Indonesian Bill an Environmental, Economic Disaster

Indonesia’s  parliament is poised to pass a massive “omnibus bill” stimulus package by early October to help offset the economic damage incurred by the Covid-19 pandemic. Unfortunately, that package currently contains provisions that will allow unbridled deforestation that will both harm the environment and sabotage the bill’s economic growth potential.

The omnibus bill involves the insertion of 174 new articles into 79 existing laws governing areas including taxation, labor, investment and the environment. President Joko “Jokowi” Widodo’s government has pitched the bill as an essential job-creation tool designed to streamline business-unfriendly bureaucratic processes in order to boost investment.

However, some of the bill’s provisions would also directly increase the risk of massive deforestation by eliminating existing legal protections for primary forest cover.

Specifically, the bill would loosen requirements for environmental impact assessments for industrial and agribusiness projects and empower the central government to approve business and investment in officially designated forest and peatland areas, which are currently protected by a deforestation moratorium.

The bill also eliminates the legal requirement that provinces maintain a minimum forest cover of 30% on provincial land by allowing them to set such standards “proportionately.”

And it includes a provision that could increase the regional risk of catastrophic haze from plantation fires by lifting the existing strict legal liability for companies with fires occurring on their concession areas.

According to an analysis by the Indonesian non-governmental organization Madani of these provisions, their potential impacts are nothing less than catastrophic. The NGO warns that the omnibus bill if passed in its current form could lead to the complete destruction of natural forest cover in the provinces of Riau, Jambi, South Sumatra, Bangka Belitung and Central Java over the next two to three decades.

This assessment is reinforced by a public letter sent to domestic and international financiers by a coalition of Indonesian civil-society and environmental NGOs. They warned that the result of the bill’s passage will be that “Indonesian​​ current laws and regulations will no longer​​ comply​​ with​​ globally accepted​​ environmental and social safeguards.”

These concerns aren’t limited to environmental organizations. In July, the World Bank’s Indonesia and Timor Leste country director, Satu Kahkonen, criticized the bill by warning that in its present form it “is basically not helping Indonesia” because it will “move Indonesia’s environmental legislation further away from the implementation of best practices.”

Tragically, the severe environmental consequences of the omnibus bill will also directly undermine its stated intention of economic stimulus and job creation. That’s because the environmental harms wrought by the bill will harm Indonesia’s  attractiveness as an investment destination and exporter. That will in effect reverse recent hard-won progress by the Indonesian government and the private sector in reducing widespread deforestation and destruction of peat lands.

One of the sectors that have the most to lose from the omnibus bill’s pro-deforestation elements is the palm-oil industry. The sector – whose exports constitute more than 2% of Indonesia’s annual gross domestic product – has made strides in recent years to shake its well-earned reputation as a major driver of forest destruction by implementing “No Deforestation, No Peatland, No Exploitation” (NDPE) policies.

Those policies, in tandem with Indonesian government initiatives, including the enactment in August 2019 of a permanent moratorium on forest clearing for timber and plantation development, helped reduce deforestation in Indonesia in 2019 to its lowest levels in almost two decades.

But rather than decrying the omnibus bill’s pro-deforestation elements, Indonesia’s palm-oil sector has instead taken a position of complicit silence.

The glaring exception to this has been Astra Agro Lestari, a subsidiary of the British conglomerate Jardine Matheson. Astra Agro Lestari, Indonesia’s second-largest palm-oil producer, has significant influence within both the palm-oil sector and the Indonesian government through Joko Supriyono, Astra’s vice-resident director and chairman of the Indonesian Palm Oil Producers Association (GAPKI).

Despite Astra’s adoption in 2015 of an NDPE policy, in February this year, Supriyono expressed unqualified support for the deeply flawed omnibus bill as “a solution to the complexity of licensing in the palm-oil sector.” He described GAPKI’s support for the bill as essential to “the interests of the national palm-oil sector.”