Commodity Booms and Green
Growth in Indonesia
Budy P. Resosudarmo
Australian National University
Commodity boom: Coal and palm oil
2
Palm oil
Coal
Oil
Natural gas
0
50
100
150
200
250
300
350
400
450
2000 2011
Index o
f pro
duction
Export of CPO
3
0
2
4
6
8
10
12
14
16
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Indonesia Malaysia World minus I&M
Billion US$
Export of Major Mining Commodities
4
0
5
10
15
20
25
30
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Copper Nickle Bauxite Coal
Billion US$
Contribution to exports
Coal and palm oil
Oil and gas
0
5
10
15
20
25
2000 2011
% o
f goods e
xport
s
5
Indonesia the world’s largest exports of both
coal and palm oil
Coal and palm oil prices have fallen during
2012, but export values continue to increase
Workers in oil palm plantation
6
-200
200
600
1000
1400
1800
2007 2008 2009 2010
Permanent workers Employers Temporary workers Unpaid workers
Thousand workers
Workers in coal mining
7
0
50
100
150
200
250
300
2007 2008 2009 2010 2011
Permanent workers Employers Temporary workers Unpaid workers
Thousand workers
Average hourly wage of permanent workers
8
3,000
6,000
9,000
12,000
15,000
18,000
2007 2008 2009 2010
Oil Palm Plantation Food Crops Coal Mining
Mining excluding Coal All sectors
Substantial benefits from the booms
Palm oil
1.7 million jobs, 1.6% of total
Wages higher than for food crops
Large smallholder involvement (42% of oil palm plantation land)
Now world’s largest exporter
9
Pictures: http://www.greenprospectsasia.com/content/indonesian-small%C2%ADholders-get-help-produce-cspo, http://www.energyspectrumindo.com/2012/06/indonesian-coal-miner-toba-bara-cuts.html
Substantial benefits from the booms
Coal
260,000 jobs, 0.2% of total
Wages much higher than average
Growing contribution to government revenue
Now world’s largest exporter
Both provide sizeable benefits to local economies, principally off Java
10
Pictures: http://www.greenprospectsasia.com/content/indonesian-small%C2%ADholders-get-help-produce-cspo, http://www.energyspectrumindo.com/2012/06/indonesian-coal-miner-toba-bara-cuts.html
Green growth
President has made several
speeches calling for green growth
Pro-growth, pro-job, pro-poor, pro-
environment
Leading institutions support the
concept
11
Picture: http://blog.cifor.org/9657/indonesian-president-makes-speech-at-cifor-on-sustainable-growth-with-
equity/#.UFP_a5gY1RV
The economy has been growing rather well, and so, a good time to conduct
the policy
Idea is not to slow growth, but to address market failures to decouple growth
from environmental damage (i.e. price externalities, don’t subsidise pollution,
adequately govern open-access resources)
Greenhouse gas emissions Indonesia one of the largest emitters, mostly
from deforestation and peat management
Commitment: Reduce emissions by 26%
against business-as-usual (BAU) (or 41% with
support) by 2020, although BAU not formally
locked in
12
Picture: http://www.energyspectrumindo.com/2012/06/pt-kdl-power-plant-project-in-40.html
2011 National Action Plan: Most reductions from forests and peat, but also actions in
other sectors
Emissions from energy are increasingly quickly (4.4% per annum since 2000),
stoked by coal
Plan to expand geothermal: 48% of a second ‘crash program’ of 10,000 MW by 2018
Many challenges, including human capital; energy subsidy is still an issue
Forests
“I will dedicate the last
three years of my term as
President to deliver
enduring results that will
sustain and enhance the
environment and forests
of Indonesia”
President Yudhoyono
September 2011
13
Picture: http://blog.cifor.org/forests-indonesia-feature/#.UFUzeZgY1RX
Deforestation
14
Recent Deforestation
0.4
0.2
0.7
0.1
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
Brazil D.R. Congo Indonesia Sudan
% p
er
annum
15
2011 estimate: 0.5
(Ministry of Forestry)
REDD+ United Nations’ Reducing Emissions from Deforestation and
Degradation scheme
May 2010: Norway committed $1 billion. $30 million disbursed to date
President has given strong backing
Appointment of UKP4 (President’s Delivery
Unit for Development Monitoring and
Oversight) to manage initial implementation
REDD+ Agency proposed
>45 demonstration activities, half in
Kalimantan
16
Picture: http://blog.cifor.org
Pictures: http://www.foodtechnology.co.nz/export?page=1
Deforestation moratorium
Presidential decree in May 2011
Bans new permits to clear primary forests and peatlands
17
Implementation difficult:
e.g. Tripa case (Aceh)
Exemptions exist
(e.g. energy, sugar, rice projects)
Clearing of primary forest also
continues under existing permits Picture: http://news.mongabay.com/2012/0906-tripa-revoked.html
REDD+ challenges
International market for emissions credits
from avoided deforestation not in sight
REDD+ Agency may be weak
Land tenure, forest monitoring, emissions measurement, local conflicts
Might one day be important economic mechanism for sustainable forest
management
Next President’s support crucial
Economics of alternative land uses very attractive…
18
Picture: http://www.globalcarbonproject.org/news/TropicalPeatlands.html
Frictions with green growth
Oil palm a large contributor to
deforestation and emissions from
peatland
(Oil palm area: 9 million hectares.
Large permits for additional expansion
in forest areas already provided)
19 Pictures: http://www.foodtechnology.co.nz/export?page=1, http://equal-life.blogspot.com.au/2009/09/united-tractors-completing-due.html
Plantation areas
20
0
2
4
6
8
10
1996 1998 2000 2002 2004 2006 2008 2010
Rubber Coconut Oil Palm Coffee Cocoa
Million ha
Ann.ave. expansion of
appr. 400th ha
Frictions with green growth
Oil palm a large contributor to
deforestation and emissions from
peatland
(Oil palm area: 9 million hectares.
Large permits for additional expansion
in forest areas already provided)
One option: Focus expansion on
degraded land
21 Pictures: http://www.foodtechnology.co.nz/export?page=1, http://equal-life.blogspot.com.au/2009/09/united-tractors-completing-due.html
Frictions with green growth
Coal mining also land intensive, mostly
in previously forested areas.
Reclamation weak. Pollution
22 Pictures: http://www.foodtechnology.co.nz/export?page=1, http://equal-life.blogspot.com.au/2009/09/united-tractors-completing-due.html
23
Over exploitation?
PRODUCTION Proved RESERVED
000 000 tons 000 000 tons
2011
ann.gr. Since 2007 by 2011
China 3,829.5 8.7% 114,500
United States 1,094.3 -1.2% 237,295
India 637.1 4.6% 60,600
Australia 435.9 0.3% 76,400
Indonesia 437.4 11.1% 5,529
Russia 371.7 3.9% 157,010
South Africa 281.6 0.8% 30,156
Germany 208.8 -1.9% 40,699
Poland 152.6 -1.1% 5,709
Kazakhstan 127.6 4.3% 33,600
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Conclusion
Coal and palm oil have been booming in the last 10 years or so
These booms do provide large economic benefits: both at national and
local levels
Green growth: Important concept, and the momentum to do so is right
but much to be done in getting prices right and in sustainable management
of key natural assets
Serious tension the commodity booms and green growth
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Ref. papers
• Resosudarmo, B.P., Resosudarmo, I.A.P, Sarosa, W. and Subiman, N.L. (2009)
‘Socioeconomic conflicts in Indonesia’s mining industry’, in Exploiting Natural
Resources: Growth, Instability, and Conflict in the Middle East and Asia, eds R.
Cronin and A. Pandya, Henry L. Stimson Center, Washington DC: 33–48.
• Subiman, N.L., Resosudarmo, B.P. (2010), ‘Tambang untuk Kesejahteraan
Masyarakat: Konflik dan Usaha Penyelesaiannya’, in Pembangunan Berkelanjutan:
Peran dan Kontribusi Emil Salim, eds. I.J. Azis, L.M. Napitupulu, A.A. Patunru, and
B.P. Resosudarmo, Kepustakaan Populer Gramedia, Jakarta: 426-459.
• Resosudarmo, B.P., Nawir, A.A., Resosudarmo, I.A.P. and Subiman, N.L. (2012)
‘Forest land use dynamics in Indonesia’, in Land, Livelihood, the Economy and the
Environment in Indonesia, eds A. Booth, C. Manning and Thee K.W., Yayasan Obor,
Jakarta: 20–50.
• Burke, P., Resosudarmo, B.P. (2012) ‘Survey of Recent Developments’, Bulletin of
Indonesian Economic Studies, 48(3): 299-324.
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