Sustainable economic growth is possible in Indonesia, says World Bank

Landscape of fields and homes, Indonesia. Photo courtesy of Curt Carnemark / World Bank

JAKARTA, Indonesia (28 September, 2011)_Indonesia can achieve major economic growth through expansion of its timber and palm oil industries while employing the carbon emission reduction mechanism REDD+, said Andrew Steer, Special Envoy for Climate Change at the World Bank at the Forests Indonesia conference yesterday.

“Implementing REDD will help move Indonesia toward more intensive land use, better forest management practices, more efficiency and long term economic gains.” said Steer.

“We watch Indonesia with great admiration…if they succeed it will be a massive gift to the world and to Indonesia itself.”

The chief drivers of Indonesia’s economy today include communications, trade and manufacturing and transport. The country is home to the world’s third-largest area of tropical forests and is the largest producer of palm oil.

Yet the forestry and oil palm sectors add relatively little to Indonesia’s economy, with forestry contributing 0.7 percent and non-food crops, including palm oil, contributing 2.1 percent to GDP. That is set to change, as major plans get underway to expand timber and oil palm plantations.

To reduce emissions, says Steer, such expansion should focus on using degraded lands rather than peatlands.  Degraded lands have long been cleared of forest and contain low carbon stocks and limited biodiversity relative to rich peatlands. Nevertheless, many degraded lands are still suitable for oil palm cultivation. Indonesia has at least 30 million hectares of degraded land available for development. In addition, increasing the productivity and efficiency of Indonesian agriculture will reduce pressure on forest conversion and, at the same time, contribute to food security.

“There is an opportunity cost to developing plantations on peatlands in that you don’t get to sell the trees. On the other hand, more and more companies are demanding certified products and tracking supply chain emissions data. It makes good business sense for Indonesia to be ahead of the curve.”

Sustainable expansion of Indonesia’s timber and oil palm industries will help the country to achieve President Susilo Bambang Yudhoyono’s goal to reduce greenhouse gas emissions by 26 percent by 2020, ensuring that Indonesia can claim a significant share of the funds – worth billions of dollars – that are available for REDD+, an internationally agreed mechanism for compensating countries that reduce emissions from deforestation and forest degradation.

There are a number of bilateral and regional REDD+ mechanisms that promise to support Indonesia’s efforts to reduce greenhouse gas emissions. Nor is business lagging behind, as more and more private companies insist that their products come from sustainable sources including ‘household names’ such as PepsiCo, Ford and Danone.

“When the world realizes in a few years time that it is not on track to meet its goals on global warming, citizens will demand a deeper commitment to lowering emissions in a cheaper way. There are technical, political and social challenges involved but governments need to join up their thinking, NGOs need to pull us down to Earth, the private sector needs to drive growth, and the media and educational sectors need to shape the hearts of Indonesians.”