Indonesia: New Regulations on Peatland Protection May Exact Huge Economic Toll on Economy

Dames Alexander Sinaga & Muhamad Al Azhari Jakarta Globe 20 Dec 17;

Yogyakarta/Jakarta. Indonesia's tougher peatland protection regulation is estimated to cost billions of dollars and hurt a specific province's regional revenue, a study from the University of Indonesia’s Institute for Economics and Social Research, or LPEM-UI, shows.

Riyanto, a senior researcher at LPEM-UI, said at a seminar last week that the implementation of Government Regulation (PP) No. 57 of 2016, which amended Government Regulation No. 71 of 2014 on the protection and management of peatland ecosystems, is estimated to lead to a loss of Rp 76 trillion ($5.32 billion) from a decline in production of pulp and paper, palm oil, job loss and weaker economic activities in regions highly dependent on the two commodities.

"This regulation will have an impact on the macro economy. It may also deteriorate the investment climate as it has social impacts including layoffs that will increase unemployment," Riyanto, a senior researcher at LPEM-UI, said at a seminar in Yogyakarta last week.

President Joko "Jokowi" Widodo's administration started to place greater attention on the protection and management of peatlands after the country was criticized by the international community for forest and land fires in Sumatra and Kalimantan that resulted in blanketed haze that choked several Southeast Asian countries in 2015.

A year later, his administration took several measures to protect peatlands all over the country and regulate their use, despite complaints from industry players who felt the government's tougher stance was implemented blindly without consideration of the impacts the new regulation had on the industry and on the overall economy.

Riyanto said LPEM-UI estimated that Indonesia would lose up to 16.8 million cubic meters of timber production due to the relocation of 58.5 percent of the nation's industrial forests. The economic value of all industrial forests is estimated at Rp 48.5 trillion.

Riau, which has a vast area of peatland and is home to industrial forests and plantation areas, may see its regional gross domestic product decline by Rp 16.15 trillion per year and a loss of income for the local community, penciled at Rp 4.9 trillion per year from salaries, wages or various income that may be lost from a decline of business activities from the pulp and paper industry.

A slower growth in the pulp and paper industry is estimated to cause a loss of 134,000 of jobs over the course of five years since the revised regulation was implemented in 2016. In Riau province, the loss of that many jobs may cause more than half a million people to live in poverty. "There will be some serious social problems if this is not carefully anticipated," he said.

Riyanto criticized the government for disregarding innovations in peatland management, which can still both preserve, but also utilize the land for commercial purpose. About 40 percent of the nation's industrial forests currently sit on peatlands, which will be deemed protected areas under the regulation.

Previously, Aryan Wargadalam, chairman of Indonesian Pulp and Paper Association (AKPI) — which harbors the largest pulp and paper producers in the country, told the Jakarta Globe that implementation of the PP 57 may include potential losses in pulp production of 2.4 million tons per year (or $1.32 billion) and potential losses in paper production of 3.6 million tons per year (or $3.6 billion).

Gov't Statement

Djati Witjaksono, a Ministry of Environment and Forest spokesman, said the ministry is still conducting research on the government's policy on peatland protection and management.

"Our research and development department is currently conducting assessments on deforestation and carbon sequestration. And we will deliver the results after the project is completed," Djati told the Globe in a phone interview.

The spokesman said the ministry respects any research institution that conducts data collection on the impact of government regulations.

"Everyone has the right to do research, although the results may differ due to different approaches," the spokesman said.

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