'We have a clear opportunity to introduce green growth as a global paradigm'

Two-thirds of Indonesia’s population reside on the island of Java, the country’s economic and political centre. Jakarta, the capital city, overflows with people and traffic and, with more than nine million people living there, is among the 10 largest cities in the world.

Yet Indonesia has more biological diversity than anywhere on earth and teems with a bewildering variety of wildlife and plants. Home to the world’s third largest tropical rainforest, after Brazil and the Congo, it contains 10 per cent of global forest cover.   
As the custodian of a resource of such national and global importance, the Indonesian Government bears a huge responsibility. Deforestation and changing land use not only damage the country’s unique biodiversity, they also contribute to climate change; Indonesia has been the world’s third largest producer of greenhouse gases.

Indonesia’s President Susilo Bambang Yudhoyono argues that it is possible to achieve the country’s Millennium Development Goals and improve the lives of Indonesians – 50 per cent of whom are aged 30 or under – while at the same time protecting the country’s tropical forests. Indeed, Indonesia aims to be one of the world’s top 10 economies in coming decades.

“We have a clear opportunity to reshape our economic systems and to introduce green growth as a global paradigm,” says the President. His green economic programme is part of a sustainable development plan summed up as “pro-growth, pro-job, pro-poor and pro-environment”.

Indonesia made the transition to democracy after more than three decades of dictatorship under President Suharto came to an end in 1998. It has had a directly elected president – Mr Yudhoyono, currently in his second five-year term – since 2004.
The country was badly affected by the 1997-98 Asian financial crisis and took longer than other nations in the region to get back on track. But it proved resilient to the 2008-09 global financial crisis, suffering no more than a temporary economic setback thanks largely to its sizeable domestic market. The economy grew by 6 per cent in 2010 and is expected to expand similarly this year.

“I am convinced that President Yudhoyono has contributed a lot to the development of the country,” says Cabinet Secretary Dipo Alam. “Looking forward, we have created our 2025 Master Plan with a projected $300 billion (£183 billion) investment. We want to accelerate and enlarge our economic activities, while not forgetting the poor and the environment. I am very optimistic for my country and firmly believe we can achieve the targets. This is not a mantra. The 2025 Master Plan is very pragmatic, accountable and achievable.”

With its abundant natural resources, Indonesia’s main exports are oil and gas, plywood, textiles, rubber and palm oil. But the Government is promoting diversification away from commodities and low-cost production towards high value-added products, through greater industrialisation and the development of a knowledge-based economy.

Indonesia is already Southeast Asia’s largest economy, with its gross domestic product exceeding $1 trillion after taking into account purchasing price parity. The country’s debt-to-GDP ratio is currently its lowest ever, at 26 per cent.

“We have a balanced budget, owing to prudent fiscal policy,” the President told the World Economic Forum on East Asia recently. “Our trade volume and foreign reserves are at a record high. Foreign investment is rising sharply.”

Creation of a green economy will require implementation of sustainable agriculture; sustainable forestry management; energy efficiency and renewable energy usage; clean technology support; waste management; and efficient and low carbon transportation management. Key components will be innovation, education and improved national infrastructure.

In May, in line with the commitment he made in Copenhagen, President Yudhoyono signed a moratorium on logging that will last for an initial two years, following a $1 billion deal with Norway under a UN-based anti-logging campaign. Any new licensing for land use and land conversion in Indonesia’s primary or undisturbed forest and peat land areas has been suspended, effectively protecting 64 million hectares of the country’s 120 million hectares of forest.

“We will immediately start implementing the Government’s 7/26 growth strategy, with 7 per cent economic growth from 2012 and 26 per cent reduction of greenhouse gas emissions by 2020,” says Dr Kuntoro Mangkusubroto, head of the President’s Delivery Unit for Development Monitoring and Oversight. “The two-year suspension creates the pause that allows us to start with a clean sheet and develop a new land-use system that maximises the economic benefits from our natural resources and reduces Indonesia’s greenhouse gases in line with our international commitment.”

The Government is also committed to reforestation, targeting the planting of one billion trees a year. “Deforestation is significantly contributing to Indonesia’s greenhouse gas emissions,” says former Environment Minister Gusti Muhammmad Hatta (now Minister of Research and Technology). “We have decided that 14 per cent of our emissions-reduction goal will be achieved by saving the forests.”

Meanwhile, the Ministry of Energy and Mineral Resources has a new Directorate General for Renewable Energy that is spearheading a campaign for efficiency in energy use.

'Our 2025 Master Plan, with a projected £183bn investment, is very pragmatic, accountable and achievable'	'Indonesia is certain to become a world economic power. It is just a matter of time. All signs indicate we are on the right track'	'Our energy demand grows between 9 and 10 per cent per year. There is no other way; we have to use other types of energy'	'The 7/26 growth strategy is 7 per cent economic growth from 2012 and 26 per cent fewer greenhouse gas emissions by 2020'
DIPO ALAM Cabinet Secretary of the Republic of Indonesia	SURYO SULISTO Chairman of the Indonesian Chamber of Industry and Commerce (KADIN)	GUSTI MUHAMMAD HATTA Minister of Research and Technology in the Republic of Indonesia	KUNTORO MANGKUSUBROTO Head of the President’s Delivery Unit for Development Monitoring and Oversight

Indonesia has around 40 per cent of the world’s geothermal resources, the great majority of which is yet to be exploited.President Yudhoyono has said that for every 1,000 MW of electricity, at least 48 per cent should come from geothermal energy and 12 per cent from hydroelectric energy. The Government provides around 1 billion rupiahs (around £73,000) to companies that would like to invest in geothermal energy.

“As we increase the use of renewable substances, we want the use of oil to decline year by year,” says Mr Hatta. “Our energy demand currently grows between 9 per cent and 10 per cent per year. There is no other way; we have to use other types of energy. We call it the Energy Mix Programme. Indonesia has various sources of energy, such as coal, oil, geothermal or wind.”

Suryo B. Sulisto, chairman of the Indonesian Chamber of Industry and Commerce (KADIN), says there is no reason why Indonesia cannot be self-sufficient in energy. “Indonesia is so rich in resources and energy, so we should develop renewable energies. Here we are exporting millions of tonnes of coal and feeding power plants all over the world, yet we do not have enough electricity back home. That is unacceptable.”

He believes Indonesia is certain to become a world economic power. “It is just a matter of time. All the signs indicate that we are on the right track with 6 per cent economic growth. I believe that we can do much better than that.”

He acknowledges that the challenges are daunting and adds: “We need to speed up projects such as new power plants, toll roads and ports.”

Chris Wren, executive director at the British Chamber of Commerce in Indonesia, reports that interest from British investors has skyrocketed. “Last year as a whole, we received the highest number of enquiries from the UK since we started records,” he says. “We are going to see a lot more activity with our major energy companies in relation to cleaner fuels, biofuels, renewables and so on.”