DFID Indonesia Country Assistance Plan preparation

ENVIRONMENTAL ANALYSIS

CONTEXT
Indonesia is rich in natural resources and biodiversity. A combination of factors
including natural disasters, a low income economy, illegal and unsustainable
exploitation of resources and weak environmental governance has led to significant
losses of natural capital and environmental services. Poverty is widespread1.
Marginal and exposed communities rely heavily on natural resources for their
livelihoods and are highly vulnerable to loss of ecological functions that underpin
resource-based production. Inequitable access and rights to resources often result in
conflict. Indonesia is pursuing the integration of sustainable development into policies
and programmes but is unlikely to meet the MDG72 target of recovering the loss of
environmental resources, as forest and marine reserves and their inherent biodiversity
continue to decline. Industrialisation and energy use in urban areas is degrading water
and air quality... Indonesia’s poor are most vulnerable to the effects of climate
variability, pollution and natural hazards and have limited capability to respond to
them. The country has ratified eleven MEA3 protocols.

ENVIRONMENTAL CHALLENGES

Deforestation and land degradation

Indonesia forests are extensive, diverse and hugely valuable in terms of the reserves
of timber, biodiversity, traditional livelihoods (estimated half the population), and global
environmental services. The world’s second largest tropical forest is in a critical state
and being depleted at an uncontrollable rate. Some estimates claim that more than
2m ha are deforested and degraded each year, largely as a result of illegal logging4,
forest allocation and conversion to agricultural use. About 50% of the country’s forests
are degraded and 54% of that remaining is threatened. Protected and conservation
forest areas are not immune from logging of high value species and incursions for
agricultural uses. Serious environmental impacts attending controlled and uncontrolled
forest clearance include land degradation and desertification, loss of biodiversity
(especially in protected areas), soil and water loss, changes in nutrient cycling5,
flooding and siltation, air pollution (smoke hazes from set fires) and net CO2
emissions6 in quantities that significantly contribute to global warming and climate
change. The social impact of depleted forest and forest resources are significant in
terms of local livelihoods7, poverty and human conflict. With the exception of dry

1
Estimates vary: between 10% and 20% of the population live in (official) poverty and close to half the
population is living a marginal existence (<US$2/day)
2
Reversing the loss of environmental resources and applying the principles of sustainable development
3
Multilateral Environmental Agreement
4
up to 90%. The gap between industrial demand and sustainable legal supply being the driver for illegal logging
5
Trees of tropical forests soils act as nutrient reservoirs and their loss inhibits nutrient recycling back to the soil.
6
from combustion, decomposition of soil organic matter (especially peat soils), and reduction of an
environmental sink for CO2
7
100m people rely of forest resources for their livelihoods

0
season burning, traditional agronomic practices contribute little to the overall
environmental impacts. However, expansion of agricultural production onto marginal
areas and steeper slopes is causing serious problems of land degradation in upland
areas. Land pressure has driven the rural poor onto unsuitable land, and into
conservation forests where poor farming practices is causing loss of fertility and soil
erosion. Recovery of degraded land is normally possible through good land use
management.

Unsustainable forest exploitation is strongly correlated with corruption, poor political

and environmental governance, inequitable access and confusion and conflict over
land tenure and rights. Enforcement of laws dealing with illegal trade in timber species
is deficient.

Coastal Zones and Fisheries

The productivity of marine resources (capture fisheries and aquaculture) is vital to the
economy and for sustaining the livelihoods of coastal and coastal plain communities
(about 80% of the population). The 55,000 km coastline supports a rich and diverse
set of habitats including extensive coral reefs, mangrove forests and swamps, lagoons
and estuaries. The coral reef system is a world centre of coral biodiversity. The
coastal zone sustains an enormous fishery8 and provides the main source of protein
for inhabitants, but its productivity is severely threatened by unsustainable fishing
practices such as overfishing, illegal mesh sizes, destructive fishing (fish bombing and
poisoning), coral mining and the effects of pollution. Illegal trawling increases the
pressure on reserves and nurseries. The destruction of mangrove9 and swamp forest
for commercial aquaculture not only destroys fish and invertebrate nurseries but
exacerbates the problems of coastal flooding, siltation and saline intrusion. The
demand for reef products, together with the effects of pollution and bleaching has
severely reduced the condition of coral reefs10. Pollution from oil and estuaries
carrying industrial non-degradable contaminants (heavy metals, PAHs, PCBs)11, and
pesticides put capture and aquaculture fish exports at risk due to residue legislation,
with knock on effect to fisheries workers.
Coastal fishing communities are aware of the dangers and their vulnerability to coastal
degradation, but they have limited voice and poor frameworks for sustainable
exploitation. Weak institutional structures to protect informal fishing rights and poor
enforcement of environmental legislation (to effectively protect the reef systems) is
also reported.

Climate Change
Indonesia is one of the world’s largest emitter of greenhouse gases (reported in the
top five). Release of GHGs from forest fires, deforestation and subsequent
degradation of organic matter in soils are five times greater than from industrial and
domestic use of energy (9% of total national emissions). The contribution from

8
ninth largest in the world
9
1.5Mha lost between 1982 and 2000
10
60,000km2 of coral reef of which 6% is in good condition (2000)
11
PAH: polycyclic aromatic hydrocarbons. PCB: polychlorinated biphenyls

1
agriculture12 is very small by comparison. The likely environmental consequences of
global climate change for Indonesia will be greater climate variability including
extreme weather events that may result in drought, flooding, unseasonable rains and
increasing land and sea temperatures. Sea level rise and extreme rainfall events put
islands and coastal regions at risk of inundation, displacing communities and
damaging fisheries and agricultural land (saline intrusion). Rising temperatures in
Malaysian forest have been shown to decrease growth rates of trees, reducing their
capacity to store CO213. Variable climate also threatens agricultural production and
Indonesia’s rich terrestrial and marine biodiversity. Coastal livelihoods and the
security of millions who are reliant on forest resources and rainfed agriculture are
already being exposed to the threat of climate change. Managing natural resources
and energy use to stabilise and reduce emissions is a major task requiring will and
policy development. Adaptation - coping with the effects of climate variability - is a
major and more immediate challenge for Indonesia14. As such, adaptation to climate
change is a policy priority that is still under represented by the assistance of donors
and MFIs.

Urban and Peri-urban Pollution

Accelerating industrial expansion without regard for the environment has increased
pollution in urban areas. Rapid urban and industrial growth has reduced air quality in
major cities. Vehicle exhausts and industry are responsible for airborne contaminants
(notably tetraethyl lead, NOx, CO2, and SO2) while high levels of per capita energy
consumption has doubled carbon dioxide emissions15. Ambient air quality standards
are being exceeded in some towns and cities. Natural and set forest fires (dry season
burning) are responsible for large amounts of haze - particulate and CO2 pollution.
Urban and peri-urban dwellers close to large cities suffer respiratory health impacts,
but data on air pollution, acid rain and health are in short supply.

Industrial effluents, sewage and agricultural run-off have contaminated surface and
groundwater with persistent and non-biodegradable compounds, including heavy
metals, recalcitrant organics and pesticides. Potable water supplies in cities are
frequently contaminated with coliform bacteria and rural aquifers may contain
pesticide residues that have leached down from crop production systems (notably
rice). Mine drainage and mercury used for illegal extraction of gold also find their way
into aquifers. Until recently, there had been relatively little investment in water and
sewage treatment in urban areas.

The risk from per-urban agricultural pollution (agrochemicals in soil) is low and
recoverable. Contaminated soil in urban areas from current or former industrial use
will very likely be heavy but spatially contained – at least horizontally. (No data
available)

12
largely methane from flooded ricefields; and some CO2 from phytosanitary burning of stubble
13
Ecology Letters 10, 461 (2007)
14
Working paper: Indonesia and Climate Change: Current status and policies 2007 DFID and WB
15
WB estimates from 2003

2
.
Natural Disasters
Over the last 50 years, several disastrous floods, tsunami, drought, fires, earthquakes
and volcanic eruptions have occurred across the archipelago causing widespread loss
of life and livelihoods, contamination and degradation of natural resources. The
country’s frequent natural disasters16 place millions below the poverty threshold. They
not only put at risk local development initiatives but also large-scale infrastructural
works.

Early warning systems will likely remain in the domain of specialist international
centres but for drought and fire, the potential to predict, monitor and manage their
impact on natural resources is a local or regional proposition. The capacity to collect,
analyse and deliver environmental information to government institutions at low cost
has already been proven in Indonesia. Remote sensing techniques coupled with GIS
can improve flood, drought and famine early warning. Improved fire monitoring
enables real-time management and also demonstrates where land use change is
occurring in forest and agriculture sectors.

Biodiversity
Indonesia is a mega biodiversity country: the centre of plant species diversity for a
number of genera and one of the world’s centres of species diversity of hard corals
and many groups of reef-associated flora and fauna. Risks to biodiversity from
exploitation, degradation and pollution are mentioned in sections above.

CONSTRAINTS

Environmental governance remains in a high state of flux: Government aims and

policies are being globalised through becoming party to MEAs and citing MDG targets
on sustainability issues. At the same time it is committed to decentralisation and
devolution of natural resource (NR) responsibilities to local government and
communities. The new prospects of trading environmental services and providing
block grants to all villages to build community participation by 2009 may compound
the difficulties of transition from the previous agenda. The NR sector is significantly
affected by these changes and the risks to NR management are considerable, given
the reliance of the economy on renewable natural resources. Instead of creating
opportunity, greater local control could increase the risks of poor resource decisions,
unsustainable development and further degradation.

Environmental infrastructure is acknowledged to be strong, but is highly variable

across the provinces. In practice, poor states invest less in environmental governance
so that civil service capacity and public sector management is weak, and exacerbated
by fragmentation of institutions and lack of an accessible knowledge base. Outside
Jakarta, most EIAs17 are done by provincial universities and the vetting by provincial
environmental committees is worse than perfunctory when it comes to protection of

16
The World Bank (2005). Natural Disaster Hotspots: A Global Risk Analysis. Washington D.C
17
Environmental Impact Assessments

3
NR and user rights. Political rivalry, states that resent federal interference, contractors
averse to offending central government all lead to stand offs, and coupled with the
power of elites and corruption, hold back projects and rural development.

Tackling the constraints to NRM means investment in infrastructure, institutions,

resource management and information systems and the strengthening enforcement
systems. In particular, and outside of Jakarta:

• enhancing integration of environmental issues into the development process:

changing the mindset that impact assessment is not incompatible with the
achievement of economic growth
• removing the constraints to the environmental assessment process (e.g.
awareness of the requirement for EIA, bureaucratic barriers, uncertain legal status,
inaccessible documentation buried in legislation). Public information on land
ownership and rights is hard to access, though some NGOs are becoming
specialists in EIA.
• ensuring stakeholder involvement and public participation in development projects
and their assessment
• tightening up the review procedures of EIA
• ensuring co-ordination and co-operation between institutions: global information
systems and data sets need to be shared between end users, not held as
institutional assets. (for example the review of national data policy – who collects
data and controls quality, who distributes it and converts it to information relevant
for decision-makers). The availability of inexpensive remote sensing systems and
applications can enable real time NRM at a provincial level.

Indonesia’s disaster risk management framework is reported to be weak, and regional

autonomy has the unintended effect of eroding this further, limiting central government
authority to setting the legal framework for national disaster management and
monitoring, whilst disaster reduction and prevention measures are to be carried out by
provincial, district, or urban authorities.

POLICY AND INSTITUTIONAL CONTEXT

The GoI’s Medium Term Development Plan18 tackles economic growth, welfare and
environmental sustainability plus actions to speed up achievement of their MDGs. The
GoI’s PRS is also incorporated into the MTDP, with a programme designed to
enhance community empowerment through a strong focus on bottom-up policy design
and implementation.
The robust enforcement of the government’s anti-corruption campaign has led to the
arrest of a considerable number of civil servants across all levels of government. Just
how effective these policies have been remains to be seen, but they are giving rise to
more community activities, despite the slow pace of document processing (blamed on
loss of civil servants). It still remains unclear how new roles and responsibilities

18
Presidential Regulation No.7/2005 on the National Medium Team Development Plan issued on 19 January 2005.

4
established by the National 5y Plan (2000) has unfolded and how much decision-
making was effectively devolved to regions and districts.

In NRM, there is a healthy institutional infrastructure that has evolved out of the
agricultural disasters and reforms of the 70’s and 80’s. Several well resourced
agencies are responsible for developing and implementing a range of NR and
environmental policy instruments. Five ministries and agencies have mandates for
environmental programmes19 (priorities in italics):

• Ministry of Environment, which also houses the Environmental Impact

Management Agency (BAPEDAL); institutional capacity building in regions,
empowerment of society, compliance, information systems, EIA, pollution control
and environmental restoration
• Ministry of Marine Affairs and Fisheries: formulation of policy, co-ordination and
management of marine and coastal resources (exploitation and protection)
including coral reefs
• Ministry of Forestry: regulation and management of commercial concessions,
terrestrial and marine protected areas, prevention of land degradation and
rehabilitation of degraded land, illegal logging, fire management reforestation and
devolution of forestry activities.
• Department of Water Resources Development: water resources development in
urban and rural sectors, sustainable conservation, flood control, data
management, devolution of WRM to communities and the private sector
• The National Development Planning Agency (BAPPENAS): priorities for the
conserving biodiversity

A large group of donors and MFIs support the NRM programme activities of the
agencies and the expertise and technology transferred is considerable. Difficulties
arise in retaining trained staff and maintaining equipment after programme
termination. The effectiveness of the agencies has been compromised by
decentralisation and major issues have arisen over the T & Cs of disbursement of
funds to the regions.

Despite there being a strong cluster of environmental laws there are doubts about
their effectiveness outside Jakarta. Once again this is attributed to the process of
decentralisation and is expected to improve as responsibilities for their administration
and implementation become clearer as the process continues.

The MTDP contains three environmental policy objectives, one of which deals with
improving national capacity in adapting climate change issues into development.
The threat of CC on poverty reduction is bound to dampen progress with MGDs
targets and MEA goals and yet, for a country in which livelihoods are so dependent on
the productivity of ecosystems, signs of national activity and assistance by
development agencies are absent. Food security is a fundamental concern as

19
Core policies and programs are summarised in the ADB Country Environmental Analysis paper 2005

5
changes in growing season, precipitation, saline intrusion, distribution of pest and
pathogens will demand a shift in agricultural practices. Traditional coping strategies
will need augmentation: cropping systems, new varieties (traits for drought, salt and
heat tolerance) and moisture conservation. Investment in environmental information
systems (remote sensing and GIS) will improve met. forecasting, spatial mapping and
early warning systems. DFID’s new Research into Use Programme highlights adaptive
technologies and management strategies for alleviating the impacts of climate
variability on agricultural livelihoods20. The World Bank are developing a screening
tool (ADAPT)21 to adapt projects to local climatic parameters and sensitivities.

NR sector assessments and programmes still have a tendency to focus too closely on
discrete problems. They need to adopt a holistic approach that embraces cumulative
environmental and social effects and put more emphasis on ecosystem approaches
and ecological economics. Programmes addressing the reversal and remediation of
environmental degradation are in short supply and involve significant changes in
policies, institutions and practices. Few countries have these currently under way. The
UN Millennium Ecosystem Assessment22 provides a framework for ecosystem
approaches. A focus on ecosystem services helps in incorporating the environmental
dimension into sustainable development policy and planning.

20
RIUP: see at http://www.researchintouse.com/index.php?section=1
21
ADAPT 2005. http://www.climatescience.gov/workshop2005/presentations/EC1.6_Noble.pdf
22
http://www.millenniumassessment.org/en/index.aspx