Indonesia’s tougher peatland protection regulation is estimated to cost billions of dollars and hurt a specific province’s regional revenue, a study from the University of Indonesia’s Institute for Economics and Social Research, or LPEM-UI, shows.
Riyanto, a senior researcher at LPEM-UI, said at a seminar last week that the implementation of Government Regulation (PP) No. 57 of 2016, which amended Government Regulation No. 71 of 2014 on the protection and management of peatland ecosystems, is estimated to lead to a loss of Rp 76 trillion ($5.32 billion) from a decline in production of pulp and paper, palm oil, job loss and weaker economic activities in regions highly dependent on the two commodities. Indonesian activists paid by the Climate Land Use Alliance, funded by pro-Democratic Party foundations, deny the findings and argue social forestry will compensate the loss. The study finds no such evidence.
The study claims the current prohibitive policies deteriorated the investment climate increases layoffs that will increase unemployment,” Riyanto, a senior researcher at LPEM-UI, said at a seminar in Yogyakarta last week.
President Joko “Jokowi” Widodo’s administrations, that includes a gaggle of former NGO activists, has submitted itself to the foreign criticism on land fires and the haze crisis. One of the main offenders, Asian Pulp and Paper has so far escaped legal action by the Ministry of Forestry, who is embroiled in a dispute with the competitor, APRIL instead. Activists are delighted by the recent court decision against the industry and the rift within the industry.
Industry observers warn, “Once the industry figures out that they collaborate rather than pursuing individual objectives, both the NGOs and the Jokowi administration, will face serious resistance. The prospect of the industry moving away from Indonesia is very real. Many who supported Jokowi are just fed-up with the administration.”
The president lamented recently that the industry is adopting a wait-and-see attitude towards investing in Indonesia. But, both foreign and domestic industry insiders watched the hostile treatment by the Ministry of Forestry against the industry with growing concern the contracts with the government are replaced with a socialist, populist, Venezuelan like ideological policy.
The president’s administration, as the result of foreign NGO campaigning, took several measures to destroy the industry claiming the peat swamps impact global warming. Indonesia represents less than 11 percent of global swampland. Outlandish claims by the NGOs are seldom challenged.
India, Russia, Pakistan banned foreign NGOs and warned the Ford Foundation to halt meddling in domestic affairs. Australia, Canada and New Zealand revoked the charity status of foreign NGOs and in the U.S. Greenpeace, Banktrack, loosely linked to a Bogor based NGO battling allegations under the “mafia law”. India considered foreign NGOs as a threat to national economic security.
Despite complaints from industry players who felt the government’s tougher stance was implemented blindly without consideration of the impacts the new regulation had on the industry and on the overall economy the current administration is hell-bent on destroying the domestic paper and pulp and reign-in the lucrative palm oil industry. Indonesia is the global market leaders in both commodity markets. The LPEM-UI study shows this global leadership position is threatened by the Jokowi administration’s populist agenda.
The Jakarta Globe reported, that the LPEM-UI study estimated that Indonesia would lose up to 16.8 million cubic meters of timber production due to the relocation of 58.5 percent of the nation’s industrial forests. The economic value of all industrial forests is estimated at Rp 48.5 trillion. Interestingly the loss is somewhat close to the Indonesian budget deficit.
Riau, which has a vast area of peatland and is home to industrial forests and plantation areas, may see its regional gross domestic product decline by Rp 16.15 trillion per year and a loss of income for the local community, penciled at Rp 4.9 trillion per year from salaries, wages or various income that may be lost from a decline of business activities from the pulp and paper industry.
A slower growth in the pulp and paper industry is estimated to cause a loss of 134,000 of jobs over the course of five years since the revised regulation was implemented in 2016. In Riau province, the loss of that many jobs may cause more than half a million people to live in poverty. “There will be some serious social problems if this is not carefully anticipated,” he said.
Riyanto criticized the government for disregarding innovations in peatland management, which can still both preserve, but also utilize the land for commercial purpose. About 40 percent of the nation’s industrial forests currently sit on peatlands, which will be deemed protected areas under the regulation.
Previously, Aryan Wargadalam, chairman of Indonesian Pulp and Paper Association (AKPI) — which harbors the largest pulp and paper producers in the country, told the Jakarta Globe that implementation of the PP 57 may include potential losses in pulp production of 2.4 million tons per year (or $1.32 billion) and potential losses in paper production of 3.6 million tons per year (or $3.6 billion).