in Indonesia, Norway

Mixed messages on the Norway-Indonesia billion dollar forest deal

Mixed messages on the Norway-Indonesia billion dollar forest dealPerhaps not surprisingly, the billion dollar forest deal between Norway and Indonesia is proving to be controversial in Indonesia. The government now has to play an impossible balancing act – claiming to be serious about addressing deforestation, while reassuring forest destroyers that their profits will not be affected.

According to a report in the Jakarta Globe “producers of coal and palm oil continued to howl”. Indonesia is the world’s largest exporter of coal for power stations. Over the next five years, coal demand is expected to double. Bob Kamandanu, chairman of the Indonesian Coal Producers Association (APBI) said that the country’s new environmental laws were the “biggest issue facing the industry” in Indonesia.

Indonesia plans to cut its emissions by 26 per cent against business as usual by 2020. On 6 January 2010, Zulkifli Hasan revealed the government’s cunning plan for meeting its emissions target: 21 million hectares of “new forest”. “If the scenario described proceeds, if the planting proceeds, we can reach more than 26 percent,” Hasan told journalists in Jakarta. An area of 500,000 hectares is to be planted each year, at a cost of US$269 million. Of course, the 21 million hectares of “new forest” will not be forest at all. It will be plantations.

But Norway’s US$1 billion will not be used to fund Indonesia’s tree planting plans, according to Agus Purnomo, head of the National Climate Change Council, as reported in the Jakarta Post. Meanwhile, Wandojo Siswanto, the head of working group on the climate unit in Indonesia’s Forestry Ministry said, “We will renegotiate the agreement with Norway. Indonesia needs money for tree planting.”

The Letter of Intent between Norway and Indonesia states that Indonesia will implement a “two year suspension on all new concessions for conversion of peat and natural forest.” But the details about this two-year suspension are sketchy.

It seems that Indonesia’s Foreign Minister signed the Letter of Intent before agreeing (or even discussing) the deal with other government ministries. “We just knew about the decision in Oslo from the media. There was no publication at all before it,” Adi Putra Tahir, acting chairman of the Indonesian Chamber of Commerce and Industry, told the Jakarta Globe. As a result, government officials are now arguing in the Indonesian press about what the moratorium actually means.

One of the areas of disagreement is the question of whether the suspension will apply to existing concessions or only to new concessions. A vast area of land is involved. Existing licenses for conversion to non-forest land uses cover a total area of more than 30 million hectares.

On 31 May 2010, Agus Purnomo, told Reuters that the government would revoke at least some existing concessions:

“I am not ruling out any possibility. The spirit of the agreement was to save the remaining natural forest and peatland and we will do whatever humanly possibly to make it happen, within the legal context of Indonesia. If we have to go through cancellations in the court system, we will do it.”

On 1 June 2010, the Jakarta Globe reported Agus Purnomo’s explanation of how the moratorium would apply to existing concessions: “license holders who had already initiated work on their concessions could continue, while those who did not must relocate but would be compensated with permits for other sites.”

He explained that the government would provide additional information to permit holders regarding their concessions within the next six months. Unfortunately, that amounts to an open invitation to any concession holder that has not started clearing forest to do so as quickly as possible.

But other government ministers say that existing concessions will not be cancelled. On 2 June 2010, the Jakarta Globe reported the Coordinating Minister for the Economy, Hatta Rajasa, as saying that “the government had no intention of limiting the expansion of the $15 billion domestic palm oil industry, although it was committed to slowing deforestation.”

The Ministry of Forestry lent its support to Ministry for the Economy’s position. On 31 May 2010, according to the Jakarta Globe, Forestry Minister Zulkifli Hasan suggested that concessions would only be affected during the two-year suspension period:

“During the moratorium, peatlands and forests cannot be converted for non-forestry purposes,” even if their land status allows conversion. “Non-forestry activity will only be allowed on arid and over-logged land.”

He also said that the moratorium would begin in 2011-12.

Walhi (Friends of the Earth Indonesia) dismissed the moratorium as “futile“, pointing out that a moratorium on logging is also needed. Unfortunately, the Ministry of Forestry has different ideas. A week before the Norway-Indonesia deal was signed, the Forestry Minister Zulkifli Hasan announced that the Finance Ministry had agreed to proposals to remove value-added tax on log products. “The regulation will take effect this month. This is good as it will not burden industries because raw materials were not supposed to be taxed,” he told the Jakarta Post. He added that this will allow the timber industry to increase production.

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  1. Published forecasts of “demand” for Indonesian coal are probably out of date and, in effect, extrapolations based on the years of “economic growth at any price” last decade.

    China and India’s unsustainable economic growth are partly dependent on coal being cheap (i.e. implicitly suspect from the legal, social and environmental point of view) – as well as consumers not caring about the consequences of their purchases. The market (including for timber, pulp and palm oil) is distorted by prices which do not reflect both legality and social and environmental impact.

    It is likely that many of the mining, forest clearance and plantation concessions have been recently rushed through in Indonesia “on the nod” – specifically in order to gain access to REDD+ or similar funding but with little intention to actually mine, clear or plant.

    All such concessions above a low threshold should be reviewed – those granted during the last couple of years and those which have not been sufficiently implemented should be considered ineligible for compensation. As should those where corruption is reasonably suspected as having been a factor in granting the concession.

    Lawyers should be salivating at the prospect of lucrative commissions – on either side of the fence! Where are they?