US-AEP COUNTRY ASSESSMENT:
Indonesia

ACRONYMS

  1. AMDAL: Indonesian environmental impact assessment
  2. BAPEDAL: Environmental Impact Management Agency
  3. BAPEDALDA: City- or county-level BAPEDAL
  4. BAPPENAS: State Planning Agency
  5. BOD: Biological oxygen demand
  6. BKPM: Investment Coordinating Board
  7. EIA: Environmental impact assessment
  8. GOI: Government of Indonesia
  9. ISO: International Organization for Standardization
  10. KADIN: Indonesian Chamber of Commerce
  11. KLH: Ministry of Environment
  12. MOIT: Ministry of Industry and Trade
  13. NGO: Nongovernmental organization
  14. PROPER: Business Performance Rating
  15. PSL: Environmental study center
  16. REPELITTA: Government of Indonesia Five-Year Plan
  17. US-AEP: United States-Asia Environmental Partnership
  18. USEPA: United States Environmental Protection Agency

1. ECONOMIC PROFILE

Demographic Conditions and Trends

Living standards in Indonesia have markedly improved in the last 25 years. In 1967 an estimated 60 percent of its populationat that time, 115 million peoplelived in absolute poverty; life expectancy was well below that of developing countries as a whole, whereas the infant mortality rate was significantly higher. Indonesia also lagged behind other developing countries in education and had a much higher adult illiteracy rate than those of its neighbors. Population growth, at 2.4 percent annually, was a major concern.

Today, the poverty rate stands at 15 percent (for its much larger population of more than 200 million) and, according to the World Bank,1 Indonesia has had the highest annual average reduction in poverty during the last two decades of all countries studied. Infant mortality rates have been cut by more than 70 percent during this period; average life expectancy has risen by almost 50 percent. The adult illiteracy rate has fallen by nearly two-thirds.2

Indonesia's population growth has been dramatically reduced through GOI's vigorous family planning policies and is now at 1.6 percent. The population is not evenly distributed: the island of Java, with only 7 percent of the country's land area, has nearly 60 percent of the nation's total population. The portion of Indonesia's population in urban areas is increasing rapidly from only 15 percent of the total population in 1970 to more than 30 percent today. By the year 2020 half of the entire population is projected to reside in urban areas.3

Economic Conditions and Trends

According to the World Bank, after a quarter century of steadily rising incomes, Indonesia has become more diversified, less dependent on oil, more industrialized, more urbanized, increasingly driven by private initiative, and more integrated into the global economy. Its policymakers are committed to deregulation, an outward orientation, and economic efficiency. Due in large part to liberalization in trade and financial sectors, Indonesia had an average economic growth of 6.3 percent between 1986 and 1992. During this period, nontariff protection measures were largely eliminated and tariffs greatly reduced.

Real growth in gross domestic product in 1994 and 1995 was 7.3 percent and 7.2 percent respectively. Today, nonoil exports make up about 70 percent of the country's total exports and the nonoil sector accounts for roughly 85 percent of the country's gross domestic product. The private sector now accounts for about 62 percent of total fixed investment.4 Annual per capita income currently stands at about $900 and is projected to exceed $1,000 by the end of the decade.5

2. ENVIRONMENTAL PROFILE

Industrial and Environmental Development Background

The industrial sector is the driving force behind Indonesia's economic growth. Industrial goods made up 82 percent of nonoil and nongas exports in fiscal 199394. Manufacturing, which contributed only about 13 percent of gross domestic product in the 1970s and 23 percent in the 1980s, is expected to contribute one-third in the 1990s and nearly 45 percent in the next decade.

Four Javanese cities (Jakarta, Surabaya, Bandung, and Semarang) account for 36 percent of Java's and 27 percent of Indonesia's total output. The leading manufactured exports were textiles, garments, plywood and wood products, electrical goods, footwear, paper products, essential oils, processed foods, and edible oils. Concurrent with establishing itself as a growing exporter of basic manufactured goods, Indonesia has moved into the export of more advanced products, including aircraft and aircraft components, electronic goods, and measuring instruments. Indonesia's development strategy for the Second 25-Year Plan will rely heavily on the growth of industry to create higher productivity jobs and nonoil exports.6

World Bank projections indicate that the share of basic processing industries in industrial sector output will fall from 72 percent today to about 65 percent in 2010 and to 60 percent in 2020, reflecting the rapid increase in downstream processing and assembly industries, which are primarily located on Java.7 Since 1970 Indonesia's industrial base has grown more than eight times in size. The World Bank has projected that by 2010 new investment will account for 85 percent of total industrial capacity.8

Environmental Conditions

Indonesia's industrial expansion has brought with it largely uncontrolled industrial wastes and pollution leading to severe environmental degradation. The total pollution load contributed by the industrial sector has grown exponentially. World Bank estimates indicate that emissions of SOx, NOx, and total suspended particulates increased by factors of five between 1975 and 1988. The Environmental Impact Management Agency's (BAPEDAL's) recent emission inventories indicate that in Jakarta the industrial sector emitted approximately 15 percent total suspended particulates, 16 percent NOx, and 63 percent SOx; in Surabaya, industrial emissions constituted about 28 percent, 43 percent, and 88 percent respectively.

According to World Bank projections, industrial water pollution constitutes from 25 to 50 percent of the total pollution load in certain rivers in Java. Monitoring results vary widely and a preponderance of evidence indicates that urban sources account for the majority of loadings to rivers and streams on an aggregated basis; however, a 1989 survey in Surabaya estimated that industrial effluents accounted for 38 tons per day in the Brantas River, out of a total load of 120 tons per day. Monitoring in the Jabotabek area indicates that industries account for 84 tons per day of biological oxygen demand (BOD) out of a total of 171 tons per day.9 Much of the industrial discharges include a high level of BOD but also an increasing amount of toxic and hazardous waste. The extent to which industrial discharges are contaminating groundwater is not known; however, reports of typical industrial effluents, such as phenol, detergents, and nitrates, found in various groundwater resources in Java, seem to be increasing in number. As for hazardous wastes, a recent study estimated that about 2.2 million tons per year are currently being generated in West Java and metropolitan Jakarta.10

Environmental Trends

Indonesia currently does not have a systematic approach to compiling, analyzing, and publicizing environmental trends. BAPEDAL with funding from Japan is currently developing a strategy for state of the environment reporting. In addition, the U.S. Trade and Development Agency has recently approved funding for a feasibility study for a National Integrated Environmental Data Network in Indonesia. In lieu of an existing system for systematically measuring current conditions and identifying trends, the World Bank has relied heavily on extrapolating data from U.S. industry to project industrial pollution trends in Indonesia.11

3. GOVERNMENT12

Key Ministries for Industrial and Environmental Matters

At the national level, key agencies involved in industrial environmental matters include the State Ministry for Environment, BAPEDAL, Ministry of Industry and Trade (MOIT), and the State Planning Agency (BAPPENAS). These and other agencies that play key roles in areas of importance to US-AEP are described as follows:

The Ministry of Environment (KLH) does not have direct implementation responsibilities but is charged with policy formulation and coordination and oversight of environmental efforts of other line agencies and ministries. The ministry's view is that it has the main role in policy formulation, whereas BAPEDAL implements pollution control programs. KLH's main focus has been on raising environmental awareness in Indonesia and putting in place a strategy for sustainable growth including laws and regulations, information systems, and a "support network" of environmental organizations. KLH has a strategy of "mainstreaming" environmental matters into GOI's line ministries, but it has not been successful. Major responsibilities of KLH include:

Information systems. KLH is charged with publishing an annual report of data submitted by provincial environment bureaus; however, major differences exist in coverage, quality, and consistency among provinces. Information is incomplete but useful for "order of magnitude" policy decisions.13 KLH has not published a report since 1994.

Support network. A part of KLH's mandate is to develop environmental skills, encourage greater awareness of environmental issues, and enhance opportunities for wider participation in the process of environmental management. The ministry has supported development of university-based environmental study centers (PSLs); in 1994 fifty-four PSLs had been established in universities in each of the twenty-seven provinces.14 The ministry, however, has recently discontinued providing direct financial support for PSLs.

BAPEDAL, under the Ministry of Environment, has responsibility for setting environmental standards, implementing compliance programs for the central government, monitoring environmental quality, and overseeing Indonesia's environmental impact assessment (EIA) process, which in Indonesia is called the AMDAL process. Since BAPEDAL's establishment in 1990, it has seen remarkable growth from a staff of fewer than thirty to more than 300 and is the only government agency with a political appointee specifically assigned to "grow" the agency. It is chaired by the minister of KLH and has deputies for institutional development and capacity expansion, pollution control, and EIA and technical guidance. Four regional BAPEDALs are being established to administer BAPEDAL's programs in the regions. BAPEDAL has virtually no enforcement authority, although the agency is strengthening its institutional capacity for enforcement (see "Legal Mandates Program" below); a presidential decree to provide permitting/enforcement authority is being drafted by GOI.15

Ministry of Industry and Trade. The Ministry of Industry, which was recently merged with the Ministry of Trade, has historically played a lead role in administering GOI's import substitution programs, but, with economic deregulation, this role has diminished considerably in recent years. The ministry has directorates for each of Indonesia's major industry subsectors. MOIT has nine Research and Development institutes that are sector specific as well as thirteen regional research institutes. MOIT's Research and Development Center on Business Climate has an environmental unit that chairs the ministry's AMDAL commission and is examining potential policies with respect to ISO (International Organization for Standardization) 14000 and ecolabeling as well as ways to assist industry in implementing pollution prevention practices. Within the ministry, PUSTAN has the lead role for ISO 9000.

The State Development Planning Agency is GOI's central economic planning agency. Among its major responsibilities, BAPPENAS coordinates donor programs and projects and coordinates development of the government's five-year economic plan (REPELITTA) by line ministries and monitors their progress in implementing the plan. BAPPENAS also provides input on budgetary and economic matters to the Ministry of Finance, which is the lead ministry on fiscal and economic policies.

The Ministry of Public Works has three directorates: roads, human settlements, and water resources. The ministry (through the Directorate of Water Resources) is responsible by law for the quality and quantity of surface water in Indonesia.16

The Investment Coordinating Board (known as BKPM), prior to the mid-1980s, had an extensive list of promoted industries and promotional privileges; however, with economic deregulation, the agency's scope has been substantially narrowed. BKPM still has a fairly short list of prohibited investments, including three areas of investment prohibited on environmental grounds.

The Standardization Council of Indonesia is the lead agency for coordinating standards policy, including accreditation and certification. The council is responsible for oversight of Indonesia's National Standardization System, which is a basis and guide for every standardization activity in the country. The council has plans to strengthen its technical capabilities this year to address new initiatives, including ISO 14000.

State Ministry for Coordination of Economic Affairs (known as EKUIN). Despite its best efforts, KLH has not been able to establish its planned Policy Analysis Unit and has to rely on external organizations to carry out policy-related studies. Government-sponsored and nonprofit research organizations engaged in this effort include the Center for Policy and Implementation Studies, sponsored by the State Ministry for Coordination of Economic Affairs.17

The Agency for the Assessment and Application of Technology (known as BPPT) is GOI's premier agency for technology innovation and commercialization; however, in spite of its status, the agency's environmental activities with respect to clean technology are limited, primarily focused on providing recommendations for end-of-pipe technologies to small- and medium-sized industries.

The Central Bureau of Statistics produces an annual report of environment-related statistics, including data on population trends, health conditions, water supply and sanitation, and other socioeconomic factors. As in the case of KLH reports, the data are not easily comparable or useful for monitoring regional or national trends.18

Other Key Institutions for Industrial and Environmental Matters

Provincial governments are responsible for environmental management at the regional level. In principle, the authority vested in the provincial government is wide ranging, including implementation of development plans, setting environmental standards, approving location permits and other licenses for new projects, and monitoring and enforcing compliance. In practice, the provinces are poorly staffed and trained to meet these responsibilities (with certain possible exceptions, such as East Java). Within the central government, the Ministry of Home Affairs is responsible for administering provincial and local government affairs. City and county-level BAPEDALs (BAPEDALDAs) will be established, pending authorization now being considered by the Ministry of Home Affairs.

No single agency at the provincial level has pollution control as its primary mandate. Rather, provincial agency mandates and staffs correspond to the central line ministries. For example, groundwater management responsibility rests with the Ministry of Mines and Energy, whereas surface water is with Public Works. Local offices of the Ministry of Public Works monitor ambient water quality, but only representatives of the Ministry of Industry have authority to enter firms to take samples; thus, the career paths of technical staffs in the provinces are not tied to BAPEDAL but rather to the line ministries.19

4. POLICIES AND LAWS

Indonesia does not have a strong framework of civil and administrative law or a supportive civil court system. Enforcement of laws depends primarily on prosecution in criminal courts under local police authorities; thus, alternatives to "traditional" enforcement systems for environmental management, such as negotiated agreements and incentives based on business and individual reputations, are currently among the central government's most important policy tools for fostering clean technology and environmental management.

Environmental Policies and Laws20

Many government policies in Indonesia are put into place through a complex and sometimes contradictory array of presidential, ministerial, and gubernatorial decrees. A summary of major environmental laws and regulations relevant to industry and environmental infrastructure is provided in the endnotes.21 The following is a discussion of major environmental policies and programs affecting industry and urban infrastructure:

Air pollution. The Blue Sky Program was launched in July 1992 by BAPEDAL. The program includes both stationary and mobile sources. For stationary sources, the early phase program focuses on cement factories, iron and steel, pulp and paper, and coal-fired power generation. The program targets five of the largest cities: Jakarta, Bandung, Surabaya, Semarang, and Medan.22

Water pollution. Under the Prokasih (Clean Rivers) Program, Prokasih Teams in the provinces are coordinated by the vice governor, with representatives from BKLH, the Development Planning Board (known as BAPPEDA), PSLs, research laboratories, NGOs, local officials (including local water utility managers),23 and other relevant sectoral agencies. From 1989 to 1994, Prokasih activities have dealt with thirty-one rivers in thirteen provinces; the program now encompasses more than fifty rivers in seventeen provinces. Each provincial governor is responsible for program implementation within his or her province. Although the program is officially classified as "voluntary," in reality, the governors put great pressure on industries to "volunteer," such as by threatening to shut them down. The culmination of an agreement is a memorandum of understanding signed by each industry, the local mayor, and BAPEDAL.24

Toxic and hazardous waste. Although BAPEDAL issued hazardous waste standards in late 1994, they have not been vigorously enforced. BAPEDAL has announced that such hazardous wastes should be stored on site until treatment facilities are established. One hazardous waste facility has been put into operation to serve West Java; however, the facility has only recently reached the break-even point for recovering its cost.25 GOI plans to support at least two additional facilities in the near term; long-term plans call for a total of nine facilities when the level of demand would make them financially feasible.26

Environmental impact assessment. Under the new AMDAL/EIA process, launched in 1993, all new and existing projects requiring permits must prepare EIAs, including environmental management plans (known as RKLs) and monitoring plans (known as RPLs). The process has also been streamlined and for many projects largely consists of the environmental management plan and monitoring plan. BAPEDAL functions as the executive agency for monitoring and evaluating the AMDAL system. Implementation authority lies with central line agencies and provincial governments, both of which are expected to establish interagency AMDAL commissions. Central agency commissions (Komisi Pusat) are chaired by the secretary general of the relevant agency; provincial commissions (Komisi Daerah) are chaired by the head of the Development Planning Board. Members include representatives from the provincial BKLH and local PSLs. Public participation is typically limited to NGOs selected to participate on the commissions.27

Clean technology. BAPEDAL has developed a draft strategy for an Indonesian Cleaner Production Program. Most of the activities in the strategy involve donor assistance. Representative examples of activities include cleaner production data base and information centers, technical assistance for industry, training, demonstration projects, and policy.28

Environmental audits. The Government of Indonesia has recently issued a Ministerial Decree on General Guidelines for implementing environmental audits.29 Three major multinational corporations that have high-profile environmental concerns have recently conducted voluntary audits at the request of BAPEDAL: Freeport McMoRan, Indorayon, and CalTex. Findings from the Freeport audit were released to the public in April 1996 and received headline coverage in the news media.

Mandate program. The goals of this internal program of BAPEDAL, funded for two years by the World Bank, are to create momentum for environmental law, prepare and apply environmental enforcement procedures, strengthen the capacity of law officials, and increase public awareness of environmental enforcement.

Clean City Award. The Clean City Award (Adipura) is annually awarded by the president of Indonesia to the cleanest cities in the country. In 1993 fifty-eight towns and cities participated; the number was larger in 1994 and 1995. Mayors are reputed to be competing for these awards under strong encouragement from their governors, thus providing a strong incentive for action.30

Industrial Policies and Laws

Industrial investment has been greatly streamlined under GOI's economic deregulation policies. Basically, foreign direct investments must be licensed by BKPM. Manufacturing equipment imported to Indonesia must be reviewed by PT Sucofindo, a government-owned corporation, to determine that it meets standards established in procurement documents.

Little evidence exists that environmental considerations have been integrated into GOI's industrial policies. The industry sector directorates within MOIT are not for the most part engaged in environmental matters with respect to their client industries. Furthermore, BKPM has recently taken a step in the opposite direction from incorporating environmental considerations into its decisionmaking by unlinking its licensing processing from the AMDAL process. The only area in which environmental considerations still have a direct bearing on BKPM's review process is on its list of prohibited investments: three of the eleven sectors that remain on the list of absolutely prohibited investments were listed for environmental reasons. In addition, Indonesian pollution control equipment can be imported duty-free.

Beyond these policies, GOI encourages new industries, both domestic and foreign owned, to locate in industrial estates by exempting facilities from the requirement to prepare environmental impact assessments (AMDAL documents) if they locate in estates that have already fulfilled the AMDAL requirement.

Public Information Policies and Laws

GOI does not have laws that mandate government agencies to provide information to the public. In fact, it is extremely difficult for the public to access government information on environmental conditions and industrial environmental performance and participate in government decisions affecting the environment. Even the AMDAL process, which provides for participation by NGOs and local representatives affected by proposed projects, typically has no provision for public review of proposed environmental assessment documents, except for participation of NGO representatives in the AMDAL committees.

A major initiative, however, to disclose information about industrial environmental performance to the general publicthe Business Performance Rating (PROPER)was launched by BAPEDAL in June 1995. PROPER is a publicly announced rating system on company environmental performance and compliance with regulations and is the first central government program in the world to publish a single index of environmental performance. The first target group of 230 factories received ratings in June 1995; names of companies rated as "black" (worst offenders) and "green" and "gold" (best companies) were released to the public in December 1995. Early results from these ratings appear to indicate that the program is having positive results. Rather than protesting their ratings, companies are coming to BAPEDAL asking what they need to do to improve them. First-round ratings were based solely on effluent quality. BAPEDAL plans to expand the coverage of the program to include industry environmental management practices and compliance with hazardous waste requirements.31

Protection of proprietary information was a major issue faced by GOI in drafting the guidelines for environmental audits, discussed above. Although some information has been disclosed to the public from the three major corporate audits conducted to date, the guidelines protect companies performing audits from self-incrimination.32

Public information sharing and participation has been notable with respect to urban environmental issues. The Kampung Improvement Project has during the past twenty-five years improved services in 527 cities and towns by providing an integrated package of basic services, including water supply, sanitation, drainage, and other infrastructure. The project has included extensive participation by NGOs and the public in working with kampung committees to plan and monitor projects.33

Legal and Policy Developments of Particular Relevance to Industrial and Urban Environmental Management

The original objective of Prokasih was to reduce the total effluent loadings of participating industries by 50 percent. This objective has been "ratcheted up" over time; in October 1995 BAPEDAL issued effluent standards for twenty-four industry subsectors, including concentration- and load-based standards. Inclusion of standards for toxic pollutants, although limited in scope, may begin to place more industry attention on pollution prevention rather than simply end-of-pipe solutions that have been the predominant pollution abatement strategies under the Prokasih program.34

BAPEDAL's PROPER system has attracted international attention as an important new policy approach to industrial pollution control. Environment Minister Sarwono was recently given a leadership award by the Zero Emissions Research Initiative of the U.N. University for implementing PROPER; the World Bank has given strong public support to the program.35 BAPEDAL plans to expand its criteria for ranking companies, including compliance with hazardous waste regulations and environmental management practices.

5. URBAN ENVIRONMENT AND INFRASTRUCTURE

The government, aided by the international donor community, has allocated increasing investment in environmental infrastructure, from $25 billion in the 198993 five-year period to $35.8 billion in the 199498 period. The bulk of this is for urban infrastructure, including roads, water supply, drainage and flood protection, and environmental sanitation.36

For sewage and sanitation, GOI has initiated a planning exercise covering up to twenty-five cities to assess their sanitation needs. "Least-cost" technical options will need to be defined; issues of financing and cost recovery and the institutional arrangements for managing the system within each city will need to be resolved.37

Indonesia's progress in meeting its pressing urban environmental infrastructure needs is summarized as follows:38

Water Supply

Only 34 percent of Indonesia's urban poor have household connections to piped water. Water supply is plagued by high volumes of unaccounted-for water, inefficient metering, and insufficient pricing.

Wastewater

Wastewater management has traditionally been viewed as a personal, not governmental, responsibility; hence, Indonesia has one of the worst service coverage percentages for sewers in the world. In 1994 the government reported that 2.4 percent of the urban population was served or was scheduled to be served by sewerage systems.

Solid Waste

Collection and disposal of solid waste is an increasing challenge in most large cities. An estimated 1520 percent of urban solid waste is not collected at all; much of what is collected ends up in uncontrolled dumps; however, the outlook for the future is promising. Collecting fees is not difficult; tariff rates in major cities are high enough to support profitable enterprises. The director general of Cipta Karya is committed to privatization.

Hazardous Waste

GOI has supported three projects for central treatment, storage, and disposal facilities: Jakarta (currently operating, but only at 30 percent capacity), Surabaya (in progress), and Kalimantan (project development stage).

6. PRIVATE SECTOR AND ACADEMIA

Industry

Given the export orientation of Indonesian industry, it is perhaps surprising that the industry has shown a general lack of appreciation for ISO 14000. A number of industry associations and chambers of commerce, however, have recently shown an active interest in developing ISO 14000; attendance at seminars and workshops has been brisk.39

In addition to clean production programs set up by a number of government agencies, private sector support is illustrated by the fact that KADIN (the Indonesian Chamber of Commerce) has agreed to be the site of the United Nations Industrial Development Organisation's proposed National Cleaner Production Center, although the actual establishment of the center is still uncertain. In addition, the American Chamber of Commerce has a strong environment committee.

Indonesia has an emerging domestic environmental industry, both in equipment manufacturing and environmental engineering and consulting. A new environmental industry trade group has been formed, the Indonesian Environmental Trade Association. Another important group that provides a forum for environmental professionals in the private sector as well as government is the Indonesian Association of Environmental and Sanitary Engineers.40

About 150 companies have been certified for ISO 9000. GOI has placed no direct pressure or provided incentives for firms to be ISO 9000 certified; at present no discussion has occurred on placing direct pressure or incorporating standards into regulations. Nevertheless, ISO 9000 has picked up momentum, as evidenced by the fact that firms have recently placed ads in newspapers announcing that they have been certified.41

A number of industry associations, chambers of commerce, and so on have shown active interest in the development of ISO 14000; attendance at seminars and workshops has been brisk. Under the coordination of the Standardization Council of Indonesia, six working groups have been formed to shape the best certification procedure for Indonesia, consisting of government (BAPEDAL and MOIT), NGO, university, and industry (INKINDO) representatives.42

Academic and Research Institutions

Several joint clean technology research programs exist between industry and university/research institutions, for example, between KADIN and Gajamada University and between industry and government programs, largely through MOIT's research and development institutes. MOIT's institutes are under a mandate to become self-supporting and have begun to privatize their consulting activities to industry with mixed success (ranging from 20 percent to as high as 70 percent self-sufficiency).

PSLs were originally established with the strong support of the central government to provide environmental centers of excellence around the country; however, the PSLs around the country are currently primarily engaged in EIA activities and do not appear to be focusing on clean technology/environmental management issues to any major extent. Furthermore, recent regulations issued by GOI have made host universities responsible for PSL funding. This has resulted in a major retrenchment of PSLs in both the scope of their activities and their capabilities.43

Financial and Insurance Institutions

As a result of deregulatory measures in the banking sector in the 1980s, the number of private commercial banks has grown to 144 with 2,773 offices. In addition, the state owns five banks with 981 offices, each serving specific sectors of the economy. Both state and commercial banks generally require submission of an EIA (AMDAL document) prior to loan approval; however, the level of scrutiny varies widely across institutions depending on their priorities and capacity. For example, Bank Indonesia, the country's central bank, does not have an explicit policy concerning the EIA review process. Other banks review the document to varying levels of detail; at least one private bank requires the loan package specifically to include financing for pollution controls if called for in the EIA.44

7. ENVIRONMENTAL AWARENESS AND PUBLIC INVOLVEMENT

General Public Awareness of Environmental Issues

Coverage of environmental issues has increased tremendously in recent years; news stories in the press are commonplace. One NGO that prepares press clippings from all of the provinces reported to the US-AEP assessment team that they find hundreds of environmental articles each week. Other anecdotal evidence abounds, for example, a newspaper targeted to Jakarta's young people (AIKON) is committed to raising environmental awareness; the Indonesian Forum for the Environment (see below) has sponsored a number of workshops for journalists.45

Although the Ministry of Environment has stated that it intends to produce annual state of the environment reports, the reports are actually published irregularly and do not appear to be widely recognized by the environmental community. On the other hand, in metropolitan Jakarta a number of continuous air quality monitors, funded by Japan, display air quality information to the public on a real-time basis.

Nongovernmental Organizations

Nearly 270 NGOs in Indonesia are engaged in environmental matters. Some of the largest NGOs include the following46:

The Indonesian Forum for the Environment is an umbrella organization for hundreds of grassroots environmental NGOs throughout Indonesia. Founded in 1980, the forum has been actively engaged in industrial environmental issues, including conducting tests of water quality and industrial effluents, litigating against industries, as well as participating in positive industry/NGO dialogue forums. Regarding the latter, the forum was engaged in dialogue with the pulp and paper industry and MOIT, which resulted in Indonesia's move away from chlorine processes.

Indonesian Legal Aid Foundation (known as LB). With chapters in fourteen cities, the foundation is a group of human rights and environmental lawyers providing legal representation to communities throughout Indonesia. In June 1995 foundation lawyers persuaded judges to accept as evidence reports that the foundation obtained from government agencies showing severe deterioration of the Surabaya River just downstream from three paper mills. Lawyers with the Indonesian Center for Environmental Law (see below) and LB Jakarta are bringing a lawsuit against four paper mills on the Ciujung River in Serang, West Java. The case is pioneering the use of "class action" legal standing.

E-Law Indonesia was established by the Indonesian Forum for the Environment and the Indonesian Legal Aid Foundation in 1991. More than forty environmental advocates from throughout Indonesia came together at a conference in Palembang in the summer of 1995 to share ideas and information about the pulp and paper industry, cited in an E-Law report as "one common enemy of most all Indonesian environmental advocates."

The Indonesian Center for Environmental Law provides public policy input to the Indonesian government at the central and regional levels and gives legal assistance to community advocacy groups. The center is preparing itself to be the most complete data, information, and documentation center for environmental law in Indonesia.

Friends of the Environment Fund (known as DML) is a business NGO, with about 150 corporate members. The organization promotes recycling, including by funding a plastics recycling program in Jakarta, and publishes a periodical on addressing industrial environmental issues. Among its programs, the fund provides small grants to environmental NGOs.

The Institute for Eco-Labeling has recently been established by a former minister of environment.

8. U.S. GOVERNMENT ACTIVITIES

U.S. Agency for International Development

Under the U.S. Agency for International Development mission's Indonesia Clean Industrial Production program, waste reduction assessments have been conducted in six industry subsectors (pulp and paper, metal finishing, flex packaging, wet batteries, paints, and furniture coatings). Under the Association of Southeast Asian Nations's Environmental Improvement Project, waste audits have been conducted in other sectors, including iron and steel, and food processing.47

Under the mission's Municipal Finance Project, started in 1989, the mission has provided extensive assistance to GOI in decentralizing urban infrastructure financing. The project is developing municipal financing mechanisms such as bonds and the Regional Development Account. The Private Participation in Urban Services project is the mission's principal vehicle for delivery of technical assistance in developing partnerships and private sector participation in urban infrastructure development, including assistance in addressing legal policy reforms needed for successful privatization activities.

U.S. Environmental Protection Agency (USEPA)

USEPA, in addition to its activities in Indonesia as a US-AEP partner, is currently providing or considering assistance to Indonesia in several areas48:

� In conjunction with the U.S. Agency for International Development's Rapid Assessment Program and by leveraging significant funding from the World Bank, USEPA has begun an extensive review of Indonesia's pesticide regulatory program. The second phase of the program will include expanding the lessons learned from this project to other interested Southeast Asian countries.

� USEPA is considering an Indonesian request to place select USEPA officials in priority regional BAPEDALs to support their development.

US-AEP Activities in Indonesia

US-AEP has supported 226 environmental exchanges, processed 300 trade leads, and sponsored 55 technology grants through the National Association of State Development Agencies, in addition to initiatives through the Council of State Governments. With USEPA, US-AEP has supported short-term technical assistance and training modules.

9. INTERNATIONAL ORGANIZATIONS AND BILATERAL ASSISTANCE

GOI is receiving an extensive array of multilateral and bilateral assistance in clean technology and environmental infrastructure. Five bilateral and three multilateral projects involve cleaner industrial production. BAPEDAL is a major recipient of capacity-building assistance. Representative donor activities include the following49:

World Bank

BAPEDAL Development and Technical Assistance Project. The project is providing extensive assistance to BAPEDEL through five projects designed to build capacity for standards setting, monitoring, enforcement, permitting, and laboratory capacity.

Industrial Technology Development Project is directed toward Agency for the Assessment and Application of Technology, MOIT, and the Indonesian Institute of Science. It is intended to (a) strengthen Indonesia's system of industrial metrology, standards, testing, and quality support services, (b) finance provision of technology-upgrading services to small- and medium-sized enterprises by both public and private technology suppliers, (c) provide assistance for reorienting the public research and development labs to support technology development in the private sector, especially small- and medium-sized enterprises, and (d) strengthen the capacity to formulate and coordinate technology and industrial strategies, policies, and programs.50

Indonesian environment and development. The World Bank in 1994 completed a comprehensive study of environment and development in Indonesia. The study included an analysis of industrial pollution intensity that the Bank is still refining.51

Metropolitan Environmental Improvement Project, Jakarta. This project has provided a wide range of technical, financial, and institutional assistance to Jakarta in managing its environmental problems.

Asian Development Bank

The Asian Development Bank's BAPEDAL Regional Network Project will provide loans and technical assistance to BAPEDAL for institution building, establishment of regional BAPEDALDAs, and interagency coordination. The project has made slow progress because much of the groundwork and the establishment of BAPEDALDAs is being done under the World Bank assistance project, which has yet to complete the groundwork. The Asian Development Bank's operational program for environmental infrastructure is summarized in the endnotes.52

United Nations

BAPEDAL Integrated Marketing Communications Strategy under the U.N. Environment Programme provides assistance to BAPEDAL to improve its social marketing strategy as part of its larger objectives to improve public awareness, attitude, and behavior with respect to environmental protection.

The United Nations Industrial Development Organisation has chosen KADIN as the location for a National Cleaner Production Center; however, the actual establishment of the center is still uncertain.

Bilateral Assistance

Australia has initiated a five-year project of technical assistance, technology demonstration, and training support in clean production in East Java.

Canada is currently designing a project to provide environmental management assistance to the provinces.

Germany is providing technical assistance to BAPEDAL, focusing on the textile industry in a watershed close to Bandung.

Japan has provided $125 million for a soft loan program to finance pollution control equipment and consulting services for pollution prevention. About fifty-five loans have been made under the first phase of the program, primarily for pollution control equipment. Japan and GOI are currently negotiating the second phase of the program, which will be about $225 million. Japan has also established a pilot wastewater treatment plant and provides operator training at the Bandung Institute. In addition, Japan is providing assistance to BAPEDAL to strengthen the agency's ambient environmental quality monitoring program, including building laboratory capabilities.

The Netherlands is providing technical assistance to BAPEDAL in strengthening its monitoring capacity.

10. OPPORTUNITIES FOR A CLEAN REVOLUTION

Policy Framework

PROPER program. BAPEDAL is planning to expand the PROPER program from dealing solely with effluent quality to more general facility environmental management and compliance with hazardous waste requirements. Because an effective disclosure system may be applicable throughout the region (e.g., the Philippines government has expressed interest in the PROPER system), donor support in improving and expanding the rating system may pay major dividends, both in terms of improving Indonesia's system and in fostering the concept throughout the region.

AMDAL process and commissions. The AMDAL process is similar to the EIA process in the United States, which forces project sponsors to consider and mitigate the environmental and social consequences of major development projects. In Indonesia, a firm's ability to obtain investment licenses, commercial loans, and operating licenses is tied to the AMDAL process. If a simple and effective but quick AMDAL process could be devised that required consideration of technology choice on the environment for new investment, it could provide a major opportunity for improving environmental management.

The "public participation" component of the AMDAL process is currently limited to participation of selected NGOs to sit on the national or provincial commissions. A more broadly based institutional mechanism providing for input to the process from a larger segment of the public (e.g., public hearings and publication of proposed recommendations for public comment) would greatly foster engagement of the public in the decisionmaking process

Economic development. Indonesia is preparing its next five-year economic plan (REPELITTA VII). Because preparations of REPELITTAs rely on an extensive consensus-building process across the government, this planning process may provide a unique opportunity for GOI to articulate a plan for integrating environmental considerations into industrial and economic development policies. Long- and short-term donor assistance to BAPPENAS could be invaluable in mobilizing support for an integrated industry and environment program.

Level the playing field for cleaner production/pollution prevention. A systematic bias exists in Indonesia's environmental policies, favoring end-of-pipe solutions. This bias reflects a significant lack of information about clean production and may be depriving firms of more cost-effective options. A policy program to level the playing field would involve redressing the bias in environmental management and overcoming a market failure in technology information markets.

Industrial Environmental Management

ISO 14000. The ISO 14000 movement could be a useful focus for donor activities to galvanize support of the central industrial and economic planning ministries for environmental and quality improvement. At the present time, most of the industry sector directorates within MOIT are not aggressively engaged in clean technology and only beginning to appreciate ISO 14000 and its implications for competitiveness. With deregulation of the economy, however, the ministry is sorting out new priorities and directions and may well be open to assuming a leadership role in aggressively promoting and moving ISO 14000 forward in Indonesia. An ISO 14000 program might include (a) information seminars for senior government officials, (b) high-level visits to one or more of the first- and second-tier newly industrialized countries to explore their approaches to ISO 14000, (c) assistance to GOI in searching for the best "home" for ISO 14000, and (d) a business awareness program and cost-effective certification program for small- and medium-sized firms.

Within MOIT, ISO 9000 and 14000 are managed by different organizations without a closely coordinated effort. Advice on how these two processes may be more closely integrated would be welcomed by PUSTAN.

Role for MOIT in PROPER program. A real need exists to provide systematic assistance that could help firms receiving poor ratings under BAPEDAL's PROPER Prokasih program to upgrade their environmental practices and business rating. Perhaps MOIT could become the primary repository of advice for firms with poor ratings seeking to improve their ratings. This could be an effective way of enticing MOIT to begin mainstreaming the environment into its programs.

National Pollution Prevention Roundtable. Indonesia has recently established a pollution prevention organization in conjunction with the National Pollution Prevention Roundtable in the United States. This new organization could provide an important forum for transferring U.S. clean production experience, technology, and practices.

Environmental Infrastructure

Revolving fund. East Java may be the first province to initiate an environmental permit system, which could include an effluent charge scheme and a revolving fund for environmental infrastructure. This program could provide a "model" permit/charge scheme that could be emulated in other provinces and possibly throughout the region.

REFERENCES

Afsah, Shakeb, Benoit Laplante, and David Wheeler. 1995. What is PROPER? Reputational Incentives for Pollution Control in Indonesia. Washington, D.C.: World Bank, Policy Research Department, Environment and Infrastructure Division (October).

Afsah, Shakeb, Benoit Laplante, and Nabiel Makarim. 1995. Program-Based Pollution Control Management: The Indonesian PROKASIH Program. Washington, DC: The World Bank, Policy Research Department, Environment and Infrastructure Division (October).

Asian Development Bank (ADB). N.d. Operational Program 199597. Environmental Infrastructure.

Badan Pengendalian Damak Lingkungan (BAPEDAL). 1995. BAPEDAL Guidelines for Effluents (October).

Brandon, Carter and Ramesh Ramankutty. 1993. Toward an Environmental Strategy for Asia . Washington, D.C.: World Bank.

Bratasida, Liana (BAPEDAL) and Jean Lowry (EMDI Cleaner Production Adviser). 1995. Indonesian National Cleaner Production Strategy, Background Information (May).

Butler, John, Elizabeth Marcotte, and Michael Rock. 1996. Policy Initiatives for Clean Production in Indonesia. Report to the Urban Environmental Management Office of USAID/Indonesia (May 10).

Environmental Business International (EBI). 1996. Indonesia Environmental Market Summary. Prepared for US-AEP (March).

Environmental Law Alliance Worldwide (E-Law). 1996. Environmental Law Alliance Worldwide. Home page. (Internet: http://open.igc.org/elaw).

Gourlay, Peter. 1996. Assessment of Environmental Infrastructure in Asia. Washington, D.C.: US-AEP (March).

Indonesian Center for Environmental Law (ICEL). 1996. Indonesian Center for Environmental Law. Home page. (Internet: http://www.open.igc.apc.org/elaw/asia/indon/icel.html).

Indonesian Forum for the Environment. 1996. Wahana Lingkungan Hidup Indonesia, The Indonesian Forum for Environment. Home page. (Internet: http://www.sdn.or.id/walhi).

Louis Berger International. 1994. A Review of Environmental Policy, Regulations, Programs, and Institutions of the ASEAN Member Countries. Association for Southeast Asian Nations, Environmental Improvement Project, Jakarta (December).

Tumiwa, Samuel. 1995. "Bilateral, Multilateral, Private Sector Assistance and GOI Activities in Support of Cleaner Industrial Production." Second draft. Jakarta: Urban Environmental Management Office, USAID/ Indonesia (March 30).

United States-Asia Environmental Partnership (US-AEP). 1995. "The Package," Useful Information for American Business People about the Environmental Market in Indonesia. US-AEP Indonesia, Office of Technology Cooperation, Jakarta (September).

. 1996. "US-AEP/USFCS Environmental Infrastructure Strategy: Indonesia." Washington, D.C. (August).

World Bank. 1992. World Development Report 1992. New York: Oxford University Press.

. 1994. Indonesia: Environment and Development. Challenges for the Future. Washington, D.C. (July).

. 1995a. "Country Assistance Strategy of the World Bank Group for Indonesia." Memorandum of the President of the International Bank for Reconstruction and Development to the Executive Director, Country Department III, East Asia and Pacific Region, Washington, D.C. (February 27).

. 1995b. Indonesia-Industrial Technology Development Project. Staff Appraisal Report. East Asia and Pacific Regional Office, Washington, D.C. (November 20).

. 1996. Public Opinion, Markets Are New Weapons in Pollution Fight, Press Release No. 97/S004, Washington, D.C. (August 21).

ENDNOTES

1. World Bank (1992).

2. World Bank (1994, 45).

3. World Bank (1994, 1011).

4. World Bank (1994, 89).

5. Michael Rock, Winrock International, Arlington, Virginia (August 1996).

6. World Bank (1994, 23).

7. World Bank (1994, 1617).

8. Brandon and Ramankutty (1993, 8).

9. World Bank (1994, 76). Data are seriously lacking on industrial effluents and water quality; wide discrepancies have been observed in estimates of the degree to which industrial sources contribute to Indonesia's water quality problems compared with the contribution of municipal and other sources. Original source materials providing estimates of BOD5 (the amount of dissolved oxygen needed or consumed in five days by biological processes to break down organic matter in effluent) loadings to rivers show that 1530 percent can be attributed to industrial sources, compared to 2550 percent cited in this source. In 1996 BAPEDAL reported that 80 percent of BOD5 was from household sources (Mary Boomgard, US-AEP environmental infrastructure representative, Jakarta [September 20, 1996]).

10. Tumiwa (1995, 910).

11. The World Bank has conducted an extensive analysis of industrial pollution in Indonesia, using its Industrial Pollution Projection System. The system uses data from facilities in the United States, derived from the U.S. Environmental Protection Agency and U.S. Census Bureau data bases (World Bank 1994, 7483).

12. Unless otherwise noted, much of the information in this section was collected during a visit to Jakarta, Indonesia, by John Butler, US-AEP/IRG; Elizabeth Marcotte, EP3; and Michael Rock, Winrock International (April 29May 10, 1996).

13. World Bank (1994, 181).

14. World Bank (1994).

15. Mary Boomgard, US-AEP environmental infrastructure representative, Jakarta (September 20, 1996).

16. Mary Boomgard, US-AEP environmental infrastructure representative, Jakarta (September 20, 1996).

17. World Bank (1994).

18. World Bank (1994, 17475).

19. World Bank (1994, 17987); information collected during a visit to Jakarta, Indonesia, by John Butler, US-AEP/IRG; Elizabeth Marcotte, EP3; and Michael Rock, Winrock International (April 29May 10, 1996).

20. Unless otherwise noted, information in this section was collected during a visit to Jakarta, Indonesia, by John Butler, US-AEP/IRG; Elizabeth Marcotte, EP3; and Michael Rock, Winrock International (April 29May 10, 1996).

21. Major laws and regulations affecting industrial and environmental infrastructure are as follows (much of this information was drawn from Louis Berger International [1994]):

Law No. 4 of 1982 (Environmental Management Act)

Provides for:

1. The right of every person to a good and healthy living environment

2. "Polluter pays" principle

3. EIA requirements (existing and new facilities)

4. Authority to establish licensing systems

5. Right of every person to participate in environmental management process

6. Compensation of victims of environmental damage.

� EIA (AMDAL process)

EIAs are administered by implementing ministries. Each ministry has review committees.

Regulation No. 29 of 1986: Implementation of EIA as authorized under Law No. 4.

Regulation No. 51 of 1993, which replaced Regulation No. 29, eliminates some of the confusion arising from procedures in Regulation No. 29, including:

1. Shortening the time requirement for the AMDAL process

2. Improving the evaluation process, especially for multisectoral activities

3. Increasing compliance by linking the issuance of permits to the AMDAL process (World Bank 1994, 3637).

� Water Pollution Control

Act No. 11 of 1974 gives the governor of each province the authority to:

1. Establish intended uses of waterways and pollution carrying capacity

2. Establish liquid waste quality standards and issue permits for liquid waste disposal

3. Enter and inspect pollution sources.

EMA and Act No. 5 of 1984 are the bases for implementing water pollution control in industry.

Regulation No. 20 of 1990 on Water Pollution Control governs the control of water pollution in general by licensing instruments, water quality, and waste quality standard determination.

Land Use Planning and Siting

Act No. 24 of 1992 (Spatial Planning Act): In recognition of the need for better planning and coordination of urban sector investments, GOI in 1992 passed a new law on "spatial planning." The law provides for identification of environmentally sensitive areas, where development activities would be restricted, and improved planning for the location and support of significant "activity centers." The preparation of "Strategic Structural Plans" provides an opportunity for municipal governments to protect critical ecosystems and guide the development of urban sector growth, with a least-cost provision of supportive infrastructure. Implementing regulations had not yet been put in place as of July 1994 (World Bank 1994, 139)

Air Pollution Control

No specific regulations on air pollution have been promulgated; however, regulations under other programs address air emissions (e.g., emission standards for hazardous waste incinerators, odor restrictions, and provincial air quality standards).

Hazardous Substances and Waste

The Hazardous Substances Ordinance 1949 regulates the import and use of nonwaste hazardous substances.

The Ministry of Industry Decision Number 148/M/Sk/1985 on the security of Hazardous and Toxic Substances in Industrial Companies states that it is the duty of industry to take steps to prevent pollution by hazardous and toxic substances:

1. In the planning and establishment phase, covering the choice of site, processing technology, design, and equipment

2. In the operation phase, covering storage, processing, and transporting of hazardous substances.

Government Regulation 19 of 1994 on Hazardous Waste Management deals with regulation of hazardous and toxic waste, based on the cradle-to-grave approach. Handlers of hazardous and toxic substances should have responsibility for "coping with environmental disaster and pollution," but the regulation does not apply strict liability principles. An EIA is required for hazardous and toxic waste treatment activities.

22. World Bank (1994, 6).

23. Local water utility agencies (known as PDAMs) have been particularly influential in a number of the Prokasih committees, because they are directly and adversely affected by high pollution levels in surface waters (Mary Boomgard, US-AEP environmental infrastructure representative, Jakarta [September 20, 1996]).

24. World Bank (1994).

25. Mary Boomgard, US-AEP environmental infrastructure representative, Jakarta (September 20, 1996).

26. US-AEP (1996); World Bank (1994, 134).

27. World Bank (1994, 18485).

28. Bratasida and Lowry (1995); Tumiwa (1995, 2528).

29. Louis Berger International (1994); Mary Boomgard, US-AEP environmental infrastructure representative, Jakarta (September 20, 1996).

30. Butler, Marcotte, and Rock (1996). The Adipura award has been an extremely successful alternative to command and control policies in Indonesia; many argue it is the most successful. The incentive for mayors is extremely effective: their reappointment is often contingent on their cities receiving the awards. In the past, awards were primarily based on the cosmetic appearance of cities; however, in 1996 many other factors were heavily weighted; as a result, some cities that had won the award for six years in a row failed to win again (Mary Boomgard, US-AEP environmental infrastructure representative, Jakarta [September 20, 1996]).

31. World Bank (1994, 5); information collected during visit to Jakarta, Indonesia, by John Butler, US-AEP/IRG; Elizabeth Marcotte, EP3; and Michael Rock, Winrock International (April 29May 10, 1996); Afsah, Laplante, and Makarim (1995, 19).

32. Mary Boomgard, US-AEP environmental infrastructure representative, Jakarta (September 20, 1996).

33. World Bank (1994, 19495).

34. BAPEDAL (1995) provides the effluent standards issued in October 1995. It is noteworthy that the standards generally address "conventional" pollutants (BOD5, TSS, and so on); for some industries, they also include standards for toxic metals.

35. World Bank (1996).

36. World Bank (1994, 22).

37. World Bank (1994, 122).

38. US-AEP (1996).

39. World Bank (1994).

40. US-AEP (1995); Mary Boomgard, US-AEP environmental infrastructure representative, Jakarta (September 20, 1996).

41. World Bank (1994, 23); information collected during visit to Jakarta, Indonesia, by John Butler, US-AEP/IRG; Elizabeth Marcotte, EP3; and Michael Rock, Winrock International (April 29May 10, 1996).

42. World Bank (1994, 23); information collected during visit to Jakarta, Indonesia, by John Butler, US-AEP/IRG; Elizabeth Marcotte, EP3; and Michael Rock, Winrock International (April 29May 10, 1996).

43. Information collected during visit to Jakarta, Indonesia, by John Butler, US-AEP/IRG; Elizabeth Marcotte, EP3; and Michael Rock, Winrock International (April 29May 10, 1996); Mary Boomgard, US-AEP environmental infrastructure representative, Jakarta (September 20, 1996).

44. Information collected during visit to Jakarta, Indonesia, by John Butler, US-AEP/IRG; Elizabeth Marcotte, EP3; and Michael Rock, Winrock International (April 29May 10, 1996).

45. Information collected during visit to Jakarta, Indonesia, by John Butler, US-AEP/IRG; Elizabeth Marcotte, EP3; and Michael Rock, Winrock International (April 29May 10, 1996).

46. Information in this section was collected during visit to Jakarta, Indonesia, by John Butler, US-AEP/IRG; Elizabeth Marcotte, EP3; and Michael Rock, Winrock International (April 29May 10, 1996); Indonesian Forum for the Environment (1996); Indonesia Center for Environment Law (1996); Environmental Law Alliance Worldwide (1996).

47. Information collected during visit to Jakarta, Indonesia, by John Butler, US-AEP/IRG; Elizabeth Marcotte, EP3; and Michael Rock, Winrock International (April 29May 10, 1996).

48. Marianne Bailey, Asia Program Manager, Office of International Activities, U.S. Environmental Protection Agency (August 22, 1996).

49. Information from this section is from Tumiwa (1995) unless otherwise noted.

50. World Bank (1995b).

51. World Bank (1994).

52. The Asian Development Bank's Operational 199597 Program for Environmental Infrastructure includes (Asian Development Bank [N.d.]):

1995 firm loans

Capacity Building Project in the Water Resources Sector ($27.5 million)

Sumatra Urban Development Sector ($120.0 million). Project will include urban roads, drainage, water supply, sanitation, solid waste management, and kampung and market infrastructure improvement.

West Java Urban Development Sector ($70.0 million). Description same as that for Sumatra

1996 loan pipeline

Industrial Pollution Control (Cimahi): $40.0 million

1995 Technical Assistance Program

National Environmental Sanitation Plans and Programs: $600.0 million

 

 

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