appreciate a wider perspective, and to receive training.

Others, given the fact that the Second Plan has just begun, are more hesitant to assess the Plan just yet. In addition, there is a small group of Plan critics --all based in Nogliki—who are quite negative regarding the Plan, even calling for its suspension. They blame the Plan for increasing competition and greed, encouraging dependency through reliance on ““handouts.” Things were better before the Plan, they say, and now they feel the effect of the Plan has been an increase in conflict.

Such strongly held opinions have raised a serious question. Has the Plan indeed caused an increase in conflict to the detriment of indigenous life on the island? Posing this question to a wide cross-section of indigenous respondents revealed that this negative perception of the Plan is indeed that of a distinct minority. They rejected the argument that the Plan itself causes conflict and pointed to pre- existing personal relationship conflicts in Nogliki as the real source for tensions existing among those people. Some also alleged that part of the dissatisfaction was due to perceived conflicts of interest in how the TEASP operated in Nogliki— and filed grievances to press their case (see section IVB). Others felt that any hard feelings about the Plan could be traced simply to the disappointment grant applicants felt upon rejection of their applications with some pointing to delayed letters explaining the reasons applications were turned down as the reason some people were upset.

Furthermore, follow-up discussions with Plan critics revealed that most of them also appreciated many aspects of the SIMDP. Their real target was not the Plan in general or even the TEAS Program, but most specifically the self-sufficiency

component in which people compete for handouts primarily in the form of snowmobiles, boats, and boat engines. Add to this the perception/accusation that such grants were made “unfairly” or “corruptly” and this encapsulates the Plan critics’ case. The complaints and grievances from Nogliki were thus a mix of suspicions of improper conduct, contentious personal relationships, an unease with direct competition with community peers, and disapproval of the Plan’s perceived encouragement of dependency.

E. External Monitor Overall Evaluation

With the SIMDP 2 only in operation for four or five months at the point of the EM visit, a definitive evaluation of its efficacy could not be made. However, certain trends, patterns, and challenges were clearly evident as the Plan moves towards implementing its first year programs. Initial EM observations included:

 A continuing high evaluation of the SIMDP by the majority of Sakhalin Indigenous Minorities (SIM)  The participation of a whole new group of people in Plan governance, many of whom had no previous contact with the SIMDPs  Fewer committee members familiar with bureaucratic procedures like those of the SIMDP governance bodies  An increase in the proportion of SIMDP funds going to grant competitions o The competition for cultural support went from US$30,000 in the SIMDP 1 to US$50,000 in this first year of the SIMDP 2 o The self-sufficiency competition of the TEASP was raised from US$28,000 to US$60,000  An increase in grievances, from a few over the entire course of SIMDP 1 to five in the first five months of SIMDP 2

Clearly some of the above items are related, with many of the problems/issues/questions related to innovations introduced by SIMDP 2. New or revamped Experts Groups to advise Plan committees were a part of those innovations; some adjustments to their structure or operations would be advisable (see section V).

The start-up of SIMDP 2 revealed the increasing integration of the three Plan partners (as contrasted to the First Plan) as they worked effectively in responding to the grievances through the mechanism of a three-party Working Group, planned to conduct three-party internal monitoring, and collaborated to select a Plan Coordinator. All of these tasks were previously handled exclusively or primarily by the Company during the First Plan. The Second Plan also demonstrated an effort to foster wider participation in the Plan, as the Governing Board reaffirmed the

6 operational principle that no person should occupy more than one governance position. Combined with the Plan’s structural innovation that only SIM should serve on the SDF Council and the TEASP Committee, this has meant that newcomers predominate in many of the Plan’s bodies. This has both good aspects and challenging ones, as the benefits of inclusion need to be buttressed by the need to train the newcomers in the ways of both bureaucratic procedures and substantive issues and to guard against domination of the experienced and respected old- timers in decision-making.

The most controversial aspect of the Plan at the start of SIMDP 2 is clearly the operation of the Self-Sufficiency component of the SIMDP 2. The focus of a number of grievances, it poses a challenge to the Plan to resolve the charges of unfair resources’ allocation and conflicts of interest in a timely fashion. Thus the credibility of how the Plan responds to such concerns through both the grievance procedure and through other measures will be critical to maintaining the good name of the SIMDP 2. On the positive side, the complaints raised have served to focus the Plan’s partners on the operation of the Self-Sufficiency component and sparked a productive discussion on the role of grants in an economic development plan. With the Governing Board’s decision to refer to the RCAR for advice on the future of this component, this may be a good opportunity for Sakhalin’s Indigenous Minorities to continue to develop their own definition of sustainable development.

The SIMDP also continued to attract international attention. In May, 2011, the SIMDP (both 1 and 2) were subjects of discussion at a panel presentation before the United Nations’ Permanent Forum on Indigenous Issues in New York and also at a workshop presentation at the World Bank which was co-sponsored by the World Bank’s private sector arm, the International Finance Corporation. All three Plan partners participated, along with RAIPON and Cross-Cultural Consulting Services (CCCS), the firm preparing these EM reports.

Domestically, the Plan also participated in the International Exhibition-Fair, “Northern Treasures 2011,” held in Moscow. Highlighted at that exhibition was the experience of the three-way partnership during SIMDP implementation and also of one of the SIMDP 1’s more successful Business Plan recipients, which introduced to a national audience a number of SIM wild plant-based food products. The SIMDP’s Business Plans had helped finance the Ungysh Clan’s wild plant packing and processing initiative.

Lastly, the EM noted, during discussions with SIM in Alexandrovsk-Sakhalinsky, that the 50+ SIM population resident in the city seem to not be fully accounted for in the Plan, with most attention in the District paid to Viakhtu and Trambaus.

RECOMMENDATION:

√ The EC should consider adding SIM living in the City of Alexandrovsk-Sakhalinsky as a third distinct SIM group in Alexandrovsk-Sakhalinsky District (in addition to Viakhtu and Trambaus) in regards to information-sharing and consultation.

II. SIMDP Partners

A. The Three-way Partnership

All three partners are satisfied with the operation of their partnership and point to joint activities like their consultative visit around the island to brief indigenous communities about the new SIMDP 2 and to announce the two grant competitions between 25 March and 5 April, 2011 (reaching 200 people) as a good indication of their positive working relationship. The partners have fulfilled their obligations to have their representatives participate in all Plan governance bodies and continue to aid the planning and implementation of the SIMDP 2. Not all observers of the Plan are convinced this is always a balanced relationship, however, with a few individuals complaining of undue SOG influence a few times during the last six months.

B. RCAR and SOG in the SIMDP

Both the RCAR and the SOG continued their strong record of cooperation into the initial implementation of the Second Plan, with multiple representatives each serving on both the Governing Board and Executive Committee. Their representation on the two committees has diminished, however, due to the new committee/council composition of directly elected indigenous representatives from each district. This is offset somewhat, however, by representation of all partners in the Experts Groups attached to the Committee and Council, In addition, any member of the GB has the right to participate in any meeting of an SIMDP governance body.

RECOMMENDATION:

√ To maintain the flow of information to Plan partners from the SDF Council and the TEASP Committee, the partners may consider posting their representatives to sit in regularly on their meetings.

C. SIMDP in SEIC

The SIMDP continues as an important part of Sakhalin Energy’s social commitments with the Company fulfilling its leadership roles on both the Governing Board and Executive Committee The addition of a new Coordinator’s position to replace SIMDP 1’s Plan Assistant will cause some internal change, as the new post responds to the three partners’ scope of work to coordinate the entire SIMDP and oversee the handling of grievances. This is in contrast to the previous situation where the Plan Assistant was primarily responsible for supporting the Social Development Program and the Mini-Grants Fund but gave over such responsibilities for the TEAS Program to the Sakhalin Energy Indigenous Minorities Unit Head and the Nogliki/Val CLO. The Coordinator took over her position on 1 April, 2011 while the Plan Assistant was retained by Sakhalin Energy for an extra half-year to overlap with the Coordinator so as to train her for her new position.

For the new coordinator, Sakhalin Energy has proposed a training program and has sent her to attend special workshops in Moscow, as part of activities held in conjunction with the Northern Treasures exhibition. This native of Nogliki received higher education in St. Petersburg with a pedagogy degree before returning to Sakhalin. She enjoys learning through her work about her own Nivkh culture and assisting in the development of Sakhalin’s Indigenous Minorities. She hopes to learn more about the rights and potential development options of Sakhalin’s indigenous population.

The Indigenous Minorities Unit thus is composed of three persons following this transitional period: the Unit head, Yulia Zavyalova, who also serves as a member of the SIMDP 2 Governing Board; the new Plan Coordinator, Svetlana Sangi; and the Nogliki/Val CLO, Leena Zhamyanova, who also takes an active role in the Plan governance as a member of the Executive Committee.

As mentioned above, Sakhalin Energy’s direct representation on the two operational bodies, the SDF Council and the TEASP committee, was eliminated in the changeover from SIMDP 1 to SIMDP 2. Outside observers might wonder at why a company would yield so much power in a development program which it

funds 100%. The Company responds that the experience of SIMDP 1 has given it a level of confidence in the cooperative nature of its relationship with both the SOG and the indigenous communities—and to the fact that this change in community representation was not its sole decision but that of the combined partnership and that it followed recommendations received during the consultations. The Company points out that it is also represented in both bodies’ Experts Groups, the Executive Committee and Governing Board.

The Company continues its “tradition” from the First Plan of covering the costs of a number of activities to support the SIMDP with financing beyond the yearly SIMDP 2 budget of USD$312,000. Examples for the first few months of the SIMDP include a commitment to finance administrative costs for the microcredit program of the TEAS Program as well as to provide training for the new committee and council members.

RECOMMENDATION:

√ Partners should discuss with the new SIMDP 2 Coordinator training opportunities to build her capacity as regards indigenous development issues.

D. Role of the Districts in the SIMDP 2

Views of the SIM Specialists and other District Government representatives

Indigenous Minorities Specialists and District government representatives (vice- mayors, other government staff) interviewed all were appreciative of the benefits and opportunities that the SIMDP 2 provides their local indigenous communities. An often raised request, though, was for more systematic—and timely— communication of information regarding competitions and SDF long-term programs. They appreciated the efforts to keep them informed as evidenced by the March/April Consultation visit, but requested that the SIMDP 2 partners consider involving the Districts more actively in promoting the Plan. They suggested that local SIM councils could help distribute information and that the SIM Specialists could assist in monitoring and in evaluating local competition grant applications.

Some districts appear to be better informed than others. Apparently, information flow is somewhat dependent on how well district government staff and the SIMDP 2 staff communicate.

Views of Others

There was a division of opinion from others involved with the SIMDP as to the proper level of involvement in the SIMDP 2 by people at the District level. The greatest degree of support was for a more active role by the SIM specialists and the local SIM Councils (and some also suggested the Rodovoye Hozaitsva Councils as well) in publicizing the SDF and TEASP competitions and helping assess local applicants for these competitions. One senior indigenous SIMDP 2 participant recommended that the SOG hold a meeting, attended by partners SEIC and RCAR, to determine how best to articulate SIMDP 2 implementation in the Districts.

Others are not so sure, with one equally senior indigenous SIMDP 2 participant maintaining that SIM should be free to apply to Plan grants without fear of their applications being vetoed by jealous neighbours as they think might happen if applications were assessed at the local level. Some people are also leery of too much government involvement in what they see as a properly SIM-focused initiative.

RECOMMENDATIONS:

√ Announcements of all competitions, including application forms, should be sent by the Plan via email to the Indigenous Minorities Specialists in the Districts.

III. Governance

A. Committees/governing bodies

The SIMDP 2 introduced a number of changes in governance from the first Plan. Key among them was the reorganization of the committees to be comprised of only indigenous community representatives and an expansion of Executive Committee oversight of grievances.

Of the two innovations, clearly the decision to go to all-indigenous bodies for the SDF Council and the TEASP Committee was the most substantive. This shift was implemented with the support of the SOG and at the request of indigenous communities during the consultations held during 2010 to plan the SIMDP 2. It has been extremely well received by nearly all informants as a positive step towards indigenous self-management of their own affairs. Members of the Company’s Indigenous Minorities Unit also report that current Plan participants are more active and more responsive and seem to be motivated by a desire for community service. At the same time, there is also a universal acknowledgment that given the lack of experience of many of these new committee/council members, training is necessary. This is compatible with the SIMDP 2’s emphasis on capacity-building.

Elected at their local gathering places in each district, the new representatives on the committees—a goodly number of whom had no connection whatsoever with the previous Plan--are quite enthusiastic about their new responsibilities. For many of them, there is a steep learning curve, as they meander their ways through an unfamiliar bureaucratic maze. As a new member of the SDF Council put it, “I have no difficulty serving on the Council. But just speaking to the Company is a problem: they use too many abbreviations and specialist jargon!”

The newcomers among them enjoy the opportunity to see beyond the confines of their own village or town and meet SIM from around the island-possibly for the first time. One of the Smyrnikh members even revealed that her work on the SIMDP 2 led her to meet for the first time other SIM from another village in her District only 50 km away, and she was inspired to take her family—also the first time for them all--to the annual SIM festival held in Poronaisk in June.

Their service on the Committee/Council has also thrust them into the role of advocate and representative for the SIM resident in their District and applicants for the Plan’s competitive grants. They described how at Committee/Council meetings, each member shares information about their area and the applications made by indigenous groups or organizations from their district. And they often do this with passion: “Every member defends their district. But amidst all the

12 cries and screams, we are confident the truth will emerge and we will make the right decisions.”

The dynamic thus set up is that the newcomers tend naturally to defend their own districts (and, some say, their own friends and family in particular) and tend to make decisions as regards other districts based totally on the information given by other district representatives rather than relying on any objective criteria or the Experts Groups’ assessments. Given their lack of experience, they are also heavily reliant on those with previous Plan experience and have tended to yield inordinately to such “senior” members both on the Committee/Council and off. At the same time, members of the Committee and the Council are often unclear as to the relationship between their body and the overarching Executive Committee and Governing Board, as their own regulations do not mention such a relationship.

Training in many dimensions is thus imperative. Sessions held to date have been enthusiastically received by most members but far more is both desired by members and desirable for the bodies’ efficient operation. Sakhalin Energy is to be commended for taking on this additional task, providing workshops for both bodies in February and a follow-up workshop for the SDF Council in the spring on grant program design. Future trainings for the TEASP Committee could focus on Business Plans (“What is it? How can we evaluate it?”) with parallel trainings conducted at the community level emphasizing how to prepare a Business Plan. A workshop for both bodies could target “Decision-making as a Process.”

Other issues which have arisen or were recommended to the EM and which should be considered for possible changes in governance regulations include:

 Conflicts of interest: members of all bodies should disclose any vested interests they have in an issue or competition application before the body. This would include disclosing whether the applicant was a family member or employee or had any other particularly close relationship with the council/committee member. Wording of such a regulation could follow that adopted by the EC for its own deliberations on 25 February, 2011.

 Committee/Council member recall: Need to specify a process by which locally elected members of the TEASP Committee or SDF Council can be recalled or replaced

 Role of committee/council members as information conduit for district: How to inform and disclose SIMDP 2 information to their District, including reporting back to the District as to the results of SIMDP 2 meetings and decisions

 Explanation of grant competition rejections: Both TEASP Committee and SDF Council should expand their explanations to applicants of why their grants were rejected. This should be seen as a capacity-building opportunity for the applicants.

 Keep making an effort at inclusion when staffing SIMDP 2 governance bodies, bringing in critical and senior SIM personages

RECOMMENDATIONS:

√ Partners should work with the chairs of the TEASP Committee and SDF Council to determine an appropriate training program for their members for the coming years

√ The EC and GB should consider a regulation amendment requiring disclosure of vested interests of any committee/council member in any application which comes before an SIMDP 2 governance body

√ The role of the District representatives on the SDF Council and the TEASP Committee need to be specified as to how to convey information to the SIM of their districts

√ The EC and GB should consider a regulation amendment outlining a process for recall or replacement of members of the TEASP Committee or SDF Council

√ Amend TEASP Committee and SDF Council regulations to recognise oversight functions of EC and GB to clarify to committee and council members how their bodies relate to the Plan’s management entities

B. Information Disclosure

Sakhalin Energy has been proactive in increasing the visibility of the new Plan in an effort to increase transparency and access: Informational bulletin boards have been placed in every community with concentrated indigenous settlement, a dedicated SIMDP web site has been launched (www.simdp.ru), and the Company’s Community Liaison helps distribute Plan awareness in both Val and Nogliki through regularly scheduled outreach visits.

However, one reporting requirement does not appear to have been fulfilled as of yet. SIMDP 2 section 4.5.1 calls upon the Plan Coordinator to issue internal reports monthly to the three Plan partners.

RECOMMENDATION:

√ The SIMDP’s semi-annual report should both be a joint effort of all three Plan partners and also report key issues and challenges in greater depth

√ The Plan Coordinator should issue the monthly reports as required by SIMDP 2 section 4.5.1

C. Governing Board

The second Governing Board meeting was held on 29 June, 2011, five months after the inaugural meeting held at the end of February. The meeting ran smoothly, reflecting the experience of most GB members as carryovers from the First Plan, with members giving newer Plan participants many suggestions about how to conduct their SIMDP 2 work. The GB also had a vibrant discussion on the place of the self-sufficiency component in the TEAS Program, a discussion which was prompted by the Executive Committee’s investigation of four grievances regarding that component.

Some members of the Governing Board privately indicated some confusion as to their role, particularly in-between meetings. They wondered as to in what ways they were “governing” the Plan if they didn’t do anything for the SIMDP 2 other than attend a meeting every six months: could they, for instance, visit Projects as a Plan representative? Could they sit in on committee/council meetings?2 Could they request information? Could they help monitor the Plan’s operation?

The receipt of timely information was also raised by some GB members as needed to properly accomplish their GB roles. They suggested that the packet of materials they received the day of the GB meeting was very comprehensive and quite useful, and that they appreciated it being sent to them at least one week prior to the GB meeting. The EM noted with approval that the packet of materials distributed for the June meeting included lists of all applicants for the competitions, both those

2 They can; regulations allow for that although they may be unaware of such provisions. 15

successful and unsuccessful, thus giving the GB members a clearer understanding of the operation of a critical aspect of the Plan.

Lastly, the EM received some suggestions that Sakhalin Energy designate a Company lawyer to advise the GB when legal advice was needed and also provide training for Board members if such was considered by Board members to be useful.

RECOMMENDATIONS:

√ Executive Committee should prepare a statement of Governing Board roles and responsibilities as regards their activities in-between Board meetings, and submit for GB consideration

D. Executive Committee

The Executive Committee approved regulations for it to meet at minimum once per quarter and this they fulfilled—once in person and once by email correspondence. They were active in responding to five grievances, appointing a Working Group to handle them, while they also approved procedures for internal monitoring of the SIMDP 2. These were important accomplishments. They also approved the SDF Council “Spiritual Legacy” competition and, the TEASP Business Plan and Self- Sufficiency competition regulations in a timely fashion, as is required by item no.5 in their “Working Plan for 2011”

Nevertheless, some have suggested that the EC should be more proactive in reviewing TEASP Committee competitions. Others suggest that this oversight should apply to both the SDF Council and the TEASP Committee given the division of labour between indigenous representatives only on the committees and the three partners represented on the EC (and Governing Board).

IV. Mitigation Measures, Grievances, and Internal Monitoring

A. Mitigation Measures

Mitigation measures for any potential negative ecological or related effects of the Sakhalin-2 project on the lives, livelihoods, and environment of SIM have been an important part of both SIMDP 1 and SIMDP 2. Over the five years of the first Plan, however, the number of mitigation issues still active has steadily declined, leaving only two ongoing efforts which deal with emergency procedures and information disclosure and which were carried over from the First to the Second Plan. Consultations to gather community input for SIMDP 2 have added four new mitigation issues, but by June 2011, one of these new issues had already been closed.

At the Governing Board meeting, Sakhalin Energy conducted a special briefing based on their recent “Monitoring of Biological Resources Report” and made a presentation on Local Monitoring and Biodiversity programmes. At the meeting RCAR representative asked about ballast waters’ monitoring and Company representatives fielded a number of sharp questions regarding possible fish mutations caused by the Project directly or indirectly. With the recent nuclear disaster in nearby Japan, attention and anxiety over the state of the local marine ecology has been heightened. The Company representatives provided detailed explanations and sought to reassure those gathered that no such mutations had occurred. They also proposed RCAR to apply to the Company in writing in case any further related questions are raised.

B. Grievances

Five grievances were filed during the opening five months of the SIMDP 2. This about equals the total number of grievances registered during the entire period of the SIMDP 1, although it should be noted that most of those grievances were filed in the last year of the Plan. This trend can be seen alternatively i) as reflecting increasing dissatisfaction with Plan implementation, or ii) as a result of superior publicizing of the Company’s grievance procedures, or iii) as a sign of increasing confidence in the effectiveness of the Plan’s procedures. As four out of five of the grievances filed related to the Self-Sufficiency component—it is likely that both increased publicity and confidence in the effectiveness of the grievance procedure can account for the increased number of filings. The latter two explanations are particularly likely given the special efforts that Sakhalin Energy has made over the last year and more to promote the Grievance Procedure as well as the explicit publicizing of the GP as part of the multiple rounds of SIMDP 2 preparations which occurred in 2010.

The grievances attested to suspicions that the Self-Sufficiency component suffers from bias and conflicts of interest Upon receipt and registration of the complaints, the Plan Coordinator turned the grievances over to the Executive Committee which appointed a Working Group to work to resolve each particular complaint. The EM believes the complaints were dealt with in a timely fashion, strictly following Grievance Procedure guidelines to inform the complainant as to the status of the complaint investigation. By August, 2011, four of the five grievances. had been closed; of those complainants reached by the EM, both stated they were satisfied with the grievance process. One complainant commented, “They took the complaint seriously—far more than I expected! And I was treated with respect.” The EC pledged to continue to work to resolve the outstanding grievance.

The EC Working Group format (with an investigatory team composed of a representative of each of the three Plan partners sent to the complainant’s district to look into the matter on the spot) seemed to have worked well. They discussed the grievance with the complainant directly and interviewed others mentioned in the complaint. Their report and conclusions were reported back to the EC and Plan Coordinator, upon which response letters were sent to the complainants and an attempt made to resolve the grievance. Once resolution is reached, the complainant signs a letter which attests to the resolution of the grievance and their satisfaction with the process of dispute resolution.

C. Internal Monitoring

The SIMDP 2 places far more emphasis on the importance of internal monitoring than the previous Plan, entrusting internal monitoring to a three-person panel of one representative each of the three partners. The Board also approved regulations for monitoring based on EC recommendations. These regulations call for others (such as SIM specialists at the district level, district IPOs like Rodovaye Hozaitsva Councils, or SIM community members) to join these monitoring teams when appropriate. The first monitoring visit will take place this coming autumn, perhaps in October, accompanied by the Plan Coordinator and perhaps a representative of both the SDF Council and the TEASP Committee.

This upgrade and emphasis on internal monitoring is seen by many as critical to help the Plan avoid abuse of its grant programs and especially the Self-Sufficiency component of the TEAS Program which has been the object of concern over the misuse of funds. A vigorous monitoring effort is called for to give the Plan some way to safeguard its social investments, including unannounced checks on the whereabouts of equipment given as grants, checks on the registration status of granted equipment (under whose name has the equipment been registered), and a review of the role of partner organisations in the purchase and distribution of grant equipment. This effort can prove critical to re-establishing full credibility to the TEASP.

RECOMMENDATIONS:

√ The Internal Monitoring Team should request local District representatives to advise them on their monitoring visit to their District (either with suggestions and/or through participation), providing context and information about the applications received and about use of the grants delivered.

V. SIMDP Components

A. Traditional Economic Activities Support Program (TEASP)

The TEASP, a key component of SIMDP 1, continued over into in SIMDP 2. Key changes include i) the recasting of committee membership so that only indigenous representatives of each of the seven Districts of concentrated indigenous residence serve, ii) the establishment of an Experts Group to advise the Committee, and iii) the formal inclusion of a micro-credit subcomponent alongside Self-Sufficiency and Business Plan grants. Competition and contention, which accompanied some of the TEASP actions during SIMDP 1, also carried over into the Second Plan, as the novice Committee members doubled the percentage of TEASP funds given over to Self-Sufficiency (20% in SIMDP 1, on average; around 40% during this first allocation under SIMDP 2).

This increase in Self-Sufficiency grants, along with the rise in grievances that accompanied it, helped spark discussion and debate as to the proper role of such “handouts” in the Plan. During the Governing Board meeting in June, members vociferously debated the proper role of Self-Sufficiency in the TEASP, with most members seeming to support it being scaled back, if not eliminated entirely. Many felt that the TEASP should re-emphasize Business Plans and micro-credit as the only substantive ways to develop economically. The Board decided to ask the RCAR to conduct discussions with indigenous communities around the Island regarding the proper role of such grants in the TEASP and advise the GB as to the results. This could possibly be a critical moment in the emerging capacity of the SIM for self-determination.

Such conclusions were mostly paralleled in EM interviews beyond the GB meeting. A good number of respondents advocated for the TEASP refocusing on Rodoviye Hozaitsva, the clan enterprises, as the proper target if the formal TEASP objective of spurring job creation (as stated in the “Regulation for the TEASP Committee” and the “Regulation for the TEASP”) was to be accomplished. This, and only this, was the proper way, they felt, for TEASP grants to help build for the future, and not be squandered as “handouts” which only fills immediate needs and that need constant replenishing. If the grievances filed in June have helped spark this discussion and strategic thinking—whatever the legitimacy of their complaints-- then that is clearly a positive community development.

The Committee decided during its first meeting in February to amend its regulations and allow a committee member to discuss their own project which was undergoing consideration for approval by the Committee, although they kept the ban on voting. This decision was later overturned by the GB. As the TEASP Committee members need to establish a reputation for impartiality and fairness,

this was a proper EC decision. A similar issue of equal access has been raised by some Self-Sufficiency applicants as to whether or not they have the right to appear before the TEASP Committee to discuss their application. Some claimed that they were advised by some GB members that they had that right but that the Committee turned down their requests.

Self-Sufficiency Grants

Despite complaints and controversy regarding the award of some Self-Sufficiency grants, a number of observers feel that the awards made generally went to deserving recipients. Even for the eight awards made to Nogliki applicants, the three given to Val have not been challenged. Self-Sufficiency grants remain popular in the communities around the Island.

The critics of Self-Sufficiency grants, however, are growing in both numbers and intensity. They fault the grants for providing charity rather than fulfilling the central objective of the TEASP, which is to boost economic development through job creation. With many applications mostly copies of each other rendering the applications nearly indistinguishable, the TEASP Committee and the Experts Group are hard pressed to choose one over the other—providing a fertile ground for anger, complaints, and grievances. Some community respondents suggested given the difficulties of selection that a lottery for all eligible applications be held to choose among equally worthy applications.

Unsubstantiated charges of bias and fraud in the implementation of the Self- Sufficiency component were also heard. These included deceitfully applying in the name of poor or unemployed people, reselling grant equipment for personal gain, individuals manipulating applications and rules to receive multiple boats, snowmobiles, or similar equipment. The latter charge may be partially a misunderstanding of the role of partner organisations, which are needed to apply on behalf of unregistered individuals, and whose name and that of its head may appear multiple times in any listing of Self-Sufficiency grants.

The application set for Self-Sufficiency grants revealed two statistical anomalies. One was that 44 of 75 applications were from Nogliki, which Plan staff explained was due to Nogliki applicants applying as individuals, rather than as family members or members of group organisations, hoping thereby to increase their chances of success.3 The other anomaly was the 100% success rate of the partner organisation Nin-Mif of Nogliki for the three applications it sponsored, whereas other partner organisations achieved successful application rates no higher than 33% (including the other two Nogliki partners with 3 of 11 and 2 of 25 successful).

3 It should also be noted the competition rules did not set quotas for districts, so this Nogliki predominance was perfectly within contest rules. 21

One should note that partner organisations do not receive any part of the grant monies they pass through to successful applicants but do so as a public service to their communities.

The appears to be some confusion as to the proper target for Self-Sufficiency grants, with both individuals/families allowed to apply for the grants along with obschini and rodoviye hozaitsva, as listed on the grant application forms. However, this appears to be at odds with TEASP regulations which in section 4.7 reserves these grants for “disadvantaged and socially vulnerable people” living in non-urban areas following traditional subsistence lifestyles (not earning commercial profit) for at least four months per year. Most EM informants suggested the need to restrict Self-Sufficiency grants to only vulnerable groups, such as the elderly, which recasts Self-Sufficiency grants as more a social protection measure than economic development.

This approach would clearly distinguish the targets of the various TEASP components, with Business Plans and micro-credit aimed at developing rodoviye hozaitsva while Self-Sufficiency grants would be restricted to disadvantaged/vulnerable individuals/households. Some indigenous entrepreneurs supported this approach, explaining that the Program needs to encourage the establishment of cooperative organizations such as obschini and rodoviye hozaistva. Such a TEAS Program recasting or re-emphasis (Self-Sufficiency for vulnerable people, BP and microcredit for enterprises) would refocus the Plan appropriately on sustainable development.

Two other issues have also been discussed regarding qualifications for the Self- Sufficiency grants. One regards the perception of many that there is a restriction operating in awarding such grants only to those who are unemployed. This derives probably from a set of somewhat unclear regulations which alternately target such grants for those that reside “permanently” (defined as more that 6 months per year) at traditional places of subsistence but then also say they could reside there only “seasonally” (defined as 4-6 months per year). This in effect puts the minimal time frame conducting subsistence activities at four months. Aside from this lack of clarity regarding the time minimum spent on subsistence, the reality of indigenous life involves many (most?) people conducting “traditional economic activities” at least part-time during the year to supplement other family income sources, so that under such a definition a large number of SIM could qualify for such grants. Furthermore, many SIM are involved in the informal economy or part-time wage labour, rendering any clear distinction between “employed” and “unemployed” often problematic and leading to hard feelings and charges of the Committee not selecting fairly.

The other issue which applicants and others have raised is the requirement to show a driver’s license for those requesting boat motors or snowmobiles. Although

22 all acknowledge this as a legitimate requirement, some applicants reported some confusion regarding whether or not an individual whose name was on the application needed to have a license or whether it was enough if someone in their household had the license (with the proper endorsement for snowmobile or boat). Also, respondents in some districts said driver license training was either not available locally or infrequently available, thus posing a hardship to some. Nevertheless, during this first grant competition only a handful of applications were actually turned down due to lack of a driver’s license. At their June 2011 meeting the GB recommended drivers license training applications be supported and this was subsequently approved by the SDF Council.

Business Plans

Only 2 out of 7 Business Plan (BP) applications were successful. The Business Plan component is targeted at non-commercial rodovaye hozaitsva and obschini, but even their applications were considered weak by the TEASP Experts Group. Observers of the indigenous economic scene point out that there are many factors working against the development of SIM businesses including regulations restricting fish catch, the large sums of cash needed to develop fishing businesses (for boats, processing, etc.), and similar restrictions on land for the gathering of wild plants. Without changes in the codes, legislation, and regulations, they say it is very hard to develop SIM businesses.

Experts from the Experts Group felt that there were serious weaknesses in the submitted Business Plans, as they often lacked clear cash flows, income projections, marketing plans, or profit reports. The stated objective of the BP component is to create jobs, but some BP applications didn’t even mention this. Although many Business Plan applicants or would-be applicants were complaining that they needed an accountant to prepare a Business Plan, one financial expert pointed to a lack not so much of an accountant but to financial management experience and thus familiarity with even basic business concepts and approaches. They need, in the expert’s opinion, a simplified manual indicating what a BP should look like.

Some SIM businessmen, though, agreed with many SIM entrepreneurs that the BP applications were too hard to prepare because they did not have any experience in planning in this way. Particularly for those who came of age in the Soviet period, no business training was previously available to them, while for those under 40 schooling in such topics has been rare. Training to develop Business Plans must be a priority and the application period must be timed to be long enough so that such training can assist people during that time.

Suggestions for BP-related training included working with the SOG on development of a SIM Training Program/School to incorporate business planning (including

budgeting and reporting), management (for rodovaye hozaitsva and obschini staff) and technical skills. These suggestions recognised that basic business skills could not be delivered effectively in two or three mini-sessions and need to be conveyed over longer periods of time. The goal would be long-term community capacity- building for economic development and thus collaboration with the SOG is imperative.

Micro-credit

Micro-credit emerged as a TEASP component during the final year or so of SIMDP 1. However, reorganization of the Batani Fund (BF) resulted in the micro-credit option not being available during the last year of the previous Plan, and the allocated 1,080,000 RUB carried over to this year’s TEASP budget. In addition, with 5080,000 RUB originally allocated to Business Plans not spent but redirected towards micro-credit loans, there is a potential fund of over 1.58 million RUB available for loans this year.

The Batani Fund is based in Moscow. This has caused some to wonder if such an appointment as an implementation partner is appropriate for Sakhalin as the Fund may not be very familiar with business conditions on Sakhalin, but others point to the Batani Fund’s experience and connections to argue that the Batani Fund is the right group for the job 4 . The BF recommended a series of three training/informational seminars be held in each of the seven SIM Districts, and the TEASP Committee decided to hold them in September 2011.

Micro-credit will be available for commercial loans only, offering loans at 3% with a one-year payback period and up to a maximum of 300,000 RUB per loan. These basic terms should prove attractive to some businesses (primarily rodovaye hozaitsva) as commercial bank loans are rarely available for rates below 15-18% and often are as high as 35%-50% for multi- (2 or 3) year loans. Discussion of the new component has raised a number of questions regarding micro-credit implementation, with many wondering whether the proposed one-year payback period was too short, while others argued that micro-credit applications should be contingent on the development of the equivalent of a Business Plan (without necessarily asking for a BP grant) to demonstrate what income would be used to pay back the loan.

Will there be a demand for such loans? That is unknown at this time, although speculation seems to point to Okha and Poronaisk being the most likely sources of micro-credit applications. And where would the money from repaid loans be deposited? Some maintain that such monies should be used for community welfare

4 The problem may be lessened during the initial implementation if the former head of RCAR, now a RAIPON vice-president, takes on Batani Fund leadership temporarily during 2011-2012. 24 or grants, while many suggest that such repayments offer a perfect opportunity to provide seed money—through loan repayments—for an independent Indigenous Fund which could then become a free-standing source of SIM business loans. However, if any option is selected that does anything other than simply recycle the microcredit rubles, then in future years the TEASP budget must be divided to allocate money for the micro-credit component as well as for Self-Sufficiency and BP grants.

Information Disclosure

“The Regulation on TEASP,” adopted on 25 February, 2011 spelled out the responsibility of TEASP Committee members to conduct local informational meetings and to assist with local monitoring. These functions need to be reinforced, as complaints were heard that not all Committee members adequately and consistently held meetings to inform local people of the results of Committee meetings and activities. People want public meetings to be held promptly after Committee meetings have been held, particularly when the results of competitions are eagerly awaited.

The same Regulation also calls for feedback “letters with comments on projects” to be sent out no later than one month after TEASP Committee decisions are made. This period, although understandable from the SIMDP staff’s perspective, is probably too long from the recipients’ perspective, and opens the door for rumours and differential treatment (your access to information depends on your personal relationship with the Committee member). Also, a review of letters received by rejected applicants indicated that although sometimes the discussion of reasons for rejection was adequate, at other times it was clearly not.

Many informants also spoke to the need for community public meetings to explain how to apply for Business Plans and also for the preparation of a pamphlet which would describe the application process.

RECOMMENDATIONS:

√ During considerations of Self-Sufficiency, BP, or micro- credit applications, the TEASP Committee, along with the EC, should be guided by a principle of fairness: not giving a privileged position to those on the Committee as regards consideration of proposals they have a vested interest in. If, for example, applicants for Self-Sufficiency grants can not have direct access to committee deliberations, then neither should committee members with a stake in such applications have either.

√ TEASP Committee, upon receiving input from local communities and RCAR, should clarify targets of Self- Sufficiency grants and adjust regulations and application forms appropriately and submit such changes to the GB/EC for approval

√ Need to clarify minimal time frame (4 or 6 months) spent in areas of traditional subsistence activities needed to qualify for Self-Sufficiency grants

√ Applications for Self-Sufficiency grants should require applicants to supply information as to: i) whether the applicant has received previous SIMDP 1 or 2 grants, and ii) whether the applicant has received similar equipment from SOG or other programs, within preceding five years (clarify Regulation on TEASP for 2011, section 4.2)

√ The TEASP Committee should discuss with Sakhalin Energy, the SOG and the RCAR, the possibility of the latter preparing a simplified manual for BP preparation

√ The TEASP Committee should determine the most effective approach to assisting rodoviye hozaitsva (and obschini?) in preparing Business Plans, whether by special training workshops, or other means

√ Need to reinforce / reemphasise TEASP Committee members role as informational conduits to local District SIM regarding competitions and other matters

√ Need to continue improving quality of feedback with reasons for application rejections in announcement letters to applicants, treating this as a capacity building opportunity for applicants [TEASP]

TEASP Experts Group

An innovation for SIMDP 2 was the establishment of an Experts Group (EG) which would report to the TEASP Committee. The EG is composed of two representatives from each of the three Plan Partners and is tasked with evaluating all grant applications which are submitted to the TEAS Program. They meet separately from the Committee, submitting their recommendations in writing. For this first evaluation process, EG members chose, in their words, not to “select” grantees but to merely determine which 26 applications were, in their opinion, “qualified,” according to Committee rules of the competitions for BP and Self-Sufficiency grants. Of the 75 Self-Sufficiency grants they reviewed, they judged 18 as “unqualified;” among the Business Plans only one of seven was considered as partially qualified.

EG members reported relying on the RCAR members of the group for context of people and places and also spoke of the difficulty they had reviewing the Self-Sufficiency applications because they were so similar. Given the lack of experience of most EG members in evaluating proposals, training for the EG members in how to fulfil their committee obligations might be a good idea. Such training could be combined with that provided for Committee members. Another suggestion received urged that for BP proposals, special reviewers with financial management be specifically engaged to provide technical input and feedback to both the EG reviews and the applications themselves.

The TEASP Committee members felt that the EG recommendations were useful, not only with their review of the applications, but also with their suggestions for changes in TEASP regulations and the competition process. The Committee accepted their assessment of basic qualifications for Self-Sufficiency and selected the Self-Sufficiency grantees from the EG-approved qualified list. The only variation in terms of Business Plans was their partial allocation of funds to one BP which had been judged unqualified by the EG.

RECOMMENDATIONS:

√ Ensure grant applications for review are provided to TEASP EG members a minimum of one week before the meet to discuss the applications

√ Provide a special EG evaluation form for TEASP competitions guiding the reviewer to consider relevant assessment points

√ Have the EG review the TEASP competition application forms prior to opening the competitions to the public

B. Social Development Fund

Component Allocations

As during the SIMDP 1 when the predecessor to the Social Development Fund (SDF), the Social Development Program (SDP) was nearly universally praised for its component content and its smooth process of delivery of benefits and services, the SDF received praise across the board. The Fund held three in-person and one electronic meeting, and received two training sessions which were very appreciated. As regards support for cultural initiatives, the SDF can be considered the joint successor of the former Plan’s Mini-Grant Fund (MGF) and the SDP’s Culture component, combining as it does all support for cultural activities/projects into one component; this was a logical move to streamline the Plan taken by the Council in April. The new SDF also parallels the MGF with its establishment of a themed competition to select among grant proposals for cultural support. “Spiritual Legacy (of the SIM ancestors)” was 2011’s theme but with the new Plan the amount of money disbursed in a competition has risen from USD30,000 to USD50,000. One downside, however, of consolidating the cultural components into a themed competition is that it does not allow organisations to submit applications for proposals which do not fit the theme.

The entire amount for the SDF is exactly half of the SIMDP 2 amount, USD 156,000, with USD100,000 reserved for “long-term programs”, USD50,000 for the Spiritual Legacy cultural competition, and USD6,000 left in a “Reserve.” The allocation among the three components (long-term, competition, reserve) was based more on mechanical carryover from the first Plan rather than on SDF Council members’ active deliberation. Council members explain that given their inexperience, their yielding to those more experienced, albeit staffers, was appropriate this first time around but that next year they will exercise more oversight into such a basic SDF Council decision. At the Governing Board level, there was also some discussion of and disagreement over the proper usage of the “reserve” fund, with some objecting to the special “emergency” allocation to particular medical hardship cases, while the Reserve was also tapped for a RUB 169,000 allocation to support administrative fees for the newly designated SDF partner organisation.

The decision was made to classify education, health, and capacity-building programs (all mandated as component categories for the SDF in the Plan) as “long- term programs,” distinguishing them from all cultural programs which were awarded by competition. The “long-term” label worked to obviate a selection process for the specific health and education programs with programs pre-selected and presented by the staff to the SDF Council members for their approval. This was

28 done with the explanation that the pre-selections were both following previous SIMDP 1 programs and reflected the desires of the communities as reflected during the Working Group consultations during 2010 (as mentioned in the SIMDP 2). These commitments were labelled as “sustainable” commitments but they would probably be better characterised as “continuing.”

The Plan only mandates that SDF monies be allocated among health, education, culture and capacity-building, leaving the decision on yearly distribution and selection of programs to the Council’s discretion. Use of the term “long-term” to apply to some programs and not others should be done cautiously, if at all. For future SDF component and program allocations, it was suggested by some that it would be good to have SIM community input into Council decision-making, perhaps polling local SIM Councils, interviewing the District SIM specialists, and holding open community meetings. Through these approaches, SIM priorities among culture, health, education, and capacity-building could be assessed. Another suggested approach was to not have the Council make the decision on a programmatic basis based on community input but simply to open the health, education, and capacity-building components to a competitive application process whereby organisations submitted their proposals to the Council.

For the 2011 allocations, about 40% of the combined “long-term” budget component was spent on student scholarships and other student supports, mostly representing an on-going commitment to individual students. SDF Council members averred that this was money well spent, as students worked harder knowing that their support was dependent on how well they did in their studies; without such support, fewer SIM students could continue in school. In contrast to SIMDP 1, the 2011 SIMDP 2 allocations had lowered amounts for health (26.6%) and increased allocations for capacity-building (33.0%), a component which has achieved a more robust position in this Second Plan. Nearly all capacity-building funds (88%) went to the RCAR- and SOG-sponsored Indigenous Leaders School.

Council Members

As most of the Council members are serving for the first time on such a body, for some there is a steep learning curve but they universally express satisfaction and even excitement as they adjust to their new roles representing their Districts—and representing the SDF to their Districts. As one put it, “we have a great opportunity to do good things for our Districts.” This attitude might contribute to a bit of feistiness, as when they competed to bring funds and successful grant proposals back to their friends, families, and neighbours. Council members also displayed a distinct preference for only funding Sakhalin-based projects, turning down off- island researchers’ proposals for studying SIM, while also seeking to trim research or historical recovery projects in general.

Reviewing applications line by line, the Council members demonstrated both practicality and frugality as they suggested that for one proposal to repair a sports ground the request for 10 shovels be disallowed, saying, “people should bring their own shovels to repair the ground; that way the proposal can be cut by 1800 rubles.” Some “old-timers” to the process commented on the enthusiasm of the newcomers but suggested that they be offered training so as to make their work more efficient and on-target to achieve Council goals. The reticence regarding challenging staff-presented allocation suggestions will probably fade quickly as they learn the process and gain confidence. This is an excellent example of an SIMDP capacity-building opportunity.

Process

The Council members, observed during their June meeting, worked efficiently and professionally, carefully scrutinising each Spiritual Legacy proposal, and giving preference to grantees who had not received grants previously. They discussed them one by one, reviewing budgets and rationales, with District representatives adding background information, as necessary. When they felt more information was necessary than the documents provided, they did not hesitate to have the Council Secretary phone the applicant. Although they by and large accepted the recommendations of the SDF Experts Group as to proposal qualifications, they also made changes to some of them—adding or subtracting funds and asking for more information as they thought appropriate. It is anticipated that similar thoroughgoing attention will be paid next year to discussion of the other components (health, education, and capacity-building).

The application process for the Spiritual Legacy competition was carried out smoothly, according to both applicants interviewed and Plan staff. There was some concern expressed, though, that the letters containing explanations for rejections of applications were not giving enough feedback so as to be useful to the applicants.

Partner Organisation

To assist the SIMDP 2 in implementing the SDF programs, the SDF held a competition to find a partner organisation open to all eight eligible SIM community organisations. Only one IPO applied, the Centre for Preservation of Legacy Languages of Indigenous Minorities of the North of Russia. It was appointed partner organisation and will be responsible for the co-implementation of the two educational sub-components, three of the five health programs, and two of the five capacity-building projects, covering two-thirds of the combined budget of SDF. For such services it will receive administration fees equivalent to 13% of the project budgets to be implemented.

Conflicts of Interest

Council members dealt with conflicts of interest by declining to vote on their own projects, as required by SIMDP 2 regulations. In addition, Council members must take care to make sure that they allow themselves no more advantage or access to the Council decision-making process than would be available to any other applicant. Thus, if they are permitted to be present for and respond to discussions regarding their own proposal, they must ensure that other applicants have the same right and opportunity. If this is not practical, then the Council should consider adjusting its rules to make the process equitable for all applicants. The process for deciding on a partner organisation should also follow these conflict of interest guidelines, ensuring that discussion of potential partner organisations takes place in an atmosphere of Council member confidentiality.

RECOMMENDATIONS:

√ Each year the Council should consider anew the proper funding balance between culture, health, education, and capacity-building

√ Each year the Council should take a fresh look at the results of each program and decide anew if any programs in culture, health, education or capacity-building should be continued

√ The Council should consider as to whether a themed contest approach is the best or only way to deliver support to cultural projects

√ Programs in health, education, and capacity-building— as well as that in culture--can be open to competitive proposal bidding; the Council should consider by which manner SIM preferences will be incorporated into program selection

√ SDF Council should consider as to whether or not they want to decide on a definition for SDF purposes of “sustainable commitments” or “long-term” projects

SDF Experts Group

The SDF, like the TEASP, also was assigned an Experts Group to provide advice and recommendations regarding qualification of proposals submitted for competitions. The SDF EG, however, has a more complicated structure than that of the TEASP, one which effectively originates in SIMDP 1. Unlike the TEASP EG with its sole representation from the three SIMDP partner organisations, the SDF EG includes these and more: four representatives of different SOG ministries. This is in effect an amalgam of the previous SDP advisory panel which included ministry representatives along with the MGF Experts Group composed of representatives of the three partners. It is an unwieldy group.

The EG was used to review the Spiritual Legacy applications only and did not review the “long-term” projects with health, education, and capacity-building emphases. Of those Spiritual Legacy competition applications, the EG declared 22 unqualified (mostly for exceeding the grant maximums) and two others were recommended to be passed to the TEASP Committee. The EG wasn’t always sure that their recommendations were useful to the SDF Council, but Council members all said they found the EG recommendations indeed useful, although some admitted that they barely consulted the EG report. Council members suggested that the EG recommendations be conveyed more effectively so that they can more clearly understand the EG reasoning for positive or negative recommendations. During the SDF meetings, some Council members asked the Plan Coordinator to explain if she could explain the EG reasoning for a particular recommendation.

Some criticisms of the EG workings were received, including some who felt that EG members discussing and voting on their own proposals was inappropriate. Given that the EG is an advisory body only, this situation falls into a grey area since Social Fund Regulations (section 9.1) calls on members of “management bodies at various hierarchy levels” who have a “vested interest in any funding application reviewed” by the Plan to “refrain from decision making and voting on this application.” Is the EG a “management body” and so subject to the conflict of interest clauses of the Plan’s regulations? This question was raised at the June 2011 GB meeting where the Experts Groups were determined to not be management bodies.

Others felt that the membership structure of the EG—with five members from the SOG out of the Group’s total seven—gave the SOG too much influence on the Group. This unbalanced number derives, as noted above, from the needs of review for two very different procedures: that of the cultural competition based on SIM traditions and the other for initiatives making use primarily of the State and its allied organisations and services (health, education, and capacity-building). For the former, knowledge of SIM communities and legacies are helpful and for the latter

32 the specialised knowledge from the ministries is most relevant. The two groups need to be separated and their expertise more appropriately used to review SDF proposals.

RECOMMENDATION:

√ The SDF Council should review the appropriate composition of the SDF EG and advise the EC / GB accordingly if any changes are considered appropriate

VI. Planning

A. Action Items

The items included in the Appendix are suggestions by the EM to enable the Plan to better adhere to its objectives and to improve its implementation effectiveness. Action Items are addressed to each of the below governance bodies or Plan partners:

 Governing Board  Executive Committee  TEASP Committee  SDF Council  TEASP Experts Group  SDF Experts Group  RCAR  SOG  Sakhalin Energy

RECOMMENDATION:

√ Action Items should be reviewed by each of the indicated groups, discussed, and responded to in writing copying both the Chair of the Governing Board and the External Monitor.

B. Next SIMDP 2 EM Visit and Report

The Third SIMDP 2 EM Report will be based on at-a-distance review of Plan documents, phone and email interviews, as well as on remote attendance at the December 2011 Governance Board meeting. The Second Report is expected to be disclosed in Q1 2012.

Appendix: Recommendations Arranged into Action Items for Responsible Parties

Note:

 These matrices capture all recommendations applicable to each body from throughout this External Monitor Report  Each party is responsible for responding to its Action Items Matrix and for designating the other responsible parties  Check recommendation in main body of Report for full text of recommendation

Governing Board Action Items Matrix (As of [Date] 2011) Recommendation Response Status √ The EC and GB should consider a regulation amendment requiring disclosure of vested interests of any committee/council member in any application which comes before an SIMDP 2 governance body √ The EC and GB should consider a regulation amendment outlining a process for recall or replacement of members of the TEASP Committee or SDF Council

Executive Committee Action Items Matrix (As of [Date] 2011) Recommendation Response Status √ The EC should consider adding SIM living in the City of Alexandrovsk-Sakhalinsky as a

35 third distinct SIM group in Alexandrovsk-Sakhalinsky District (in addition to Viakhtu and Trambaus) in regards to information-sharing and consultation.

√ The Executive Committee should discuss whether or not to prepare a recommendation to the Governing Board specifying how to better engage District Indigenous Minorities Specialists and District Indigenous Minorities Councils in support of SIMDP 2 implementation. √ Announcements of all competitions, including application forms, should be sent by the Plan via email to the Indigenous Minorities Specialists in the Districts. √ The EC and GB should consider a regulation amendment requiring disclosure of vested interests of any committee/council member in any application which comes before an SIMDP 2 governance body √ The role of the District representatives on the SDF Council and the TEASP Committee need to be specified as to how to convey information to the SIM of their districts √ The EC and GB should consider a regulation amendment outlining a process for recall or replacement of members of the TEASP Committee or SDF Council √ The SIMDP’s semi-annual report should both be a joint effort of all three Plan partners and also report key issues and challenges in greater depth √ The Plan Coordinator should issue the monthly reports as required by SIMDP 2 section 4.5.1 √ Executive Committee should

prepare a statement of Governing Board roles and responsibilities as regards their activities in-between Board meetings, and submit for GB consideration

√ To keep the Governing Board sufficiently informed about SIMDP 2 progress in-between GB meetings, the Plan Coordinator should issue GB members periodic Plan updates. Similarly EC meeting minutes should be distributed to GB members within two weeks of the EC meeting √ The Internal Monitoring Team should request local District representatives to advise them on their monitoring visit to their District (either with suggestions and/or through participation)

TEASP Action Items Matrix (As of [Date] 2011) Recommendation Response Status √ Partners should work with the chairs of the TEASP Committee and SDF Council to determine an appropriate training program for their members for the coming year √ Amend TEASP Committee regulations to recognise oversight functions of EC and GB to clarify to committee members how the TEASP relates to the Plan’s management entities. √ To keep the Governing Board sufficiently informed about SIMDP 2 progress in- between GB meetings, the Plan Coordinator should issue GB members periodic Plan updates. Similarly TEASP meeting minutes should be distributed to GB members

37 within two weeks of those meetings.

√ Need to clarify minimal time frame (4 or 6 months) spent in areas of traditional subsistence activities needed to qualify for Self-Sufficiency grants √ Applications for Self- Sufficiency grants should require applicants to supply information as to: i) whether the applicant has received previous SIMDP 1 or 2 grants, and ii) whether the applicant has received similar equipment from SOG or other programs, within preceding five years (clarify Regulation on TEASP for 2011, section 4.2)

√ The TEASP Committee should discuss with the partners the possibility of the latter preparing a simplified

manual for BP preparation √ The TEASP Committee should determine the most effective approach to assisting rodoviye hozaitsva (and obschini?) in preparing Business Plans, whether by special training workshops, or other means

√ Need to reinforce / reemphasise TEASP Committee members role as informational conduits to local District SIM regarding competitions and other matters √ Need to continue improving quality of feedback with reasons for application rejections in announcement letters to applicants, treating this as a capacity building opportunity for applicants

TEASP EG Action Items Matrix (As of [Date] 2011) Recommendation Response Status √ Ensure grant applications for review are provided to TEASP EG members a minimum of one week before the meet to discuss the applications √ Provide special EG evaluation form for TEASP competitions guiding the reviewer to consider relevant assessment points √ Have the EG review the TEASP competition application forms prior to opening the competitions to the public why?

SDF Action Items Matrix (As of [Date] 2011) Recommendation Response Status √ Partners should work with the chairs of the TEASP Committee and SDF Council to determine an

39 appropriate training program for their members for the coming year √ Amend SDF Council regulations to recognise oversight functions of EC and GB to clarify to council members how the SDF Council relates to the Plan’s management entities. √ To keep the Governing Board sufficiently informed about SIMDP 2 progress in- between GB meetings, the Plan Coordinator should issue GB members periodic Plan updates. Similarly SDF meeting minutes should be distributed to GB members within two weeks of those meetings.

√ Each year the Council should consider anew the proper funding balance between culture, health, education, and capacity-building √ Each year the Council should take a fresh look at the results of each program and decide anew if any programs in culture, health, education or capacity-building should be continued √ The Council should consider as to whether a themed contest approach is the best or only way to deliver support to cultural projects √ Programs in health, education, and capacity- building—as well as that in culture--can be open to competitive proposal bidding; the Council should consider by which manner SIM preferences will be incorporated into program selection √ SDF Council should consider as to whether or not they want to decide on a definition for SDF purposes of “sustainable commitments” or “long-term” projects

SDF EG Action Items Matrix (As of [Date] 2011) Recommendation Response Status √ The SDF Council should review the appropriate composition of the SDF EG and advise the EC / GB accordingly if any changes are considered appropriate

RCAR Action Items Matrix (As of [Date] 2011) Recommendation Response Status √ To maintain the flow of information to Plan partners from the SDF Council and the TEASP Committee, the partners may consider requesting permission from these bodies to allow their representatives to sit in regularly on their meetings.. √ Partners should discuss with the new SIMDP 2 Coordinator training opportunities to build her capacity as regards indigenous development issues.

√ Partners should work with the chairs of the TEASP Committee and SDF Council to determine an appropriate training program for their members for the coming years

SOG Action Items Matrix (As of [Date] 2011)

Recommendation Response Status √ To maintain the flow of information to Plan partners from the SDF Council and the TEASP Committee, the partners may consider requesting permission from these bodies to allow their representatives to sit in regularly on their meetings. √ Partners should discuss with the new SIMDP 2 Coordinator training opportunities to build her capacity as regards indigenous development issues.

√ Action Items should be reviewed by each of the indicated groups, discussed, and responded to in writing copying both the Chair of the Governing Board and the External Monitor. √ Partners should work with the chairs of the TEASP Committee and SDF Council to determine an appropriate training program for their members for the coming years √ The Internal Monitoring Team should request local District representatives to advise them on their monitoring visit to their District (either with suggestions and/or through participation), providing context and information about the applications received and about use of the grants delivered.

Sakhalin Energy Action Items Matrix (As of [Date] 2011) Recommendation Response Status √ Sakhalin Energy should discuss with the new SIMDP 2 Coordinator training opportunities to build her capacity as regards indigenous development issues √ To maintain the flow of information to Plan partners

42 from the SDF Council and the TEASP Committee, the partners may consider requesting permission from these bodies to allow their representatives to sit in regularly on their meetings. √ Partners should discuss with the new SIMDP 2 Coordinator training opportunities to build her capacity as regards indigenous development issues

√ Partners should work with the chairs of the TEASP Committee and SDF Council to determine an appropriate training program for their members for the coming years