Indonesia to relax forest protection on key projects

Reuters 30 Dec 09;

JAKARTA (Reuters) - Indonesia will allow some infrastructure projects deemed in the public interest such as toll roads and geothermal energy plants to operate in protected forests, the chief economics minister said on Wednesday.

Under Indonesian law it is currently forbidden to undertake any kind of activity that could impact on a forest conservation area.

But chief economics minister Hatta Rajasa told reporters that the government would issue a new rule to allow some development in forests after discussions between relevant ministers.

"For the public interest such infrastructure projects and geothermal projects can use protected forests," Rajasa said.

The users of protected forests would have to compensate by setting aside twice as much land within another part of the province for use as forested land, he added.

The minister said the regulation would give investors certainty and denied it would disturb forest conservation.

"We know that there are many geothermal projects located in protected areas. That's why this regulation is part of the government's 100-day programme," he said.

The administration of President Susilo Bambang Yudhoyono, who started a second term in October, has set 100-day programmes focused on removing bottlenecks that have stalled investment and infrastructure development in Southeast Asia's biggest economy.

Overlapping regulations on the environment and resource development frequently complicate plans to develop projects in Indonesia, although green groups also complain that firms are sometimes wrongly given permission to exploit forests.

Indonesia also currently has one of the fastest rates of deforestation in the world that threatens to swiftly erode its dwindling untouched tracts of tropical forests.

At the same time, the developing nation desperately wants to speed up spending on airports, roads, ports and other infrastructure to help reduce inefficiencies and speed up economic growth in order to reduce poverty and unemployment.

On energy, Indonesia has established two crash programmes to increase power generation by 10,000 megawatts (MW) in a bid to resolve chronic power shortages in the country.

The first programme, which is due to be 40 percent complete by the middle of next year, relies on coal-fired power stations, while a second programme, due to start next year, has nearly half, or 4,733 MW, of power slated to come from geothermal sources.

Abadi Poernomo, president director of Pertamina Geothermal Energy (PHE), said previously the company planned to increase its geothermal capacity but had been blocked by the conservation law.

PHE, which is a unit of the country's state oil and gas firm Pertamina, planned to increase its geothermal capacity to 1,342 MW in 2014 from 272 MW currently. Pertamina already operates geothermal projects in West Java and North Sulawesi.

Indonesia is hoping to tap alternative sources of energy to meet rising power demand and cut consumption of expensive crude oil as its own reserves dwindle.

The vast archipelago, with hundreds of active and extinct volcanoes, has the potential to produce an estimated 27,000 MW of electricity from geothermal sources.

However, most of the potential remains largely untapped because the high cost of geothermal energy makes the price of electricity generated this way expensive.

(Reporting by Muklis Ali; Editing by Ed Davies)