The tiff between the Minister of Forestry and Environment and other members of the Jokowi cabinet illustrates the disparity of comprehension of how an economy the size of Indonesia works.
Growth has been replaced with inward looking domestic consumption, industry replaced with basket weaving. Protectionism is blamed for poor economics. The Jokowi administration and the pro-“peoples” parties are failing the very people they claim to represent by purposefully remaining ignorant of the global economic dynamics that have given rise to the current economic troubles.
Moderates such as the Minister of Industry and others are at loggerheads and battling an ideologically driven economic narrative. The Minister of Forestry, for example, is quick to blame industry; but an examination of the record paints a very different picture.
Even conservative members of the Indonesian parliament like the Commission IV Indonesian Legislator Firman Subagyo said, “…..the biggest problem is that President Jokowi has got many negative information and hoaxes about the Indonesian products.”
He added, “But maybe, what the experts have explained is not heard by the President nor is it intentionally not told to the President to accommodate one group’s interests.”
Some groups’ interests center on the Minister of Forestry, the former head of WWF and now officio of the Peat land Agency Nazir Foaed, and his Chief of Staff Teten Masduki. Nazir Foaed, who was formerly employed by the Climate Land Use Alliance, which is heavily funded by US industrial interests, and Teten Masduki, who in a Tempo article called the industry resistance “anti-reformist,” together promote a foreign green agenda that has plagued the Indonesian economy.
Despite the feel-good words by the Minister of Forestry promising he does not want to destroy the palm oil and forestry sectors, the messages by Minister Siti have not generated much confidence in the industry. Indonesian industry players are forced to import 9.5 million cubic meters per year from Malaysia to overcome the shortfall caused by the flawed government policies.
Punishing 12.1 Million Workers, Impacting 41.7 Indonesians
Foresthints.news, regularly quoting the Minister of Forestry, wrote,
Minister Siti Nurbaya went on to explain that data from the Indonesian Central Bureau of Statistics (BPS) indicated economic growth in Indonesia of 5.02% in 2016, more than 95% of which derived from the contributions of sectors other than the palm and pulp & paper sub-sectors.
The minister said that the contribution of the plantation sub-sector – which includes the palm oil industry – to overall national Gross Domestic Product (GDP) in 2016 stood at 3.79%. This figure includes palm oil plantations in mineral soils and peatlands.
This assumption means Indonesia has a balanced GDP with a good industry mix for employment and is, or was, in better shape than the Malaysian industry. Industry figures suggest that for every one of the 12.1 million employees in the forestry and agricultural sector the industry supports 3.45 Indonesians indirectly.
This means the radical changes proposed by green policy leaning cabinet officials impacts about 41.7 million Indonesians. With elections around the corner, 41.7 million Indonesians represent a considerable voter power base. Rumblings in the provinces have suggested for some time that the Jokowi administration is facing increasing resistance at the grass-roots level.
Examining the World Bank Report: A Different Picture Emerges
Quoting a 2016 World Bank study, the Minister of Forestry claims do not add up either. The minister was quoted,
Minister Siti Nurbaya also recalled that in late January 2017, the President gave a warning about the economic losses of over IDR 220 trillion (approximately USD 16.1 billion according to World Bank calculations) caused by forest and land fires, especially those stemming from peatlands.
An examination of the report reveals a different picture. Of the total hectares reported burned, the category “others” represents 807,369 hectares. “Swamp forests,” the correct classification of “peatland,” represents only 176,179 hectares or 7.57% of total hectares burned.
Natural forests fires were identified in 259,376 hectares, and food crops 346,039 hectares. A total of 1,588,963 hectares of non-industry fires were reported by the World Bank.
The quote by the Minister of Forestry shows that only 32% or 739,301 hectares of total land burned were in industrial concessions, with Riau representing only 5%. Therefore, the minister’s blaming of the industry is not supported by the data.
Economic Failures? Blame the Industry
The Indonesian Parliament and Bank Indonesia are already forecasting the hoped for Jokowi economic growth of 6.1% is too ambitious. Commitments by Indonesia are seriously in doubt and all the talk is little more than populist rhetoric. Tax collection suffered from a shortfall, despite the tax amnesty, and reached only 76% of its projections.
With the US no longer contributing to the green fund, the Indonesian citizen will bear the brunt of the Paris commitments that the US found it could simply not afford.
With further depression of Indonesia’s only two growth engines, the palm oil and paper industry, the budget deficit is expected to increase.
The Governor of Riau has in a strongly worded meeting highlighted the economic impacts in Riau. This sentiment was shared by the Governor of Kalimantan who requested an exclusion from the controversial peat land regulation fearing the loss of foreign investments. It is not known if the calls by the governors are being heeded by the administration.
Riau and Kalimantan provinces are the growth engines for the battered Indonesian economy, which continues to lack performance, innovation, or excitement amongst foreign investors.
The NGO “Black Campaigns”: Threat to National Economic Security?
A 2011 Japanese study by Dr. Amzul Rifin highlighted that the major cause of loss to the Indonesian state was the negative campaigns executed by Netherlands-based environmental NGOs. A 2015 Malaysian study went further in confirming the economic loss for the Indonesian government.
In April 2015, Dan Farber, who currently teaches at the University of California Berkeley School of Law pointed out that the relationship between falling commodity prices and the value of Brazilian currency was making commodity exports unprofitable. The conclusion is that NGO campaigns have contributed the destabilization of the Brazilian economy and damaged the democratic process.
An almost identical development occurred with the Indonesian rupiah and the Malaysian ringgit. We can therefore draw the conclusion that NGO campaigning against the commodity sector has a direct and negative effect on the stability of a country’s currency.
In this vein, the Indian government long ago recognized this trend and now considers NGO campaigns as a threat to national economic security. As a result, radical environmental groups like Greenpeace are banned from operating in the country. The Indian government identified an estimated loss of between 2-3% of GDP as a result of negative NGO campaigning.
Studies show Indonesia suffers between 2–2.5% GDP or USD 22.2 billion every year due to negative NGO campaigning. As this number equates roughly to the annual budget loss, it begs the question of how long it will be before the administration recognizes the value of its strategic economy and the danger posed by negative NGO campaigning.
Many in the industry are skeptical that the government will ever wake up and smell the roses. So for now they wait and see.