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Green, prosperous and at the heart of ASEAN

Article - July 26, 2017

Business-friendly Riau is working to encourage visitation and investment while also preserving its forests


Strategically on the eastern coast of Sumatra, along the Strait of Malacca and close to neighboring Malaysia and Singapore, Riau province sits at the center of the ASEAN region and is known for its natural resources and endless forests.
The provincial capital and largest city is Pekanbaru, which translates as ‘new market’ in Indonesian. It has long been known as a mercantile center since the Kingdom of Siak fell under the influence of the Dutch East India Company during the mid-1700s. This strategic city of trade was transferred to the Dutch authorities and remained a commercial asset during the colonial period.

Today, Pekanbaru is known for being one of the cleanest cities in Indonesia having won the prestigious cleanest city award for the seventh time in a row in 2011. Pekanbaru is also famous for its wide main roads, and for its tolerance. Besides being home to a large Christian and Muslim demographic it also has a significant Chinese minority, which makes up more than 10% of the city’s population.

As a province, Riau is known as being one of the most prosperous in Indonesia, with rich deposits of hydrocarbons and lucrative palm oil and rubber plantations.

International oil companies, including Chevron have offices in the province. There is also a substantial oil refining and export facility in the port of Dumai.

Although petroleum has transformed Riau into something of an Indonesian Texas, forestry has increasingly become a lucrative source of income and employment for the province. Important investors in Riau include PT Riau Andalan Pulp Paper (RAPP) and PT Asia Pulp and Paper (APP). These two Indonesian paper giants have embraced sustainable plantation harvesting and reforestation practices over the last decade to ensure the future of the sector.

“We have a total of a million acres under restoration and conservation at the moment. We are committed to spending $100 million for conservation over 10 years” explains Tony Wenas, RAPP’s President Director.

Along with its major environmental commitments, RAPP has invested heavily in Riau in recent years, especially in improving downstream product volumes. In fact this period of low commodity prices has been utilized by the company to upgrade its capacity, including commissioning a new $300-million paper mill.

This aligns with the economic vision of Riau’s governor, Arsyadjuliandi Rachman, who has implemented a number of reforms designed to encourage visitation and increase the ease of doing business in the province. Prior to becoming governor, he spent most of his career in the private sector after studying in the United States. Mr. Rachman was particularly active in the Young Entrepreneurs Association (HIPMI), and went on to serve in Jakarta as a member of parliament and also spent time as a senior representative of the Indonesian Chamber of Commerce (KADIN).

These experiences working in companies, serving in government and managing business associations have certainly shaped his approach to developing Riau’s economy, and increasing finished product generation is one of them.

“We are looking to create jobs in value-added sectors, as we have all the raw materials, we just need to develop the downstream. For this we will need the private sector’s involvement,” explains Governor Rachman.

One of the major ecological issues afflicting the province and its neighbours, which also hinders economic development tremendously, has also been successfully tackled by a range of initiatives from two of its major investors: RAPP and APP.

Vast forest peat fires have plagued the area and caused damaging smog clouds. These are primarily the result of slash-and-burn fires caused by farmers that get out of control.

For its part, RAPP has implemented an effective preventative initiative called the Fire-Free Village Program (FFVP).

Beginning two years ago, the FFVP aimed to encourage responsible land management practices by providing incentives to communities that end slash-and-burn activities. Villages that keep their area free of fire receive around $7,500 in assistance from the company, a significant amount for rural communities there.  

Alternatives to burning off are provided through the company’s agricultural assistance program. Excavators and hand tractors are made available to villagers, offering an alternative to slash and burn.   

APP, also a major investor in the region, has worked to battle the forest fires by mobilizing a large, well resourced network of locals.  

This community engagement program is able to mobilize more than 2,600 reserve firefighters from across 220 villages. They provide training and equipment for local forest fire management personnel who are from the local communities.

Of course, preventing fires to begin with is better than deploying resources to extinguish them. Developed with $10 million in funding and introduced during COP21 in Paris last year, the Integrated Forestry and Farming System (IFFS), implemented by APP, is a community empowerment program, designed to support communities in developing agroforestry – where agriculture is intertwined with natural forest – as an alternative to slash and burn farming.

With deforestation and agriculture accounting for nearly a third of global emissions, encouraging sustainable land use is essential to climate change mitigation and adaption. But with 350 million people worldwide living in or near forests, the needs of people must be at the heart of efforts.

One year after its launch, APP’s IFFS program is active in 58 communities, with 22 expected to join the program by the end of the year. APP has a target of reaching 500 communities by 2020. Communities have been selected on the basis of a model that assesses proximity to APP’s forest concessions and the vulnerability of the local area to forest fire, deforestation and conflict over resources.

The objective of each community project is to boost income levels by 30% to 50% over the period of three years by promoting economic activities that are closely linked with the viability of areas of natural forest – thus ensuring that communities have a direct stake in the protection of the rainforest. Projects to date have involved animal husbandry, rice, corn and vegetable farming as well as the development of Kemiri Sunan in West Kalimantan as a potential source of bio-fuel for Indonesia’s B15/B20 biodiesel program.

As Aida Greenbury, APP’s Managing Director of Sustainability explains, “We believe that this agroforestry program will help communities to achieve economic development while protecting Indonesia’s forests,”

Additionally, and importantly for biodiversity, like RAPP, APP has set aside one and a half million acres of forest as exclusive wildlife conservation zones. Approximately 70% of the habitat of Sumatra’s iconic fauna is located within these designated conservation areas, which host much of the island’s tropical rainforest heritage.

These famous forests of Sumatra, with tigers, rhino, elephant and orangutan have been a draw card for tourists for generations. Due to its proximity to Indonesia’s neighbors, Pekanbaru serves as a major gateway for tourists from Malaysia and Singapore who are just a stone’s throw away on the other side of the Strait of Malacca. These travelers, who are increasingly seeking to explore the jungles of Sumatra, (of which a good portion is to be found in Riau) often spend time in the province’s capital enjoying the culture and shopping of this diverse city. However compared to other parts of Indonesia, Riau is relatively undiscovered.

As Governor Rachman tells United World, “I am focusing a lot on tourism, which has not been done much before. We are looking abroad, we see the potential, and I am sure investors will as well”.

Feeding into increased visitation is the governor’s vision to position Riau at the ASEAN’s economic center by taking advantage of growing regional ties and removal of trade and movement barriers.  

“Our position in the region is right at the heart. We are perhaps the best-located province to take advantage of the ASEAN’s economic integration. We have an impressive mix of regional and multinational companies that are already based here and that number is set to grow”.