Indonesia Misses Once-in-A Lifetime Opportunity to Build Back Better by Passing Controversial Deregulation Law


In a global race to come out of the COVID-19 pandemic with a stronger and more resilient economy by putting the environment first, Indonesia is set to be left behind as lawmakers recently passed a deregulation law proposed by the government.

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A labour union protesting with, flags, posters, and alphabet blocks that read "TOLAK OMNIBUS LAW" meaning "REJECT THE OMNIBUS LAW," a term widely used among protesters.

With provisions that weaken environmental and social safeguards, the deregulation law on job creation, commonly called omnibus law, could hamper efforts to protect Indonesia’s tropical forests, one of the world’s richest that serves an integral part in tackling the climate crisis by absorbing heat-trapping greenhouse gas emissions.

The omnibus law was passed at a time when more and more political and business leaders are calling for governments to put the environment first in their post-pandemic economic recovery plans.

To date, more than 700 companies globally have signed a host of open letters to world leaders, calling on them to ensure that economic stimulus packages tackle both the impacts of the coronavirus and the ongoing climate crisis.

The United Nations (UN) and the Organisation for Economic Co-operation and Development (OECD) call this a “once in a lifetime opportunity” and a “win-win strategy” as building a greener economy, one that doesn’t rely on extracting fossil fuels from the ground and clearing rainforests, would create more and better jobs as well as more healthy and resilient societies.

According to an analysis by McKinsey on post-pandemic recovery plans, spending on renewables creates five more jobs per million dollars invested than spending on fossil fuels.

Furthermore, recent study by Oxford University shows that COVID-19 economic recovery plans that also aim to tackle the climate crisis have better prospects for increasing national wealth and enhancing productive human, social, physical, intangible and natural capital.

This can be achieved by investing on green technologies and industries as well as protecting forests, which provide income, livelihoods and well-being for rural populations, particularly Indigenous peoples, small farm holders, and other forest-dependent communities that live near forests.

Costa Rica is a perfect example on how protecting nature can create jobs rather than curb them as the Central American country has managed to double its forest cover in recent decades while tripling the size of its economy at the same time.

"Restoring nature is not a burden to economic development," Costa Rica Environment Minister Carlos Manuel Rodriguez said.

Indonesia, however, seems to be moving in another direction with the recent passing of the omnibus law.

“Today the Indonesian parliament made a ruinous false choice between environmental sustainability and economic growth by effectively legitimizing uncontrolled deforestation as an engine for a so-called pro-investment job creation policy,” Phelim Kine, Senior Campaigns Director with U.S-based campaign NGO Mighty Earth, said.

The idea behind the omnibus law is that there’s a dire need to create jobs in Indonesia, but investors aren’t coming in to Indonesia due to labor and environmental regulations that are too strict and permit issuance processes that are too convoluted.

In order to attract investors who will in turn create job opportunities, Indonesia needs an omnibus law that revises and/or removes legal stipulations that are deemed unfriendly to investors, and add new ones that provide convenience and incentives to investors.

President Joko Widodo, who first proposed the idea last year, said the omnibus law is even more urgently needed now as the pandemic has resulted in massive layoffs, with 3.5 million people losing their jobs.

The Job Creation Law or in Bahasa Indonesia, Undang Undang Cipta Kerja constitutes sweeping changes to 79 of the country’s laws, some of them pertaining to the natural resources sector.

These changes will make it easier for businesses to acquire licenses and lands in Indonesia, turning the country into a buffet of natural resources for the extractive industry, according to Dewi Kartika, secretary-general of the Consortium for Agrarian Reform (KPA).

“This is a sign that the gate of capitalism is being opened as wide as possible,” she said. “It’s not just agrarian, but all sectors, such as agriculture, land, forest, mining, labor, education. All these are being pushed to become very capitalistic.”

Kartika calls the omnibus law a liberalization of natural resources in Indonesia disguised as a piece of legislation to create jobs.

“This law is a new legal tool to carry out an even more massive environmental destruction,” she said.

Indonesia Omnibus Law protests in Jakarta 8 October 2020

Future deforestation

Among the contentious articles in the omnibus law is the provision that removes the requirement for the government to maintain 30% of the watershed and/or island area as forest area.

According to the 1999 Forestry Law, a region can’t have its forest area go below 30% of its watershed and/or island area in order to prevent disasters such as flooding and landslide, a common occurrence in the country due to its high rainfall.

The government proposed to remove this stipulation in the omnibus law, arguing in the law’s academic paper that the 30% minimum limit is no longer relevant as some regions in the country, especially in the densely-populated Java Island, have had their forest area declined to less than 30% of the total area. Java alone has lost at least 3.2 million hectares or 63% of its natural forests since 1950, mainly due to illegal logging.

However, other regions still have a significant amount of forests, especially the ones in eastern Indonesia like Papua, home to the last frontier of intact forest in Indonesia and one of the world’s richest biodiversity hotspot.

Environmentalists argue that the government’s justification essentially means that prolonged deforestation that has happened in Java can also occur on other islands, and thus the 30% minimum limit should be scrapped altogether.

The proposed removal immediately prompted criticisms from forestry experts.

During a parliamentary meeting to discuss the omnibus law on June 10, San Afri Awang, a forestry lecturer at Gadjah Mada University and senior adviser to the environment minister, said that the removal of the stipulation can lead to deforestation in the future. 

“If the number [30%] wants to be removed, there should be an academic study,” he said. “Since Indonesia gained its independence, there should’ve been an evaluation to see if the current forest areas have had their water [catchment] depleted or not. If we have had shortage of water in each region, be careful. If we remove this 30% number, we can be sinful to our children and grandchildren.”

According to a recent study by environmental NGO Madani, millions of hectares of natural forests will be gone in near future due to the changes in the omnibus law.

To come up with the conclusion, Madani calculated how many years it’ll take for natural forests to be completely gone from each provinces by using the government’s annual deforestation rate in each provinces as its basis.

Based on the assumption that the deforestation rate will remain the same due to the relaxation of forest protection measures in the omnibus law, all natural forests in five provinces in Indonesia will be gone by 2056. One of them, Riau, will lose all its natural forests as fast as 2032. 

Madani also analyzed the potential impact of the law on the natural forests in West Papua province in Papua region.

The province could have been left with only 20% of its natural forests in 45 river basin areas by 2058 if its natural forests are left unprotected from industrial-scale activities, including those that have already been given permits to companies.

Despite the analysis and oppositions from environmentalists, lawmakers decided to approve the removal of the 30% limit that’s proposed by the government.

Furthermore, other provisional changes that could facilitate future deforestation in the omnibus law are also approved.

For instance, under the omnibus law, the parliament is no longer involved in the spatial planning process that determines which areas could be deforested and which ones should be conserved. 

Instead, the central government will have unchecked authority in determining the functions of forest areas, including for mining.

The central government’s power in determining forest area is further strengthened by other changes in the omnibus law, such as the stipulation that the spatial planning process will be done by using technology and geographical coordinates or satellites and for the central government to prioritize the process in strategic areas, although what constitute as a strategic area is not clear.

The Ministry of Environment and Forestry argues that the use of remote sensing technology is much cheaper than ground survey

Kartika of KPA, however, said that ditching ground survey for remote sensing could create new conflicts as the presence of villages inside forest area might not be captured accurately by satellites, which could result in these villages being demarcated as forest area and for economic development projects. 

“This creates a potential of a one-sided determination of forest area by the Ministry of Environment and Forestry,” she said. “Because that’s what’s been happening, with more than 20,000 villages already demarcated as forest area. Not to mention that now the process will rely only on technology. What we want is for the government to meet with villagers and Indigenous peoples in the process, [to determine] the village boundaries.”

Responding to the criticisms, Environment and Forestry Minister Siti Nurbaya Bakar said that the concerns over deforestation threats are unfounded because even if the 30% minimum stipulation for forest area is scrapped in the omnibus law, the government would take into account various factors in determining the size of forest area.

These factors include the environmental and social carrying capacity of an area.

“In fact, the [stipulation] in omnibus law can be stricter than just mere figure of 30%,” she said on her Twitter account.

Coal mining in East Kutai, East Kalimantan

Boon for mining companies

Totok Dwi Diantoro, a lecturer at the Gadjah Mada University’s environmental law faculty, however, is still concerned since the omnibus law is designed to attract as much investment as possible, something which might require new concessions to be established in forest area.

He suspected the removal to be aimed at “allocating [and] for companies’ interests to be able to access [land] without the limitation of 30%”.

Totok added that the scrapping of the 30% stipulation could have a far reaching effect, one that benefits companies like those in the mining sector.

Under the 2016 ministerial guideline on operation in forest area, mining companies that apply for mining permit in forest area have to provide replacement land twice the size of the forest area that they apply for. This stipulation only applies for regions which forest area is less than 30% of its total area.

“Let’s take Java Island as an example. Since the forest area in Java is already less than 30%, companies have to provide compensation land twice [the size of the forest area],” Totok said. “Now that the 30% [stipulation] is gone, the obligation to provide this replacement land is also gone.”

This is not the only way that mining companies could benefit from the omnibus law. The mining sector also stands to benefit from other changes stipulated in the law, such as the relaxation of royalty payments.

Under the omnibus law, mining companies can be totally exempted from paying royalty as long as they develop downstream facilities, such as coal-fired power plants.

Activists have lambasted this stipulation, saying that the government is essentially bailing out mining companies at a time when there’s a global push for fossil fuel companies to be heavily taxed due to their environmental polluting and contribution to climate change from their carbon emissions.

Due to this relaxation of royalty payment, Indonesia stands to lose up to $1,1 billion from potential income.

Such incentives, Iqbal said, would push for massive exploitation and destruction of the environment and people’s living spaces.

“Granting zero percent of royalty payment is the same as giving the coal free of charge to companies,” Iqbal Damanik from environmental NGO Auriga Nusantara, Iqbal Damanik, said.

Mining companies in Indonesia already enjoyed many incentives from the revision of the country’s mining law earlier this year, which was also heavily criticized by environmentalists as it encourage massive exploitation of the nation’s depleting coal reserve.

For instance, mining companies that develop downstream facilities can have their permits extended for unlimited amount of times for 30 years each.

Activists say this is a sign that the government is systematically and deliberately opening up the country’s natural resources like forest and coal for unbridled exploitation.

“This is all happening because the legislative [process] of the job creation [omnibus] law has been taken hostage by conflicts of interests,” Merah Johansyah from mining watchdog Mining Advocacy Network (JATAM) said. “As many as 50% of parliament members and its leaders are connected to coal businesses.”

Kisworo Dwi Cahyono from the Indonesian Forum for the Environment (WALHI) South Kalimantan chapter said that the omnibus law is a sign that the government and lawmakers are bowing down to investors.

“Is this country the Republic of Indonesia or the Republic of Investors?” he said. “With lifetime mining permits and 0% royalty payment, regions will only have mining pits and disasters. It’s like our country is being walked over by investors.”