Funds part of $1.4b pledged by Norway to curb deforestation and cut emissions
Lynn Lee, Straits Times 21 Aug 10;
JAKARTA: Indonesia's efforts to preserve natural forests - estimated to be around 120 million ha - received a US$30 million (S$41 million) fillip two days ago from Norway.
The money will go to fund projects that reduce carbon emissions by stopping deforestation and forest degradation, and creating a system to prove these emission reductions.
The Indonesian government also agreed to impose a minimum two-year moratorium on the clearance of peatlands and natural forests. The 120 million ha forests are more than three times the land area of both East and West Malaysia.
The US$30 million is an initial payment from the US$1 billion kitty that Norway has pledged.
Indonesia's President Susilo Bambang Yudhoyono had previously said that the country would cut its greenhouse gas emissions by at least 26 per cent in the next 10 years, with a higher target if international funding help was received.
While welcomed by environmentalists, there are also rumblings on the ground. Conservationists worry that the funds could be mismanaged or lost to corruption.
Palm oil and timber planters and mine owners believe the moratorium will dampen expansion plans, delay mining projects and could result in lost jobs.
Fund managers - who have stakes in plantation firms - are predicting that small planters will be swallowed up by big firms while the profits of larger firms will be hit.
Outspoken economist Drajad Wibowo said on Thursday that the US$1 billion promised by Norway would hardly ease the economic losses from the moratorium.
'Indonesia can actually get US$800 million per year from income tax levied on the export of paper, palm oil and timber,' he said, as reported by the Media Indonesia newspaper.
As it stands, the moratorium is likely to have an impact on Indonesia's plan to be self-sufficient in food crops. The government had planned on creating a massive food estate in the eastern-most province of Papua, with big companies growing items like palm oil and sugarcane, and corn and rice.
Yesterday, the government minister in charge of Indonesia's partnership with Norway, Mr Kuntoro Mangkusubroto, confirmed with The Straits Times that the land size of the Merauke food estate in Papua is likely to shrink.
He had earlier said that it could be cut to between 350,000ha and 500,000ha from an initial plan of 1.2 million ha, due to the discovery of carbon-rich peat lands in the area.
'What we're doing now is to come up with the technical details of the moratorium - what types of land come under it, and how this affects land development permits that have already been issued,' said Mr Kuntoro.
Mr Kiekie Boenawan, investment head at fund house Schroders, says the markets were taking the news in their stride as details were scant and some companies were already looking to expand in other countries such as in Africa and Papua New Guinea.
As the details of the forest deal become clear in coming weeks, the government will have to demonstrate that a capable institution or team will be handling the funds.
Officials and environmentalists will have to explain how conservation will be balanced with the needs of the mining, rubber and palm oil industries - these contribute at least 10 per cent to annual economic growth.
They will need to assure businesses and the public that economic growth will not be sacrificed, while protecting forests is crucial to staving off the devastating effects of climate change.
