New government, old challenges in natural resource management

By Fitrian Ardiansyah, published in Coal Asia, August 17 – September 20, 2014, page 142-143

for the pdf version (9.8MB), please see: Opinion Fitrian Ardiansyah_CoalAsia_AugSep2014

 

CoalAsia_AugSep2014_New Government

The General Elections Commission of Indonesia confirmed Joko Widodo as the winner of the presidential race winner a month ago, paving the way for the creation of a new government that will run for the next five years and address a huge challenge in managing the country’s natural resources.

Although his opponent, Prabowo Subianto, refuses to admit defeat, many scholars and observers believe that Joko Widodo, or ‘Jokowi’ as he is popularly known, will be sworn in as the seventh president later this year.

Officially, the Constitutional Court has to declare Jokowi as the country’s elected president. Nevertheless, whoever the Indonesian next president is, he needs to hit the ground running, taking responsibility for forming a government that can deal with difficult issues such as balancing the country’s economic development, social welfare and environmental protection.

One immediate challenge, that the new president and his cabinet need to address, is regarding fossil fuel and energy subsidies.

High energy subsidies create significant costs for Indonesia and its people, impacting on the economy, the environment and Indonesia’s energy security.

Indonesia-Investment reports that the government allocated IDR300 trillion (US$26.3 billion) on energy subsidies in 2013 (mostly on fuels and electricity), and this year the government will spend at least IDR282 trillion (US$24.7 billion).

In general, such subsidies hinder Indonesia’s sector development, including in poverty alleviation, education and healthcare. In a 2014 report for the International Institute
for Sustainable Development, Ari A. Perdana argues that fossil fuel and energy subsidies do not support low-income households very efficiently and can effectively ‘crowd out’ government spending on alternative policies.

The relatively high subsidies also inhibit the development of indigenous renewable energy sources such as geothermal, biomass, bioenergy and micro-hydro. In 2009, Agus Purnomo, the special advisor on climate change to Indonesia’s president, argued that cutting fossil fuel subsidies is the key to bolstering the renewable energy sector’s
competitiveness.

The new president, therefore, not only has to lay out a policy to cut fuel subsidies immediately but also to develop programs and appoint energy and finance ministers who can use the fund shifted from the subsidies, to help seed investment in
renewable energy development, enabling Indonesia to secure its future energy supply and move toward a sustainable energy growth path.

Jusuf Kalla, the running mate of Jokowi, told Reuters a month ago that a priority program in their first 100 days in office will include the reduction of fuel subsidies. This is likely to be the first big test for the new government since the issue of fuel subsidy reduction is a politically sensitive one.

If the new government is successful to approach and address this, including to convince a ‘divided parliament’ and the general public, the new president and his cabinet have a good platform to create incentives for boosting Indonesia’s economic development, creating incentives for saving energy and finding renewable sources, and eventually reducing the country greenhouse gas emissions.

Another key challenge for the new government in managing the country’s natural resources is to formulate the future development platform of Indonesia, particularly whether the country will still depend heavily on natural resource exploitation.

Continuous natural resource exploitation has contributed significantly to Indonesia’s economic strength but, at the same time, this has led to resource depletion, and environmental degradation and related disasters.

The National Agency for Disaster Management (BNPB) reveals that for the period of 1815-2014, environmental and climate related disaster events have been prevalent, including floods (38 percent), strong wind (21), landslides (16), and drought (12). A study published by the United Nations Environment Program, for example, estimates that in the period of 2010-2013, flood events in Kalimantan have inundated more than 190,000 houses and displaced more than 700,000 people, resulting in significant social and economic costs.

Such disasters reflect on the past and current natural resource management regime of Indonesia as a country, particularly in the management of (or lack of management of) its forests, agriculture, land and key natural resources. Such disasters cost and will eventually shake the very foundations of Indonesia’s economy.

To date, Indonesia has one of the world’s largest rainforest areas but the Indonesian Forestry Ministry and the Center for International Forestry Research show that roughly only one-third of these forest areas are covered by primary forests, one-third by logged-over areas and one-third by vegetation other than forests.

Some scholars argue that forests in Indonesia are still disappearing fast. An article published in the 2014 journal Nature Climate Change suggests that the annual deforestation rate of Indonesia is twice the rate reported by the Indonesian government.

To address this issue, the new government needs to adopt a policy that ensures that halting deforestation and peat land loss is the center of Indonesia’s development policies and programs.

The current president, Susilo Bambang Yudhoyono, and his cabinet have managed to introduce forest and peat land conversion moratorium as well as establish a national REDD+ (reducing emissions from deforestation and forest degradation) agency.

Such a policy and new agency, however, have already been confronted by a huge task, particularly in being seen to be inclusive, taking into account the voices and interests of various ministries, sectors, layers of governments, and groups of stakeholders such as from local communities and the private sector.

The new government needs to realize that in a big, democratic and decentralized country such as Indonesia, any policy formulated or institution set-up needs all the support it can get to ensure that the desired changes can take place on the ground.

The new government, therefore, needs to rethink its future cabinet structure that allows good coordination among key ministries, such as development planning, forestry, agriculture, energy and the environment, and key agencies, such as the national climate change council and the REDD+ agency.

The new government will be judged by its selection of these ministers and heads of these agencies, and whether these leaders are those representing big businesses or willing to see Indonesia achieving sustainable development outcomes.

In addition, the new president should be much firmer in showing his leadership so that any decision would be followed and applied by those ministries and agencies accordingly.

Fred Stolle of the World Resources Institute, for instance, highlights this issue by stating that Indonesia has relatively good policies on forestry but the biggest challenge of all is to follow up the policies with effective implementation and law enforcement.

This first 100 days of the new government, therefore, would serve as the period for Indonesians to scrutinize the selection of ministers and formulation of key policies of their elected president and vice president.

In general, Indonesian citizens during this period, and even before, have to voice out and remind the elected government about the needs for significant transformation of the country’s current natural resource development, pushing for more efficient and sustainable use of natural resources.

For the elected president and vice presidents, they have to show that they can lead Indonesia, by formulating and implementing their vision, policies and programs that bring about the country’s sustainable development outcomes.

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The author is acting executive director of Pelangi Indonesia, a doctoral candidate at the Australian National University, and the recipient of Australian Leadership Award and Allison Sudradjat Award. He can be reached at fitrian.ardiansyah@anu.edu.au.

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Climate change and Indonesia’s key resources

By Fitrian Ardiansyah, published in Coal Asia, February 22 – March 22, 2014, page 150-151

for the pdf version, please see Opinion Fitrian Ardiansyah_CoalAsia_FebMar2014

Climate change and Indonesia ke resources

In his speech on a recent visit to Jakarta, the US Secretary of State John Kerry calls the world to pursue actions on climate change. This has propelled climate change back on the global news headlines.

With the current negotiation on climate change at the UN level converging toward Paris in 2015, expectedly resulting in a global climate change treaty agreed by all nations, the statement made by John Kerry is like a breath of fresh air since many countries have been waiting for the US examples and leadership in this issue.

A bilateral agreement between China and the US – reached a day before his visit to Indonesia – to cooperate more closely on combating climate change may potentially lead to wider and stronger commitments to curb greenhouse gases (GHG) by both and other big countries.

Any positive movement and actions coming out from the two superpowers are significant steps toward reaching a global commitment.

For Indonesia, actions from the two superpowers and wider global actions, including an agreed treaty, will definitely help and strengthen the country’s existing policies and programs on climate change.

As an archipelagic nation, Indonesia has started to experience climate change impacts, and if not seriously dealt with, these could further put pressure on the country’s economy, society and natural environment, which include extreme and unseasonal weather, droughts, flooding and trans-boundary haze.

At the same time, stronger actions on climate change at the global level are likely to provide a platform for Indonesia to decouple its economy from GHG emissions. Global agreed actions, particularly that include stronger commitments in terms of GHG emissions reduction, can in turn provide economic incentives for both state and corporate actors to reduce their emissions.

Without such incentives, it will be challenging for an emerging economy like Indonesia that has a high and relatively steady economic growth, a huge natural resources base and projected population expansion, to reduce the growth of its GHG emissions.

Sufficient economic incentives added with appropriate policies and programs can assist Indonesia to achieve balanced development – development that ensures economic growth and climate change mitigation.

To be able to attain this, however, the government of Indonesia may require specific interventions at the national and sub-national levels in key sectors such as energy (with key commodities including coal, gas and renewables) and agriculture (with key commodities including palm oil).

In the energy sector, Indonesia has significant resources and reserves of coal and gas, producing more this type of energy sources, not only for domestic consumption but also for meeting theexport demand. The 2012 data of the Energy and Mineral Resources Ministry indicate a persistent growth of production of coal, with the proportion of export reaching above 90 percent in the period of 2007-2009.

The increased domestic use of coal means that emissions from coal, which was minor contribution in 1980s and remained below 10 percent until late 1990s, have spiked in the last ten years. In 2009, according to the Energy and Mineral Resources Ministry, the contribution of emissions from coal was almost 40 percent.

The use of fossil fuels – i.e. coal, gas and oil – appears to continue playing an important role in the country’s energy mix in the future. Yet, to achieve a strong economic growth while ensuring the reduction of GHG emissions, Indonesia needs to dramatically boost investment in renewable energy and energy conservation (e.g. clean technology, eco-efficiency, eco-designs, etc.).

Boosting and attracting investments require policy reforms, especially which relate to energy subsidies and fundamental institutional changes. Many economists believe that huge energy subsidies have hindered the development of Indonesia’s renewable energy and can lead to energy security issues in the future.

In the agriculture sector, Indonesia has a challenging future in terms of providing food for its population. Several projections, for example, reveal that Indonesia’s rice consumption would exceed its production in 2020 and beyond. One of the possible factors causing this is likely to be the issue of land availability.

If climate change impacts are taken into consideration, the agricultural production may fall below these current projected figures. Climate change not only could lead to the reduction of the volume of agriculture commodities produced but may also result in other related damages and costs.

It is crucial, therefore, for the government to formulate policies and programs which ensure that the agriculture sector can cope with climate change challenges.

The current programs initiated by the Agriculture Ministry including by developing crop varieties which can cope with climate challenges (i.e. resilience to drought, flooding and diseases) and improving farmers field education on climate change and
variability, need to be further supported, especially at local level (i.e. ensuring farmers to have support so that they can increase their adaptive capacity).

Such programs and the lessons-learnt resulting from these not only can help Indonesia to develop climate change adaptation in the agriculture sector but also contribute to the negotiation of global adaptation programs and funds.

When it comes to discussing the agriculture sector, palm oil is undeniably one of the most important commodities for Indonesia.

With the skyrocketing demand for palm oil over the past 25 years, the challenge of climate change (both in terms of the future demand for biofuel and issues associated with deforestation) and the increase in capability to produce more, world production of palm oil, including in Indonesia, is expected to nearly double by 2020.

The amount of land given over to oil palms that has multiplied since the mid-1970s would even dramatically increase in the future.

Such increase in palm oil production leads to challenges and opportunities for Indonesia. Immediate and future opportunities for Indonesia, among others, are to show good cases that the country can meet the domestic and global demand by promoting sustainable palm oil production.

Key challenges include applying better land management, including no conversion forest and peat lands as well as the implementation of zero burning activities, and other GHG saving activities, including the use of POME (palm oil mill effluent) for energy and other uses.

The speech made by the US Secretary of State serves as a good reminder for the US itself, China and other big countries, including Indonesia, that all nations have responsibilities toward addressing climate change albeit with different capabilities.

When it comes to Indonesia’s domestic capability, the country needs to focus on its key sectors, resources and commodities. These sectors are both contributors to GHG missions and potentially affected by climate change impacts.

Strategically focusing on these sectors and resources means a further burden for a developing country like Indonesia because it requires huge financial, institutional and social investments.

It, nevertheless, also presents a good opportunity for the country not only to safeguard it against the threat climate change poses to development but also seize the economic opportunity that climate change presents.

Let us hope the current and future governments choose their options wisely.

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The author is climate and sustainability specialist, a doctoral candidate at the Australian National University, the recipient of Australian Leadership Award and Allison Sudradjat Award, and Program Development Director of Pelangi Indonesia.

Challenges for better natural resources management beyond 2014

By Fitrian Ardiansyah, published in Coal Asia, December 20, 2013 – January 20, 2014, page 144-145

for the pdf version, please see Opinion Fitrian Ardiansyah_CoalAsia_Dec13Jan2014

CoalAsia_Dec13Jan2014_BetterNRM2014

With the 2014 general election on the horizon in Indonesia, one may wonder whether the issues of better natural resource management and environmental protection would be in the mainstream debate among political parties and presidential candidates.

To date, Indonesia has experienced a stable growth since its economy recovered from financial crisis in the late 1990s and maintained its real growth performance at average above 5 percent in the period of 2000-2011, as reported by the World Bank.

The 2012 McKinsey Global Institute Report states that Indonesia is the 16th largest economy in the world.

The strength of Indonesia’s economy has been helped by its strong exports of natural resources, such as oil, gas, coal and crude palm oil (CPO), making up around 50 percent of Indonesia’s exports, as argued by the Global Edge of Michigan State University.

Indonesia has abundant resources and reserves of coal and gas, and has pushed the production of this type of energy sources in recent years, not only for domestic consumption but also for meeting the export demand. The Energy and Mineral Resources Ministry (MEMR) records that the proportion of coal export reaching above 90 percent in the period of 2007-2009.

With regard to palm oil, Indonesia in 2009 surpassed Malaysia to become the biggest producer this commodity in the world. Indonesia’s CPO exports and resultant revenues have increased dramatically over the last several decades, from 3.8 million tons (valued at US$1 billion) in 1999 to 21 million tons in 2013 (US$22.40 billion).

Commodities from forests and oceans also contribute to Indonesia’s economy. The 2011 International Trade Strategies (ITS) Report showed that various forest commodities contributed roughly 3 percent to the country’s GDP (gross domestic product).

Furthermore, natural resources and commodities have contributed significantly to the country’s employment, energy supply and food security.

The forest related sectors, for instance, employed a combined total of 3.76 million people or 4 percent of Indonesia’s working population, according to the 2011 ITS Report. While in 2010, 38.3 percent was reported by the World Bank as the figure of employment in agriculture (percent of total employment) in Indonesia.

A big question remains whether the country can retain its strong growth and support the livelihood of its population when these resources are extremely degraded or depleted.

In the general context of economic growth and GDP, resource depletion may not create immediate negative impacts. The McKinsey reveals that currently and to a large extent, Indonesia’s economic growth is propelled by its domestic consumption rather than export of natural resources.

The report further suggests that the resource sector’s share of the economy has fallen since 2000, with mining, oil and gas accounting for only 11 percent of Indonesia’s nominal GDP.

In the mid to long-run, however, resource depletion may shake the very foundation of Indonesia’s exports and eventually its economy. With the global demand for commodities likely continuing if not increasing, especially in fast-growing emerging markets, export growth from Indonesia can only remain buoyant if the country manages its resources wisely.

Resource depletion will also hurt the country’s economy domestically. In fact, it has done some damages if oil subsidy is used as a case.

Indonesia has become a net importer of both crude oil and refined products since 2004. Oil consumption has been heavily subsidized as part of energy subsidies and this has cost the government Rp306.5 trillion (US $31.5 billion) in 2012, a figure much higher than that in 2010 (Rp139.9 trillion or US $14.4 billion), according to Directorate General of Treasury of the Finance Ministry.

To address this issue, in mid-2013, the Indonesian government and parliament approved a government budget that increased the price of a liter of petrol by 44 percent and diesel by 22 percent. This intervention may have helped the government’s budget deficit but even after the price rises, as stated in the Economist, the deficit is still expected to reach 2.4 percent of GDP, up from 1.8 percent in 2012.

The same fate of resource depletion can happen to gas, coal and other mineral commodities especially if these resources are not managed carefully, which in turns may hit back at the country’s economy.

In 2012, for example, the Vice Minister of the MEMR stated that high energy consumption has caused and could accelerate the imbalance between the exploitation of fossil energy resources (such as oil, gas and coal) and the speed of inventing new reserves, leading to a depletion of Indonesia’s reserves and increasing dependency on imported energy.

Moreover, resources depletion often brings about other economic costs in the forms of environmental degradation.

Destructive, illegal and uncontrolled resources extraction in forestry, agriculture, mining and fishery sectors have usually led to deforestation and forest degradation, and depletion of fish stock which eventually created environmental related disasters such as floods, landslides, fires and haze, land, air and water pollutions, and biodiversity extinction.

Some of these impacts and disasters may not be easily reflected in the GDP of the country.

The loss of natural resources and the associated environmental impacts will surely be felt by Indonesian people and affect their daily livelihoods.

Droughts, floods and landslides, for example, often adversely affect agricultural production, in which the impacts are felt both on the level of the local economy and in the balance of trade and the current account, potentially upsetting a country’s macroeconomic equilibrium.

According to the Agriculture Ministry, more than a million hectares of the country’s paddy fields and more than 100,000 hectares of corn fields have been impacted by diseases, floods and drought in the period of 2007-2011. Out of these areas, approximately 140,000 hectares of paddy fields and 18,000 hectares of corn fields have suffered from crop failures.

If such production losses are not dealt with seriously, Indonesia may face difficulties in reaching its goal to ensure food security for its people. Even if such losses are compensated through imports, similar imbalances may surface in other areas, which include putting further dependencies of the country’s economy on foreign agriculture commodities.

Therefore, it is undoubtedly important to continue reforming the management of Indonesia’s natural resources and put this as one of the country’s development priorities.

Potential Indonesian presidential candidates and political parties should be reminded that Indonesia’s economy could be in jeopardy if its current and future economic platforms will only lead to further resource depletion and environmental degradation.

Indonesian people may need to see the track records of their candidates toward 2014 with regard to resource management and environmental protection, and identify and only support leaders who have had commitments and actions in transforming Indonesia’s natural resource management for the better.

The upcoming election once again brings an opportunity as well as challenge for us, the public, to contribute to an important decision-making process for the future of our economy and livelihoods.

It is time to demand for better natural resource management and environmental protection from our politicians and leaders.

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The author is climate and sustainability specialist, a doctoral candidate at the Australian National University, and the recipient of Australian Leadership Award and Allison Sudradjat Award.

The private sector and ‘green’ transformation

By Fitrian Ardiansyah, published in Coal Asia, July 19 – August 17, 2013, page 82-83

for the pdf version, please see Opinion Fitrian Ardiansyah_CoalAsia_JulyAugust2013

CoalAsia_JulyAugust2013_privatesector

With growing environmental and social problems faced by the society resulting from economic activities, there is a clear need for substantive solutions that cut to the heart of the economy at different levels. The private sector, as a key actor involved in economic activities, hence has a significant role to push for the transformation of the economy into greener and sustainable.

Indonesia is currently at the forefront of many sustainability issues. Deforestation, depletion of natural resources, water and air pollution, flooding and drought, are among huge challenges that the country has to deal with.

The private sector, including investors and corporates, has often been perceived as one of the main culprits causing environmental problems. In the recent event of forest and land fires in Sumatra, an analysis by World Resources Institute indicated the occurrence of fires in lands belong to a number of plantation and forestry companies. The mud flow in East Java is also an example in which the public view that a particular corporation is the sole cause of the disaster.

The private sector, nevertheless, has also been commencing initiatives with other stakeholders, including the government and civil society groups, to address environmental issues and provide immediate and long-term solutions.

At the global level, platforms such as the Forest Stewardship Council that promotes certification for sustainable forest management and the Roundtable on Sustainable Palm Oil that promotes the production and use of certified sustainable palm oil have emerged.

According to the 2012 Association of Chartered Certified Accountants report, there has been a significant increase in the application of socially responsible investment by institutional investors around the world and over 1,000 investors representing US$32 trillion has signed up to the UN Principles for Responsible Investment.

In Indonesia, although there is yet to be a comprehensive assessment on the private sector’s sustainable activities, it appears there are sections of the sector which have seen sustainability as business opportunity.

Indonesian corporations linked with foreign investors or markets which have stricter environmental regulations or requirements, for instance, may likely to promote and adopt sustainability standards for their operations or could face further pressures and negative consequences.

Pressures and demands from the Indonesian government and its society for greener economy and development have also sent signals to the private sector that destructive operations which result in negative environmental impacts need to be mitigated or stopped.

Local social conflicts could rise due to the perceived negative risks and unwanted impacts resulting from particular business activities, such as from mining, oil and gas extraction, infrastructure development, plantation establishment, logging operations, buildings and settlements.

Avoiding the halt of particular business activities resulting from tensions and conflicts could mean helping investors and corporates to save unwanted costs which could reach millions of dollars.

Creating incentives and rewards can also trigger more active involvement of the private sector to promote, develop and implement sustainable practices.

The latest increase in the tariff for renewable energy in Indonesia (i.e. geothermal, biomass, solar), for example, has created a better level of playing fields for renewable energy investors and corporates. This is expected to further attract larger investments from the private sector which eventually help reducing the country’s dependency on fossil fuels, providing wider and accessible energy for its citizens, and reducing greenhouse gas emissions.

Incentives created for reducing emissions from deforestation have also begun to attract investors and corporates to be pioneers in forest and peat land conservation and restoration. If conducted responsibly, taking into account the needs and rights of local and indigenous peoples, the private sector can demonstrate that this type of actions can produce benefits for the economy, environment and communities.

Such responsible approach is not an easy task to do. The private sector may need help from a variety of groups, including the government and civil society, to understand the complexity of the issues, calculate the costs and initial investment associated with the approach, and be patient but persistent in undertaking the journey towards sustainability.

Multi-stakeholders platforms built collaboratively by the private sector, the government and civil society groups to provide business solutions for sustainability issues can also improve the level of trusts among these actors, especially if transparent discussions and exchange of knowledge take place regularly.

Regardless of the growing number of companies taking part in sustainability platforms, it seems that the current and future environmental problems may be too big to be solved by even “the progressives” and “champions” of the private sector. There is definitely a need for a critical mass of investors and corporates so that there will not be any significant “bootleggers” and “free-riders”.

A significant and larger number of investors and corporates which promote and undertake sustainable practices can reduce costs and investments in greening the economy. A critical mass of the private sector involving in sustainability means that “the champions” of the industry will not be isolated just because they implement sustainable practices.

To achieve such situation, the private sector needs to pro-actively engage the government and seek for the support from the civil society and the media to push for better corporate governance, in which transparency is promoted, corruptions are seriously dealt with and a level of playing field is created.

According to the Global Compact Network Indonesia, good governance is a critical enabling factor. Good governance principles, such as transparency, accountability and responsiveness, therefore, should be promoted as fundamental values to guide efforts to achieve sustainability.

The private sector can further lead the way by improving its internal policies and operations, and creating funds to support such actions. The private sector may require innovation in its approach at different levels so that sustainable development can be carried out in a cost-effective and efficient way.

There is, however, an important component of education and outreach to the public and consumers. Consumers need to understand that efforts to operate in a sustainable manner require their support. Hence, identification of products or services which are really delivered in a responsible and sustainable way is a key.

Honest, clear and accessible information is vital to further promote green products and services. To achieve this, the private sector needs to undertake efforts along the supply chain.

When the private sector can push for both sustainable production and consumption, green transformation can then be considered as “effectively running”. If this is the case, many will likely applaud the contribution of the private sector, particularly toward achieving a healthier and liveable planet.

In a total economic value term, increased investors and corporates focus on sustainability not only are creating better products and services but also fundamentally addressing challenges of natural resource depletion and environmental pollution.

The journey towards greener economy may be long and uneasy, but if the private sector recognizes itself as a key stakeholder and is willing to collaboratively lead the way, this journey may yield immediate benefits and better outcomes in the future.

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The author is climate and sustainability specialist, a doctoral candidate at the Australian National University, and the recipient of Australian Leadership Award and Allison Sudradjat Award.

Responsible mining: Is it possible?

Published in Coal Asia, June 11 – July 20, 2013, page 96-97

by Fitrian Ardiansyah

for the pdf version, please see Opinion Fitrian Ardiansyah_CoalAsia_JuneJuly2013

CoalAsia_JuneJuly2013_responsible_mining

Although considered as a significant contributor to the economy of many countries, the mining sector or industry is arguably one of the most heavily criticized industries in the world when it comes to environmental and social protection. It is, therefore, a huge challenge to find an appropriate solution that could balance mining development and environmental performance.

A 2003 study conducted by the World Resources Institute reveals that approximately one-third of the world’s active mines and exploration sites are located in intact ecosystems of high conservation values.

In Indonesia, it may be difficult to know the exact number and location of mining licenses. A 2004 article in Inside Indonesia written by Dianto Bachriadi suggests that the majority of mining activities occur within the national forest estate (i.e. forest controlled by the Forestry Ministry).

Researchers from the Australian National University, in their 2012 paper, estimate that prior to 2000, there were only approximately 600 mining licenses in Indonesia, but by 2010, more than 10,000 licenses had been issued. According to the same study, many of these licenses were issued by local governments and potentially overlap with other permits previously issued over the same area.

The mining sector in Indonesia has been blessed with major investments, and along the way continuously contributing to the country’s growth domestic products (GDP) significantly. A 2011 news from Business Wire reports that the mining sector accounted for 10.8% of Indonesia’s GDP in 2009, with minerals and related products contributing one-fifth of the country’s total exports.

The same news projects that the industry looks set to post strong average annual double- digit growth of 11.2% in real terms over the forecast period to reach US$149.8 billion in 2015. With the increase in coal and mineral mining’s contribution to the total government revenue (a 6% increase in 2009 compared to 2000), it is expected that mining licenses will be issued in a wider sense.

Should this growth continue, without substantial improvement of the level of environmental performance and commitment to social responsibility made by the mining industry, criticisms towards the industry may rise.

For decades, many research institutions and environmental organizations have published reports documenting negative environmental impacts of mining activities.

In these reports, they argue that land clearing for the development of new mining sites and associated infrastructure is viewed as a direct cause of deforestation and habitat destruction in Indonesia. In particular, the most immediate impact on forests from mining activities is the removal of forest vegetation.

One of such reports is a 2000 study conducted by William Sunderlin and Sven Wunder. The study shows that there is a statistically significant relationship between the amount of mineral exports and rate of deforestation in Indonesia during the period of 1976 to 1980.

Another study focusing on Papua and Kalimantan, for instance, supports the previous study by stating that gold and copper mining activities in these two major islands had massive environmental impacts on surrounding forests since 1990s.

Other reports reveal that not only the development of mining will result in negative impacts on forest but also on other ecosystems and the society. These include contamination of rivers used for drinking water and food supplies, and increasing social conflict over access to mineral resources.

With a number of environmental organizations claiming that as of 2005, mining activities have encroached on or threatened 11.4 million hectares of forest in Indonesia, including 8.68 million hectares of protection forests and 2.8 million hectares of conservation areas, an increase in the level of criticisms towards the mining industry appears to be understandable.

In this regard, a proactive approach from the mining industry, particularly in promoting the application of responsible mining practices could be seen as a good initial step leading to a credible balanced solution.

The industry argues that this approach can somehow show that it can leave positive long-term legacies by ensuring the protection of the environment, before, during and after the mining operations take place. A number of different initiatives of responsible mining practices include measures which minimize harm to the environment, recognize human rights and indigenous people’s needs and aspirations, as well as promote greater social and governance accountability.

With a varying degree of successes, the implementation of such initiatives has taken place in Australia, Mongolia, Indonesia and other countries.

A few environmental organizations and local social development organizations are beginning to embrace the initiative and trying to work together with companies and governments to apply the initiative and monitor it.

In a large country such as Indonesia, in which 842 licenses for mining exploration and exploitation have been given between 2005 and 2011 by the Forestry Ministry, covering approximately 2.03 million hectares of forests, the application of the initiative at a larger level and the inclusion of wider stakeholders such as governments, indigenous people and  local environmental organizations are likely key to further success of the initiative.

If the initiative is implemented only at a small scope or scale, one would argue that any best practices resulting from the initiative may not necessarily be applicable to other areas in the country. If there is a bigger platform endorsed by wider stakeholders supporting the initiative, best practices resulting from it may likely be applicable to other areas or could be magnified at the national level.

To be able to undertake and achieve this, trust needs to be developed among different stakeholders, who previously perhaps have negative perceptions toward the industry. Open and transparent discussions need to commence so that any results would be perceived credible and gain wider supports.

Another important factor for any responsible mining initiative to be considered as a serious endeavour is that it should also be feeding back to the country’s legal and government system. As Indonesia is reforming its land use and forestry management by issuing a set of different policies, the initiative needs to positively influence this process and be a major counterpart.

Using a platform of responsible mining initiative, the mining industry has a good opportunity more than ever to show that not only it has the right intention to contribute to the sustainable development of Indonesia, but also a possible approach to make it happen.

Actors in the mining industry, however, need to give wholehearted support to the initiative and collaboratively engage other stakeholders to build trust so that others will be convinced that this is a serious undertaking.

If this is the case, responsible mining practices, although it may not be a perfect solution, is likely viewed as the right step towards it.

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The author is climate and sustainability specialist, a doctoral candidate at the Australian National University, and the recipient of Australian Leadership Award and Allison Sudradjat Award