Professor McKibbin will discuss recent developments in the world economy and their link to environmental and natural resource issues in general, with particular reference to energy prices and consumption. He will present several future scenarios concerning these issues and their implication for the Indonesian economy.
Given the challenges of the continuing democratic transition, the economy has performed reasonably well over the last year, as most macroeconomic indicators show. Nevertheless, a significant increase in the growth rate is necessary if Indonesia is to resume its previously rapid progress in reducing poverty. The crucial concern is the level of investment—the most fundamental pointer to the mood of the business community, both foreign and domestic. Investment remains far lower as a proportion of GDP than before the crisis. Termination of the IMF support program at the end of 2003 has had no noticeable impact, so the likely explanations are uncertainty about the future course of government policy (not least because of the fragmentation of policy-making authority following decentralisation); the parlous state of the legal system; misguided labour market policies that distort resource allocation towards low productivity agriculture and the informal sector; and the public sector's failure to devote sufficient resources to maintaining, improving and expanding economic infrastructure.
Dr Aspinall will discuss political events in Indonesia in 2004. He will concentrate on the implications of the legislative and presidential elections for the dynamics of political change at both the national and regional levels.
Increased global competition presents a more formidable challenge in the utilisation of natural resources. The strategic questions are what kind of high value-added sectors to focus on, and how to use resources in a more sustainable way that could also contribute to poverty alleviation. Finding the best strategies to meet these criteria is no easy task. The newly decentralised system complicates the matter since it creates greater uncertainties, making pessimistic and optimistic outlooks equally possible. Professors Azis and Salim argue that past strategies of natural resource utilisation cannot be continued if Indonesia is to be competitive and subscribe to a more sustainable path of development.
Professor Fox will discuss the impact of recent rapid political change (reformasi) and decentralisation on the changing patterns in managing natural resources in Indonesia. He will provide insight into the recent direction of Indonesia's management of natural resources, and the challenges involved in pursuing it, considering the social, cultural, and other specific local conditions that pertain to the Indonesian situation.
Dr Alisjahbana will explain the new rule of revenue sharing between the national and regional governments after decentralisation and show how it has changed the fiscal capacity of resource rich regions; a potential drawback being an increase in regional fiscal disparity. She explores how the changes in resources revenue sharing affect regional development. Dr Alisjahbana concludes with the challenges faced by Indonesia in addressing the above issues to obtain the maximum beneficial impact on Indonesia's national and regional development from natural resource revenues within the context of decentralisation.
The 'curse of natural resources' is one of the more colourful phrases in development economics. However, the performances of Southeast (SE) Asian economies present obvious counter-examples. It may be argued that the timing and structural effects of the post-Plaza Accord inflow of FDI to these economies helped them temporarily, but not permanently, escape the 'curse'. The continued rapid growth of China is expected to have significant effects on the structure of trade, and thus of production, in SE Asian economies. In particular, SE Asia's resource-abundant economies will become more intensive in natural resource-based exports and much less so in low-end, labour-intensive manufacturing such as garments. An interesting question that then arises is how these trends will interact with the other major phenomenon currently sweeping SE Asia—decentralisation. Professor Coxhead explores issues arising from globalisation and localisation and their potential interactions in SE Asia's natural resource-abundant economies. What are the long-run prospects in these economies for continued rapid growth?
Dr Seda's presentation discusses current issues relating to the oil and gas sectors, as well as to the present and future roles of PERTAMINA in this field. She will also briefly review the politics behind the development of the concept of oil revenue sharing between the government and oil companies and the dynamics pertaining to the emergence of PERTAMINA as the major player in the field in the 70s and 80s. Welfare issues such as why the oil and gas booms in the 70s and 80s were, in several cases, not translated into a major improvement of the welfare of local surrounding communities will also be addressed.
The Indonesian mining industry has faced tremendous challenges since the reformasi and the implementation of the decentralisation policy. This presentation describes these challenges, particularly from the mining company's point of view, and highlights some possible solutions.
Despite numerous high profile efforts in the past decade, coastal and marine resource management efforts in Indonesia have been largely ineffectual. The consequence of this failure has been a continued degradation of the globally significant economic, social and ecological values of Indonesia's seas. Pollution loads in coastal waters are now at record levels (e.g. some 370kg of mercury enters Jakarta Bay every hour), increasing numbers of economically important marine species (e.g. trochus, shark, grouper, clams and turtles) are becoming locally extinct and conflicts between marine resource users (e.g. between local and outside fishers) are commonplace. These pressures have accelerated since 1997 and will continue to deplete resources and threaten the viability and peace of coastal communities unless a new development paradigm emerges that emphasises proper governance of marine resources. Emerging experience suggests that process must meaningfully empower local stakeholders.
The relationship between political and economic power, timber markets, and the sustainability of the forests in Indonesia, after decades of relative certainty, continues to be uncertain in 2004. This presentation reviews the political and economic alliances, both domestic and international, that supported oligarchic power in the timber sector during the New Order. The reformasi period since 1998 and the specific conditionalities of the IMF that dismantled Apkindo's marketing power sought to alter long-standing relations in the sector. Globalisation of markets and changes in regional markets, notably the emergence of China as an important importer, further challenged the old forces. Signs of the enduring power of the old oligarchy, however, include the re-implementation of the log export ban, the formation of a new industrial organisation (BRIK) and the lack of resolve within the Indonesian Bank Restructuring Agency (IBRA) to use its authority over financially troubled industries to decrease excess industrial capacity in the timber sector. The persistence of the old oligarchic powers, in conjunction and competition with decentralised state and market forces, both legal and illegal, pose increasing threats to the sustainability of the timber resource.
The basic environmental concern in Java today is how to manage land and water resources in a way that will ensure a sustainable human habitat for some 130 million people. The rate of deterioration in the natural environment has accelerated in the last 25 years with the ever-growing demand in both urban and rural areas for housing, sources of livelihood, expansion in infrastructure and recreational facilities and with ever-greater efforts on the part of local governments to derive more revenue from local sources (PAD). This paper looks at some current environmental issues in the Province of West Java in the context of decentralisation, with special focus on Bandung City and District and adjacent districts. Three aspects are considered: (1) province versus district: development policies in environmentally sensitive uplands; (2) city versus community: the use of land on the urban periphery; and (3) district versus national level: PAD or plantations?
Dr Obidzinki will describe the dynamics and magnitude of illegal logging operations before and after the decentralisation era. He will provide details of the actors involved, and how they operate at local, regional, and national levels. Dr Obidzinki will then illustrate the implications of these operations to forest covers as well as to local, regional, and national economies.
Regional autonomy has added another dimension to the challenge of implementing natural resource policies. Many district/ city governments, confused by or taking advantage of conflicting national laws and policies, have developed their own positions. This reality has generated criticism from the national, and sometimes, the provincial government. This paper takes a positive stance, that change for the good will start at the local level. Building on initiatives in some progressive areas, such as East Kalimantan and West Java, this paper attempts to describe the transitional process that needs to occur to ensure, in the long run, that natural resources policies that are established can actually be enforced.
After almost four years, Indonesia’s decentralized governance structure has posed many significant new and unexpected challenges to sustainable management of natural resources. While regional governments have been quick to take advantage of their new authorities in ways that both comply with and violate the provisions of the decentralization laws, the central government is only now in the process of developing a host of new laws on natural resource, coastal and marine management. The promise in these new efforts is a legal regime that provides clear direction, criteria and limits in a decentralized management structure. The fear is that a new generation of laws will either perpetuate or even exacerbate the systemic problems in the current regime of natural resource management. The answer depends on what is presently unknown, including the outcome of the coming election, a new parliamentary structure that takes effect this month, and plans to revise the decentralization laws.
Currently the Parliament is drafting a law concerning natural resources. This presentation explains the main objectives of this new law and analyses several important issues that have emerged in the drafting process. It also discusses achievements in terms of the proper management of natural resources so far, and what urgently needs to be done, particularly in relation to the enforcement of this law.
Conference Convenor
Dr Budy P. Resosudarmo
Economics Division – Research School of Pacific and Asian Studies
The Australian National University
Canberra, 0200, Australia
Budy.Resosudarmo@anu.edu.au