International aid programs intended to curb the expansion of forest-related industries in Indonesia will likely deprive the country of an opportunity to create 3.5 million new jobs annually and reduce export revenues, a new report claims.
A report by the NGO World Growth released Thursday concluded that programs backed by international aid agencies including USAID and high-profile environmental groups such as Greenpeace and the Worldwide Fund for Nature (WWF) aimed at curbing forest conversion for commercial purposes would significantly hurt Indonesia’s economy.
World Growth chairman Alan Oxley said international aid donors promised to give Indonesia US$2 billion to back up programs that “unnecessarily crimped” expansion of the country’s most important industries — forestry, palm oil and mining — to reduce emissions from deforestation.
“Such condition may cost Indonesia’s economy up to 3.5 million jobs annually, cut growth to industries that make up 15 percent of the economy, reduce government revenues and hamper its ability to continue poverty alleviation efforts,” he said.
The report claimed the forest and palm oil sectors contributed more than $22.1 billion in exports annually, approximately 15.6 percent of the country’s total export revenue, and restraining the expansion of the two sectors would severely impede Indonesia’s promising economic growth.
Indonesia is currently the largest palm oil producer in the world. In 2010, total exports reached 15.5 million tons, up 6.8 percent from 14.5 million tons a year earlier. In 2020, Indonesia has targeted to produce 40 million tons of palm oil.
Indonesia agreed to impose a two-year moratorium on forest and peat land clearing after signing a letter of intent with the Norwegian government in May last year. Under the LoI, Indonesia will receive $1 billion, which will be disbursed once the moratorium is implemented.
Oxley said new research commissioned by the World Bank and the Norwegian government released at the UN Framework on Climate Change Convention (UNFCCC) meeting in November 2010 revealed that deforestation actually accounted for only between 5 and 9 percent of global emissions.
The number was half the figure generally accepted within the climate policymaking community, which was 17 percent, he added.
“The result of the research is significant for Indonesia as many have blamed deforestation as the main contributor to the country’s emission production,” he said.
Oxley added that the study was a warning signal for the Indonesian government to take a different approach to reducing emissions apart from the Reducing Emission from Deforestation and Degradation (REDD) scheme, which limited land conversion for commercial purposes.
“Funds from donors will not be able to generate economic [growth] effectively compared to what the private sector can do,” Oxley, the former Australian representative to the General Agreement on Tariffs and Trade (GATT), said.
The report suggested that the Indonesian government assess the economic impacts all REDD-based projects might bring and publicly announce the results. It also urged the government to consult with private industries that may be affected by any proposed emission reduction programs.
Indonesia previously said it would reduce emissions by 26 percent by 2020, or by up to 41 percent if assisted by foreign support.