The ―TUNTAS‖ vision of Jambi Province includes the target to be a ―Green Province‖ that provides a global example of how to combine GHG emission reduction goals with economic development, while ensuring that development is sustainable and environmentally friendly. The long term development plan has six overarching goals:
Improving the overall quality of life in the province to produce competitive advantages;
Developing advanced society with religious and cultural strengths;
Developing domocratic and law abiding society;
Ensuring safe, peaceful, and orderly conditions;
Ensuring equality and justice in the development; and
Ensuring sustainable development throughout the province.
Political commitment to reducing GHG is formalised through Governor‘s Decree No. 352/2013, which states that the carbon emissions from forest loss and land degradation are to be reduced by 55 MtCO2e by 2030. 47.3 MtCO2e, or 86% will be the contribution from peatland land and LULUCF.
Despite the goal of Jambi‘s TUNTAS vision and the political commitment to reduce GHG emission, Jambi‘s economy is dependent on agriculture and plantation sectors consisting of rubber and palm oil.
Palm oil plantation was identified as the drivers of deforestation and degradation in the ERP.
The Bank Indonesia (BI) recorded economic growth of Jambi Province at 4.77% in the last quarter of 2018. This is due to an increase in oil and coal prices.92 This growth suggests that mining sector will continue its contributioin to the GDP of Jambi. On the other hand, Forestry, agriculture and fisheries (the main contributor of the GDP) shows a decreasing trend due to the decrease in rubber and palm oil prices in this period. It is predicted that the economic growth of Jambi Province in the first and second quarters of 2019 will be at 4.58 to 4.98% due to improvements on forestry, agriculture and fishery, especially palm oil commodities. This positive trend indicates that provincial economic growth heavily relies on the palm oil commodity, rather than on rubber.
92 Bank Indonesia> Assessment of Regional financial and economy of Jambi Province, February 2019
An analysis of the contributions of Jambi‘s economic sector to the GDP indicated that forestry, agriculture and fishery is the dominant sector. The role of this sector in provincial economy is further analysed using input-output analysis93. This analysis focuses on the multiplier effect (income, production factor, and output) and the linkages between sectors. This study shows that the biggest income is derived from palm oil, other goods industries and beverage industry. Future linkages are foreseen between agriculture sector with oil, gas & geothermal refinery, financial institutions, banks and other food industries. The study concluded that the overall economic structure in Jambi changed throughout 2007 to 2016. Agricultural sector plays role in changing the style of the economy towards deindustrialization (reduction of industrial capacity such as heavy industry or manufacturing industry).
The efforts towards green development (i.e., reducing GHG emissions) in Jambi pose a governance risk, as palm oil offers immediate economic benefits (income) compared to the reduction of GHG emissions. The ERP needs to strengthen engagement with key stakeholders to ensure that GHG emission reduction considerations outweigh economic considerations. This strategy is relevant to Components 2 envisaged in the J-SLMP, which aim to improve forest management and to promote sustainable private sector partnership and investment. However, specific activities are needed to directly address smallholder farmers, for they constitute the largest stakholders in this sector.
The Agrarian Reform Program aims to re-structure the licenses for unproductive production forest, and allow for use by local communities. The map of agrarian reform released by MoEF in 2017 indicates the presence of 12,919.2 ha land allocation in Bungo (838,612 ha), Kerinci (2,498.7 ha), Merangin (321,257 ha), Muaro Jambi (3,360.98 ha), Sarolangun (656,489 ha), Tanjung Jabung Barat (4,227.3 ha), and Tanjung Jabung Timur (1,015.86 ha). Map of this allocation is provided in Appendix A2. These data show that the largest allocation is in Muaro Jambi District, where the existing land use are unproductive Convertible Production Forest; settlements with social and public facilties; and dry land agriculture. These allocations offer opportunities for strengthening the tenurial rights of indigenous people through social forestry mechanisms (Component 2 of the PDO).
Additionally, the restructuring of licenses can also be used to improve land and forest governance (Component 1 of the ERP). To implement the activities outlines in Component 1 of the ERP, it is important for the FMU (as the management authority of the production forest under the Agrarian Reform Program) to increase its capacity to support license restructuring, including license revocation and conflict/dispute mediation as required.
The application of sustainable palm oil principles, such as RSPO, has been initiated in Jambi Province. Asian Agri represent plantation company that applies RSPO and ISPO certification to its 41,000 ha of palm oil plantation in Jambi. Asian Agri obtained the RSPO certification in 2016, but the company has practiced zero burning policy since 1994. This policy avoids fire during land preparation, and may contribute to the reduction of fire hotspot in Jambi. Since april 2018, IDH and Jambi government has assisted 30,000 smallholder palm oil farmers in Tanjung Jabung Barat in obtaining ISPO license. This example shows promising relevance that can be achieved by introducing sustainable palm plantations (Component 2 of the PDO).
93 Yanuar, F., Amri, A., Saad, M., Syafaruddin., 2019. Using Input-Output Analysis approach to identify the role of agricultural sectors in Jambi economy. RJOAS 1(85)
5.5.2 Political Economy of Jambi
Political economy of Jambi is shaped by the macro-economic profile (Gross Domestic Products, economic growth, inflation rate, and export-import) and political commitment of the Governor to support national development targets. Medium Term Development Plan (Rencana Pembangunan Jangka Menengah Daerah – RPJMD) of Jambi Province (2016-2021) was formulated based on 11 strategic issues that include improvement of governance; quality of human resources; strategy to increase investment; management of natural resources; Quality of public infrastructure; economic disparity; optimising international trade relations; price fluctutation of agriculture and plantation commodities; climate change and reduction of greenhouse gas; Food and energy sovereignity; and strengthening and justifying provincial boundaries.
Jambi Province still relies on plantation and forestry sectors (specifically plantation sub-sector consisting of Palm Oil, Rubber, Cinnamon and Coffee). Of these subsectors, palm oil and coffeee commodities are associated with encroachment (deforestation). Commodity if rubber is its low (only Rp. 5,000 per kg sheet). Therefore, Jambi ust rely on palm oil and coffee as primary commodities to support the GDP. Implementation of BioCF may be associated with high opportunity cost for Jambi Province, as BioCF may aim for reduction or halting of palm oil and coffee expansions.
All of the above issues are considered as causes for sub-optimal economic growth and welfare of people in Jambi Province. Implementation of ERP will be relevant with human resources, governance and environmental issues. Improving environmental quality (including improvement on licesing regime, community awareness, and companies‘ compliance to environmental regulations) and reducing greenhouse gas emission are part of the political commitments to achieve good and healthy environmental quality. Jambi TUNTAS Vision and Governor‘s decree on action plan for emission reduction are examples of these political commitments.
The main challenge in political economic situation of Jambi is to balance the needs for economic growth and environmental sustainability. In this context, ERP may be able to contribute to at least four of the 11 strategic issues by providing support for:
Human resource quality and livelihood (Component 1 and 2);
Good governance on forest and estate crop (Component and 2); and
Environmental quality by preventing fire, biodiversity loss and encroachment/degradation (Component 1, 2, and 3).
This alignment supports the justification of ERP as jurisdictional emission reduction program in Jambi Province. Improvement on capacities of relevant provincial government agencies (e.g., environmental, forestry, mining and mineral resources and plantation agencies) is needed. Indirect support to forestry, agriculture and fishery sector (e.g., sustainable land management and effective benefit sharing to buffer the fluctuation of prices of important commodities) may strengthen the role of the ERP in supporting the Jambi development plan.
Interventions to the forestry and estate crop sectors are feasible due to political enabling conditions at national and provincial levels. Implementation of ERP may gain leverage in forestry sector from moratorium (Peta Indikatif Penundaan Pemberian Ijin Baru – PIPPIB). In addition, forest fire prevention is guided under Perda no.2/2016 on prevention and control of land and forest fire that applies to plantation and forestry sectors
Challenges in implementing ERP in forestry sector may include aligning licensing mechanism and moratorium with provincial policies. This will be needed to ensure consistent application by FMU on site. Another challenge may include agrarian reform at national level (Tanah Object Reformasi Agraria – TORA). This policy was aimed towards improving community access to ―dormant‖ or mismanaged forestry concessions in production forest. From ERP‘s point of views, this policy may support welfare of local communties. However, application of TORA will result in changes of land status from forest to other use area. Ultimately, such land parcel will become individual property that may have the following implications to the ERP:
Shifting of policy stakeholders from FMU (provincial) into land agency / land office when dealing with environmental and social risks. Such shift and subsequent stakeholder engagement needs to be anticipated; and
Shifting of ERP target groups from private companies (forestry concession holders) to individual person or household. Shifting of approach and strategy may need to be anticipated.
Benefit sharing mechanism also needs to be considered if such shift occurs.
In the context of political economy in Jambi, ERP needs to consider two main market forces consisting of conventional and carbon markets. Conventional market still play major role in macro- economic factor of Jambi Province (i.e., GDP contribution from agriculture and estate crop sectors).
Conventional market may act as negative influencers to the success of the ERP, as conventional sectors may still be crucial to provincial economy. On the other hand, carbon market may serve as positive influencer that supports the success of ERP. Carbon market or carbon mechanism may be able to provide incentives and benefits to complement (or substitute) those from conventional market.
However, much still needs to be done to prepare Jambi to enter carbon market (e.g., setting up baseline, registration, and carbon accounting capacities).