The vision of East Kalimantan Province is 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 (Berau REDD+ Working Group, 2011). The program has four overarching goals:
Improving the overall quality of life in the province, through a balance of economic, social, cultural, and environmental aspects;
Reducing the threat of ecological and climate change related disasters such as floods, landslides, droughts, and forest fires;
Reducing pollution and the degradation of terrestrial ecosystems, water and air; and
Increasing knowledge and awareness among institutions, the government and the people of East Kalimantan about the importance of conservation of natural resources, and the wise use of renewable natural resources.
Political commitment to reducing GHG is formalised through Governor’s Regulation No. 54/2012, which states that the carbon emissions from forest loss and land degradation are to be reduced by 15.6% by 2020. Despite the goal of East Kalimantan’s Green Province vision and the political commitment to reduce GHG emission, East Kalimantan’s economy is dependent on two land-based commodity sectors consisting of coal mining and palm oil. These two commodity sectors were identified as the drivers of deforestation and degradation in the ERP.
The Bank Indonesia (BI) of East Kalimantan predicted economic growth by 3.5% due to an increase in coal prices.52 This growth suggests that coal is the significant commodity sector that supports the economy of East Kalimantan. This is significant growth compared to the 2015–2016 period, when East Kalimantan experienced an economic recession.53 This positive trend indicates that provincial economic growth heavily relies on the coal price, rather than on increased production of coal.
An analysis of the contributions of East Kalimantan’s economic sector to the GDP, the province’s economic base, the multiplier effect (income, production factor, and output) and the linkages between sectors identified ten sectors that are important to the economy of East Kalimantan (including the mining sector). These ten leading sectors are: trade, paper and printed goods, financial institutions and other financial services, fertilizer, chemicals and other rubber products, hotels and restaurants, general government, fisheries, excavation, and mining without oil and gas.54 From this list, mining is the sector most relevant to the ERP (identified as a driver of deforestation and forest degradation).
52 Tempo.co.id. December 9, 2017
53 Indonesia-investments.com. February 2016. Trade Indonesia: Exports Resource-Rich East Kalimantan Plunge
54 Ahmad,Z. 2018. Determination of economic sector in East Kalimantan, Indonesia. Journal of Chinese Economic and Foreign Trade Studies 11(1)
Despite the absence of palm oil plantations from the above-mentioned list of leading sectors, palm oil production (i.e., HGU licenses) increased from 2000 to 2013. The trend is consistent with the provincial government policy to allocate 2 million ha of palm oil HGU by 2018.55
The efforts towards green development (i.e., reducing GHG emissions) in East Kalimantan pose a governance risk, as coal and palm oil offer immediate economic benefits 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 1 and 2 of the ERP, which aim to improve land governance and increase the capacity of government institutions. Additionally, Component 3 of the ERP specifically aims to work with stakeholders in the palm oil plantation 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 such land allocation in Berau (2,091.78 ha), Bontang (98.32 ha), Kutai Barat (10,490.70 ha), Kutai Kartanegara (11,860.28 ha), Kutai Timur (27,929.68 ha), Mahakam Ulu (244.79 ha), and Paser (632.58 ha). These data show that the largest allocation is in Kutai timur District. The presence of these allocations offers opportunities for strengthening the tenurial rights of indigenous people through social forestry mechanisms (Component 5 of the ERP). 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.
The application of sustainable palm oil principles, such as RSPO, has shown a positive impact. The application of RSPO principles in Kalimantan resulted in a decreased deforestation rate in RSPO concessions, from 13,417 ha/year between November 2005 and November 2007 to 1,839 ha/year after May 2014.56 The rate of deforestation remained higher in non-RSPO concessions. This example shows promising results that can be achieved by introducing sustainable palm plantations (Component 3 of the ERP).
5.4.2 Political Economy of East Kalimantan
Political economy of East Kalimantan is shaped by the macro-economic profile (Gross Domestic Products, economic growth, inflation rate, and social welfare) and political commitment of the Governor to support national development targets. Medium Term Development Plan (Rencana Pembangunan Jangka Menengah Daerah – RPJMD) of East Kalimantan Province (2013-2018) was formulated based on five strategic issues consisting of:
Low competitiveness of human resources in East Kalimantan;
Low economic growth (-1.28% between 2010 to 2015 due to decline in coal price and decreasing contribution of mining sector);
Basic infrastructure is not well distributed;
55 Anderson et.al., 2015. Growing the Economy: Oil palm and green growth in East Kalimantan, Indonesia. An international academic conference 5‐6 June 2015, Chiang Mai University.
56 Meijaard et.al., 2017. An impact analysis of RSPO certification on Borneo forest cover and orangutan populations. Technical Report. Borneo Futures.
Lack of good governance; and
Lack of good and healthy environmental quality.
All of the above issues are considered as causes for sub-optimal economic growth and welfare of people in East Kalimantan 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. Green Kaltim 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 East Kalimantan is to balance the needs for economic growth and environmental sustainability. In this context, ERP may be able to contribute to at least three of the five strategic issues by providing support for:
Human resource quality and livelihood (Component 1, 2 and 4);
Good governance on mining, forest and estate crop (Component 1, 2 and 3); and
Environmental quality by preventing fire, mangrove loss and encroachment/degradation (Component 3 and 4).
This alignment supports the justification of ERP as jurisdictional emission reduction program in East Kalimantan Province. Improvement on capacities of relevant provincial government agencies (e.g., environmental, forestry, mining and mineral resources and plantation agencies) is needed.
Interventions to the mining, 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 Izin Baru – PIPPIB). In mining sector, Governor’s Regulation No. 1/2018 on restructuring mining licenses may provide political commitment needed for ERP implementation. In plantation/estate crop sector, Provincial Regulation (Peraturan Daerah – PERDA) No. 7/2018 on sustainable plantation.
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 (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 East Kalimantan, 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 East Kalimantan Province (i.e., GDP contribution from mining 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 East Kalimantan to enter carbon market (e.g., setting up baseline, registration, and carbon accounting capacities).