Indonesia’s Environmental Problem in the Spotlight of International Attention
Since 2014, the Indonesian government has implemented a downstreaming policy that seeks to reduce the export of raw materials while promoting their utilisation in domestic industries. The strategy aims to increase domestic added value and create employment opportunities expected to give Indonesia an advantage in the global mineral value chain. As a result, domestic investment in the metal ore mining sector increased by 132%, and foreign investment increased by 54% in 2022 (Taufikurahman et al., 2023). An increase in the number of smelters also signals an upheaval in the domestic industry. At the moment, there are 13 operational nickel smelters, a significant increase from the mere 2 in 2014. Additional processing plants are currently under development and are projected to be operational by 2025.
While in the agro-based commodities sector, this policy has successfully diversified palm oil derivative products from only 54 types in 2011 to 168 types by 2022 (IDN, 2022). Palm oil downstreaming is critical for Indonesia to enhance its competitiveness in the global market, given its status as the world’s largest palm oil producer. Furthermore, Indonesia can sell a variety of derivative products such as margarine, yoghurt, cosmetics, biodiesel, and biofuel at higher prices compared to their basic counterparts.
However, the increased economic benefits come with equal negative impacts. Nickel mining in North Konawe, a district in Southeast Sulawesi, has resulted in marine contamination and a decrease in local fishing productivity. In the Halmahera Islands, North Maluku, the same activity has caused contamination in various areas, including fields, rice fields, fish ponds, land, and plantation crops (Djamhari et al., 2024). Various parties, including the international organisation Greenpeace, have criticised this fact. According to Greenpeace records, land clearing and deforestation have occurred in multiple locations within nickel concession permits, totaling 116,942 hectares, mainly in Sulawesi and Maluku. They also emphasised downstream practices that were purportedly negligent and prioritised financial gains above all other considerations (Putri & Sedayu, 2024).
In the palm oil sector, extensive production is believed to be the primary driver of deforestation and environmental degradation, resulting in significant international concern. The World Wildlife Fund (WWF) has reported that palm oil plantations frequently result in the destruction of tropical forests and have a devastating impact on numerous animal and plant species. The extensive clearing of agricultural land also heightens the risk of human-wildlife conflict, as large animal populations are confined to smaller and more isolated portions of their natural habitat (WWF, 2024). The unrest prompted the European Union to impose restrictions on palm oil imports, resulting in Indonesia losing a potential international market. The detrimental effects of palm oil production have also raised concerns among consumers, potentially leading to a decrease in international sales.
The Power of International Commitment
Under the scrutiny of the international community, Indonesia has sought to demonstrate its good intentions by participating in global environmental agreement. Indonesia most recently signed a Memorandum of Understanding (MoU) with Norway to reduce greenhouse gas emissions from forestry and other land use. The MoU aims to assist Indonesia in its endeavours to sustainably protect and manage the environment. This includes efforts to reduce deforestation and forest degradation, conserve biodiversity, mitigate greenhouse gases from fires and peatlands, strengthen law enforcement, and address other relevant aspects (Kemlu, 2022). Initially, Indonesia signed the Paris Agreement on climate change in 2016, committing to limit the global temperature increase to 1.5°C above pre-industrial levels. The minister emphasised that Indonesia recognizes the crucial role of forestry and land use in mitigating climate change. This is particularly important, as 65% of Indonesia’s total area, which spans 187 million km2, is forested and harbours significant biodiversity (PPID, 2016).
Indonesia, being a country rich in forests, places a high priority on sustainability policies in the forestry sector. In 2022, Indonesia implemented the Forestry and Other Land Use (FOLU) Net Sink 2030 policy through a Decree issued by the Minister of Environment and Forestry. The policy is expected to contribute approximately 60% of the total greenhouse gas reduction target under the CM1 scenario. The Indonesian Minister of the Environment, Siti Nurbaya, emphasised the potential of this project to significantly reduce greenhouse gas (GHG) emissions (PPID, 2024). It is projected that by 2030, the project could lead to a reduction of approximately 140 million metric tons of CO2 emissions through a well-organised and systematic approach.
Additionally, Indonesia’s collaboration with the framework for Reducing Emissions from Deforestation and Forest Degradation (REDD) demonstrates its strong commitment. This project is a significant climate change mitigation initiative under the United Nations Framework Convention on Climate Change (UNFCCC). Its objective is to assist developing countries in protecting their forests. So far, Indonesia has received USD 156 million in funding through the Result Base Contribution (RBC) scheme for emission reduction efforts from 2016 to 2019 (Media Indonesia, 2024). The funding will greatly support Indonesia in its efforts to achieve its environmental objectives through forest conservation and restoration initiatives.
Indonesia’s compliance with environmental agreements not only demonstrates its commitment to green goals but also plays a crucial role in enhancing its reputation worldwide. Nicholas Onuf and Friedrich Kratochwil have argued that international law is not only to help sovereign states shape their behaviour but also to build their identity (Dunoff, 2012). This means that their compliance can help them define national interests, promote national values, as well as maintain their international image. Indonesia, which is heavily reliant on what many perceive as ‘environmentally harmful commodities,’ can only benefit from participating in international sustainability efforts to reduce international prejudice. It also has the potential to serve as a new means to preserve its interest on the global stage.
Many companies now prioritise environmental responsibility when selecting partners. Global investors also take this into consideration when making investment decisions in a country. The UNCTAD report reveals that 79% of developed countries, which are the primary origin of outward foreign direct investment (OFDI), have implemented promotion initiatives that are progressively emphasising the Sustainable Development Goals (SDGs). As a result, more developing countries are promoting sustainable economics to attract investors. Moreover, developed countries are more inclined to provide assistance to nations that demonstrate a commitment to environmental issues. As seen in the REDD framework, funding from developed countries flows rapidly to developing countries so that they can protect their forests. Developing countries that can preserve their forests have the potential to contribute significantly to carbon trading, offering an exciting opportunity for financial gain.
Compliance with the environmental commitment will provide multiple benefits for Indonesia. For a developing country reliant on natural commodities, establishing an environmentally friendly reputation is a critical undertaking. This is especially true given the challenges of exporting mining and plantation products, which have come under intense scrutiny worldwide. Hence, Indonesia could and should leverage the pressure on sustainability by committing to international standards in order to fully exploit its potential.