S T R A T E G I C E N V I R O N M E N T A L A S S E S S M E N TM A S T E R P L A N F O R A C C E L E R A T I O N A N D E X P A N S I O N O F

I N D O N E S I A ' S E C O N O M I C D E V E L O P M E N T( S E A M P 3 E I )

E X E C U T I V E S U M M A R Y

DANIDA INTERNATIONALDEVELOPMENT COOPERATION

MINISTRY OF FOREIGN AFFAIRS OF DENMARK

FOREWORD

The Master Plan for Acceleration and Expansion of Indonesian Economic Development 2011-2025 (MP3EI)

aims to achieve economic connectivity and accelerated growth in Indonesia in order to transform the country

into a developed country by 2025. This includes a strategic focus on 22 economic activities and the

implementation of these activities in the defined 6 Economic Corridors (ECs). The MP3EI consisted of

hundreds of individual projects that have potential either direct or indirect impact to the environment and

society: natural ecosystem, biodiversity, carrying capacity, and local community. Therefore, the inclusion of

principle of sustainable development has been stipulated since the launched of MP3EI in 2011.

After one and half year of the implementation of MP3EI, there was an increasing awareness that the

sustainable principle need further elaboration in the implementation strategy of the Master Plan. Through

the revised version of MP3EI by Presidential Decree No. 48/ 2014, we set the means of implementation to

address the sustainability (green) aspect of the Master Plan, in addition to conveying the equality (pro-poor)

and blue economy aspect. It is expected that a thorough assessment of these aspects on the economic

development will strengthen the economic, social, and environmental benefits of the Master Plan.

For ‘greening’ the MP3EI, a Strategic Environmental Assessment (SEA) was conducted to perform a strategic

environmental analysis in order to prevent environmental degradation and foresee future problems. As

mandated by the Law of Environmental Protection and Management No. 32 year 2009, the SEA-MP3EI is

carried out from the policy formulation through the implementation strategy. The process involved all the

stakeholders in all 6 economic corridors of MP3EI, so that the recommendations include principles of conflict

mitigation. The recommendations can also be utilized throughout the planning and project implementation

processes.

Herewith, we are delighted to deliver the SEA-MP3EI report as part of our main task at the Connectivity

Working Group of the Committee of Acceleration and Expansion of Economic Development (KP3EI). The

report provides an overview of the collective processes that bring recommendations to mitigate the

environmental and social risks of MP3EI. We are making efforts that the recommended actions will be

adopted in the MP3EI implementations so that MP3EI will contribute to meet national sustainable

development goals. The collected data for the project are vast and the variety of environmental data for all

the economic corridors will be used to develop environment baseline data for eco-region officers. The

baseline data is an asset for the environment policy plan in the next Medium Term National Development

Plan (RPJMN) 2015-2019.

In this occasion, I would like to thank the Ministry of Environment, The Office (The Coordinating Ministry

for Economic Affairs) for the joint work. I would also like to thank Danida for their support and cooperation

in this collaboration to continuously pursue greener investments and green growth for sustainable

development.

Vice Minister of National Development Planning /

Vice Head of National Development Planning Agency (BAPPENAS)

Lukita Dinarsyah Tuwo

0 SEA for Indonesian Master Plan for Accelerated Economic Development / 2014-09

CONTENTS

1 Introduction ................................................................................................................. 1 1.1 Project Background ........................................................................................................................ 1 1.2 Objective ........................................................................................................................................ 1 1.3 Approach ........................................................................................................................................ 1

2 Overview of the Main MP3EI SEA Findings .............................................................. 3 2.1 Policy Related Risks ...................................................................................................................... 3 2.1.1 Water .............................................................................................................................................. 4 2.1.2 Air and Climate ............................................................................................................................... 4 2.1.3 Land and Soil ................................................................................................................................. 4 2.1.4 Forests ........................................................................................................................................... 5 2.1.5 Coastal Areas ................................................................................................................................. 5 2.1.6 Biodiversity ..................................................................................................................................... 6 2.1.7 Human Health ................................................................................................................................ 6 2.1.8 Livelihood and Local Communities ................................................................................................ 7 2.1.9 Environmental Management & Horizontal Key Activities ............................................................... 7 2.2 MP3EI Policy Recommendations ................................................................................................... 8 2.2.1 Key Recommendations for Adjusting Policy .................................................................................. 8 2.2.2 Recommendations for Enhancing the Institutional Context ........................................................... 9 2.2.3 Recommendations for Specific Categories of Economic Activities.............................................. 10 2.3 Main Findings and Recommendations for MP3EI Economic Corridors ....................................... 11 2.3.1 Java Economic Corridor ............................................................................................................... 12 2.3.2 Sumatra Economic Corridor ......................................................................................................... 14 2.3.3 Kalimantan Economic Corridor .................................................................................................... 16 2.3.4 Sulawesi Economic Corridor ........................................................................................................ 18 2.3.5 Bali – Nusa Tenggara Economic Corridor ................................................................................... 19 2.3.6 Papua – Maluku Economic Corridor ............................................................................................ 21 2.4 MP3EI Impacts and the Economic Value of Natural Resources .................................................. 23

3 Conclusion ................................................................................................................ 24

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1 Introduction

This document constitutes an overview of the main findings and conclusions from the SEA

analyses conducted for both the Policy and Economic Corridor components of the Acceleration

and Expansion of Indonesia Economic Development 2011-2025 (MP3EI). Given the extensive

coverage of the SEAs, the summary focuses on providing an explanation of key findings, in

some cases through examples, and the related recommendations for mitigating unacceptable

risks and likely adverse impacts associated with the Policy and Planning.

1.1 Project Background

In 2011, the Government of Indonesia introduced the first version of the Master Plan for

Acceleration and Expansion of Indonesia Economic Development 2011-2025 (MP3EI). While

executing the recently released updated version of the MP3EI, however, it was realised that the

MP3EI, and the associated National Medium Term Development Plan (RPJMN), needed to align

its policies and plans with national commitments to social and environmental sustainability. To

accomplish the required MP3EI ‘Greening’, a Strategic Environmental Assessment (SEA) – as

the tool required by Indonesian legislation. – was initiated by Bappenas and the KP3EI. This

MP3EI SEA Project is supported by the Royal Danish Embassy and DANIDA; and was launched

in June 2013 and lasted until the second half of 2014.

1.2 Objective

The objective of the MP3EI SEA Project – in line with general role of SEA – was to provide

creditable strategic environmental analyses of the MP3EI Policy and Economic Corridor (EC)

Planning and recommendations on how to minimize or avoid associated negative effects and

the means to strengthen positive effects.

Besides addressing the MP3EI itself, dissemination of the MP3EI SEA results into the upcoming

RPJMN was seen as a ’window of opportunity’ for implementing SEA recommendations through

the national economic and other related planning.

The other main objectives in which the MP3EI SEA oriented itself, included:

• Providing feedback for related KSN (Kawasan Strategis Nasional) and Provincial Planning

• Provision of feedback for ‘Greening’ Related Legal & Institutional Setting and in relation to

‘significant’ MP3EI Projects

• Addressing MP3EI consequences in relation to Climate Change.

1.3 Approach

Assessment Framework The MP3EI document, itself, highlights its Policy and Economic Corridor (EC) planning

intentions in one integrated document. Thus, in realisation of the inherent connection between

these aspects, the MP3EI SEA was designed to enable mutual reinforcement between the

findings of the MP3EI Policy and EC SEAs, e.g.:

• MP3EI Policy SEA provided a general framework by:

o Identifying the key strategic sustainability issues at the national level

o Describing (in qualitative terms) likely risks related to the MP3EI Economic

Categories, and

o Formulating policy recommendations

• SEAs for Economic Corridors were focused on conducting detailed analyses to:

o Describe baseline conditions,

2 SEA for Indonesian Master Plan for Accelerated Economic Development / 2014-09

o Determine, via scoping and stakeholder consultation, EC-specific strategic issues

and ´Areas of Concern´,

o Verify the scoped strategic impacts linked to the EC MP3EI planning, and

o Provide EC-specific recommendations and mitigation measures

Figure 1.1 Linkages between MP3EI Policy SEA and SEAs for Economic Corridors

To support analysis of the likely risks and impacts on key sustainability issues and resulting

recommendations, other analyses were also carried out. A general legal analysis conducted as

part of the MP3EI Policy SEA in order to identify potential problems that MP3EI Policy would

have in relation to existing legal framework, legal procedures or law enforcement.

An analysis of typically externalised economic costs, related to the MP3EI induced social and

environmental risks or impacts, was carried out. For the MP3EI Policy SEA, this include a

qualitative description of the often unaccounted economic consequences, Actual estimations of

the value (USD) of these consequences were calculated at national (e.g. in the Policy SEA) and

EC levels.

Since Climate Change was considered as a key issue, two dedicated analyses of MP3EI

Projects in relation to greenhouse gases (GHG) emissions were conducted.

The MP3EI SEA also addresses – as appropriate – six principles that a SEA analysis has to

include, as stipulated by the Law 32/2009 ‘Protection and Environmental Management’, Article

16.

Mitigation Framework The analyses conducted within the MP3EI SEA project have resulted in a number of

recommendations and mitigation measures aimed at avoiding and/or minimizing environmental

and social risks and likely impacts linked to the MP3EI implementation. These address both

MP3EI Policy and Economic Corridor Planning issues in a logical structure (see Figure 1.2). At

the policy level, the key areas where mitigation measures are offered include ‘Adjustments of

MP3EI’, and ‘Amendments of Legal and Regulatory framework’.

At the EC planning / project execution levels key areas where mitigation measures are offered

include ‘Improvements of National and Provincial Planning1’ ‘Guidelines for Project Execution’,

‘Improving Institutional Environmental Management & Coordination’, and ‘MP3EI Greening

Audits’.

1 Improvement in planning can, for example, also be associated with national KSN planning and RENSTRA and can therefore be seen as a link between MP3EI

policy

and EC planning.

3

Figure 1.2 Linkages between categories of mitigation measures

Discussion of specific recommendations is provided in Section 2.2 and the summary of

Economic Corridor’s impacts and risks is in Section 2.3.

2 Overview of the Main MP3EI SEA Findings

2.1 Policy Related Risks

The analysis of the MP3EI Economic Categories has uncovered both risks and opportunities in

relation to key Indonesian sustainability policy goals. From a pure economic growth perspective,

the overarching MP3EI strategic policy of bolstering 22 existing areas of economic growth

through improving ‘connectivity’ has merit. In addition, there are some promising MP3EI

commitments in relation to transportation and the provision of water treatment.

The analysis undertaken, however, also shows that as a policy, the MP3EI misses the inclusion

of critical sustainability issues and is generally unclear regarding the implementation of positive

MP3EI initiatives. Taken as a whole, it is evident that the general MP3EI strategy lacks the

sufficient level of commitment, vision or operationalization, i.e. in terms of planning; institutional

support, and regulatory vigour, to counteract the clearly evident environmental and social

impacts which will be associated with MP3EI-stylped economic growth. Given this, a significant

portion of existing sustainability goals and targets stipulated by national polices and strategic

documents, as well as international commitments, are in conflict with MP3EI if mitigation actions

are not properly implemented.

Furthermore, the economic analysis revealed significant potential costs related to ecosystems

and habitats which may be adversely affected by the MP3EI implementation. Thus, unmanaged

environmental risks will cause not only degradation of environment and worsening of human

health but also impose problems regarding the economic efficiency of the MP3EI.

4 SEA for Indonesian Master Plan for Accelerated Economic Development / 2014-09

The following section supports this key finding by providing examples of key sustainability

weakness, or gaps, in the MP3EI policy and, thereafter, by providing a synopsis of the related

environmental and social risks that will likely result.

2.1.1 Water

MP3EI encouragement of the continuation of intensive agriculture, projected industrial growth

(e.g. food and beverage, textile industry, oil and gas), planned expansion of conventional fossil

fuel power plant capacity and tourism development will increase the demand for water and thus

lead to further pressures on existing water resources. This may exceed available capacities in

certain areas – e.g. Greater Jakarta, Bali, and numerous small islands such as Maratua or

Derawan. In addition, the large-scale removal of forest cover associated with agroforestry

activities as well as hydro-energy development can alter water regimes and affect water

resources.

The MP3EI accelerated growth will also increase the risk of water pollution due to, among other

sources, the application of agro-chemicals, nutrient loading from animal husbandry –

aquaculture production, sediment runoff from land conversion and industrial / mining wastewater

discharges. Offshore mining and deep sea tailing disposal can also lead to seawater quality

impacts and increased sedimentation in coastal waters.

Although MP3EI policy goals include further development of the water supply and wastewater

systems, and thus aim to contribute to relevant objectives for Water Resources Management

stipulated in the existing RPJMN, the MP3EI need to address the specific actions of how water

demand and wastewater from, for example, industrial, mining, agriculture, and residential

expansion water emissions. There is therefore a substantial risk that the MP3EI-related

development will not meet water resource management objectives. There is also a conflict with

the goal of ‘reducing impacts of floods and droughts’, as MP3EI only elaborates on this issue for

the Greater Jakarta Area, while there are many other areas within the country which face risks

from floods and droughts. The MP3EI also does not address a need to ensure sanitation

infrastructure and waste management systems that are resilient to climate change (as stipulated

by the RAN-API, Rencana Aksi Nasional Adaptasi Perubahan Iklim).

2.1.2 Air and Climate

Climate change-related analysis showed that the majority (~66%) of related MP3EI projects fall

into negative categories of Greenhouse Gas (GHG) contribution; and GHG estimates revealed

that enactment of the MP3EI Policy would lead to substantial additional GHGs in most of the

calculation categories. This indicates a clear conflict with the main objective of the RAN-GRK

(Rencana Aksi Nasional Penurunan Emisi Gas Rumah Kaca), i.e. “…to reduce greenhouse gas

emissions by 26% on its own, and up to 41% if Indonesia receives international aid, by the year

2020 from the condition without any action (BAU or Business as Usual)”. If not managed

properly, MP3EI developments will accelerate GHG emissions include – among others –

deforestation and peat degradation, fossil fuel consumption, or expected intensification of

transportation (terrestrial, water and air).

MP3EI implementation of industrial developments and expected associated transport intensity

will also lead to additional pressures on air quality – especially in congested urban areas with

existing and planned energy-intensive industries such as steel, aluminium and copper/nickel

smelters and mills, oil refineries, petrochemical complexes; and new Connectivity projects such

as power-plants and ports. Since the MP3EI strategy mainly stipulates the development of fossil

fuel-based energy, the combined expansions (industrial, mining, power and urban growth etc.)

will likely negatively affect and/or worsen already poor air quality in certain areas throughout

Indonesia.

2.1.3 Land and Soil

There is a risk that MP3EI implementation will lead to peat land degradation and, due to

improperly managed contamination pathways (e.g. heavy industry, agriculture fertiliser and

5

pesticide treatment, landfills), further exacerbate the risk of land and soil / groundwater quality.

Large-scale removal of forest cover resulting from planned agroindustry and mining activities

(including coal mining for energy production) exacerbates the risk of continued soil degradation

and soil loss. Inundation associated with hydroelectric power plant development can also affect

fertile low-lands and the simple poor land management can render areas of land unproductive.

Land subsidence is a substantial risk that will continue with MP3EI strategies; driven by two

major factors. First, further industrial development will lead to increased extraction of ground

water resources, which – specifically in Java coastal metropolitan areas – will exacerbate the

issue of the land subsidence. The second driver is peatland degradation, i.e. especially in

Kalimantan, which causes irreversible lowering of the surface as a consequence of peat

shrinkage and biological oxidation.

The MP3EI did not recognise these problems and has not yet prepare measures to counteract

them. Therefore, recommended actions should be implemented so that MP3EI will contribute to

meeting the relevant goals stipulated by the Strategic Action Plan of the Ministry of Environment

(RENSTRA or Rencana Strategis), and those provided by the Indonesia Climate Change

Sectoral Roadmap (i.e. which, among its priorities, stipulate ´Optimalization of land and water

resources use and development of agricultural activities with environmental knowledge´).

2.1.4 Forests

MP3EI agriculture and forestry activities, especially plantation expansion and timber harvesting,

will be the largest source of further reductions of forested areas in Indonesia. This deforestation

will also have significant secondary impacts to biodiversity and traditional or small-scale forest-

based livelihoods. Although likely a lesser pressure, deforestation will also continue due to:

• Mining sector expansion (i.e. due in part by coal-based electricity generation development

and other mining developments)

• Inundation associated with hydro-plant developments.

• Urban encroachment associated with expansion of the economic activities

• Inland road, railroad and transmission network expansions

Many of the stated MP3EI strategies for the 22 economic activities that lead to deforestation are

careful to not overtly indicate expansions into forested areas. The strategy for oil palm, for

example, stresses the goal to improve productivity (e.g. downstream during processing) and

‘verify’ productive areas. Existing reforestation schemes are also referenced as a counter-

balance to any increases in deforestation.

This apparent misalignment in sub-strategies of MP3EI is weakness in the MP3EI, as it may

conflicts with Indonesia’s law and commitments in Forestry and Peat Land Sectors of RAN-GRK

and in the Asia Forest Partnership.

2.1.5 Coastal Areas

The likely MP3EI-associated risks to coastal systems are mainly linked to ‘Connectivity’, Fishery,

Tourism, and Mining. Left un-managed, it was assessed that MP3EI accelerated ‘business as

usual’ connectivity and economic activities in coastal environmental will lead to direct destruction

of coastal habitats; such as coral reefs, mangrove and seagrass.

The development of port infrastructure and intensification of marine transport will also generate

further pressure on coastal ecosystems (e.g. noise, spills/leaks), including physical alteration of

natural coastlines and the related current and morphological dynamics (e.g. from dredging of

seabed). Offshore mining in coastal waters will also increase sedimentation and thus lead to

pressures of the coastal ecosystems.

Although there are several MP3EI goals that are dependent on maintaining the health of

Indonesian coasts, e.g. fisheries, the MP3EI does not elaborate on any regulation or measure

aimed at coastal protection or the need for sustainable integrated coastal management. Instead,

6 SEA for Indonesian Master Plan for Accelerated Economic Development / 2014-09

it focuses on the ‘connectivity’ needs for significant harbour and port developments; and implies

the associated industrial and urban development that is associated with it.

Given this and the obvious risk to coastal systems, the MP3EI is significantly weak as it relates

to obligations to protect coastal areas; e.g. those stipulated by the Water Resources

Management Targets (current RPJMN) and Indonesian Action Plan for Climate Change

Adaptation (RAN-API).

2.1.6 Biodiversity

MP3EI does not specifically stipulate any need for heightened biodiversity protection measures

to counteract the risks and impacts from economic development. Considering this, and that

many existing conservation related legislation and initiatives have not been effective in curbing

current levels of biodiversity loss at present day levels of growth, suggests that accelerated

MP3EI growth must include equally fast-tracked biodiversity protection measures. As it does not,

it is more than probable that the MP3EI will be in conflict with objectives stipulated by the

Indonesian Biodiversity Strategic and Action Plan 2003 – 2020 and UN Convention on Biological

Diversity.

Given this policy conflict, the MP3EI will contribute, and likely hasten, biodiversity loss. The

continued conversion of primary and secondary lowland rainforest into palm oil plantations for

MP3EI Agro-Industry activities and other extensive agriculture development, i.e. the most

important cause of declining biodiversity in Indonesia; can be expected to lead to loses of

biodiversity.

Furthermore, development of transport infrastructure (e.g. including agriculture and forestry-

related transport infrastructure e.g. logging roads) will also have significant impacts on

biodiversity through disturbance, destruction and fragmentation of ecosystems as well as it can

highly increase the rate of poaching and encroachment in newly accessible areas. Similarly,

energy development will negatively affect biodiversity from hydro energy utilization on aquatic

ecosystems and by construction and operation of energy infrastructure. Further, fishery, tourism

and port development proposed by the MP3EI will negatively affect marine biodiversity both

through direct destruction of habitats (e.g. project footprints, over-exploitation, destructive fishing

methods and tourism activities) as well as indirectly by deteriorating water quality in coastal

waters. Additional MP3EI marine navigation presents added pressures to biodiversity via its

impact to environmental quality and increased risk of introduction of alien invasive species.

2.1.7 Human Health

In relation to human health, the MP3EI Policy has both strengths and weaknesses. The aspect

that shows signs of strength, but is not yet sufficiently operationalised, is the MP3EI objectives

to further develop water supply and wastewater systems. This suggests the aim is to contribute

to Indonesian Millennium Development Goals to reduce proportion of population without access

to safe drinking water and basic sanitation.

However, the evident risk of MP3EI induced worsening of environmental quality will threaten

human health in areas that become more congested with urban development and industrial

production. The aforementioned worsening air and water quality would be the key strategic

vectors that would affect human health.

The increased mobilisation of disease vectors associated with MP3EI related economic

migration is also not properly addressed in the MP3EI Policy. The risk of additional spread of

HIV/AIDS in new MP3EI development areas is therefore in conflict with goals stipulated by the

Indonesian Millennium Development Goals regarding AIDS/HIV and the National AIDS Strategy

and Action Plan 2010 – 2014. The apparent risk that existing health care capacities will become

overstretched is also unaddressed.

The MP3EI also does not elaborate on policy measures to combat the health risks related to the

Climate Change. For example, MP3EI induced migration to areas endangered by the

consequences of the Climate Change. Planned expansion of industry and tourism, together with

7

increased mobility, will potentially result in greater portions of the population inhabiting coastal

areas; which are often disaster-prone (e.g. tsunami and floods) as well as are likely to be

endangered by the consequences of climate change, especially by sea-level rise. Therefore, it

can be concluded that MP3EI implementation must still consider objectives stipulated by the

Indonesian Climate Change Sectoral Roadmap, Indonesia Action Plan for Climate Change

Adaptation (RAN-API) and National Disaster Management Plan 2010 – 2014.

2.1.8 Livelihood and Local Communities

It can be expected that implementation of the MP3EI will enhance economic performance

throughout Indonesia, in line with the Millennium Development Goal to decrease the number of

low-income people. The positive effects likely to result from economic growth are, higher job

availability and flexibility of labor force; better living conditions from the development of water

supply / wastewater management systems (i.e. mainly in the Greater Jakarta Area) and more

stable energy supply. In terms of transport development, the MP3EI will also enhance the

accessibility and mobility of the population (i.e. mainly in the Greater Jakarta Area) and thus it

will support relevant objectives contained in the Strategic Plan of the Ministry of Transport.

On the other hand, further development in key Economic Activities (e.g. agroindustry, industry,

fishery etc.) can lead to loss of economic and livelihood opportunities of the local communities –

smallholder farmers, traditional fishermen, indigenous communities depending on forest

resources etc. Overly extensive development of certain economic activities can also negatively

affect local economic performance and thus have a contrary effect on local livelihoods. Large

scale development of agroindustry, industry, mining or tourism can also lead to conflicts with

local small scale landholders and it can further accelerate social inequity. There is, therefore, an

anticipated risk of growing number of conflicts over natural resources mainly related to

agroindustry, fishery, energy, mining and tourism.

Further risks to livelihoods includes increased incidences and severity of floods and droughts

due to altering watersheds from deforestation or hydropower development, or from excessive

water extraction for industry, agriculture or tourism.

The MP3EI attempts to deal with social conflict issues by proposing regional level regulations

and permits systems aimed at overcoming land use conflicts related to plantation and mining

area in forests. Although positive, policy weakness is still apparent as there is no specific

elaboration on how to achieve the planning and regulatory improvements, and also because it

does not yet integrate Climate Change in permitting procedures as suggested by the Indonesian

REDD+ National Strategy.

The MP3EI does emphasise a need for educated and skilled labour force, and is therefore in

line with the national objective to increase the skilled labour force; i.e. stipulated by the Strategic

Plan of the Ministry of National Education.

2.1.9 Environmental Management & Horizontal Key Activities

Considering the existing situation and challenges related to environmental management in

Indonesia, including improper application of environmental assessment (i.e. SEA, regional

AMDAL, and project-level AMDAL) there are a number of potential problems associated with the

MP3EI implementation.

• The lack of integrated watershed management can result in further degradation of water

resources due to implementation of the MP3EI projects

• Since enforcement of environmental regulations (emission standards) for industries is not

always demonstrated in Indonesia, the number of non-compliant industrial operations

would likely increase

• Mine closure and mine reclamation policies are not well developed or implemented. The

environmental and financial costs of this are generally borne by the communities nearby

the mining sites for many decades after mining has ceased. Also, the environmental

8 SEA for Indonesian Master Plan for Accelerated Economic Development / 2014-09

management plans for mine operations are often not consistently implemented and

enforced. Therefore – if not properly managed and controlled – MP3EI mining activities

may further worsen the situation.

• Fishery development can further intensify illegal, unregulated and unreported fishing

practices; therefore this will require enhancing of the Fishery Management system

including proper involvement of local communities in fishery planning and management

• The lack of proper application of the Integrated Coastal Zone Management System

(ICZM) in Indonesia can result in further significant problems in coastal areas associated

with tourism, industry, aquaculture etc.

• Similarly, a lack of systematic planning of industrial development (i.e. industrial sites) can

likely lead to further degradation of environmental quality (especially air and water) and

exacerbation of environmental management (waste and wastewater management) and

related human health problems.

Energy and Waste Higher energy demand is expected, which the MP3EI mainly accounts for via fossil fuel based

energy production; giving only very limited allocation to renewable energy resources. Specific

waste-related concerns are connected with what will certainly be an increase in industrial waste

generation (including hazardous waste); coupled with an already inadequate waste

management system and infrastructure. Although it is expected that some waste streams can be

recycled, increasing amounts of hazardous waste will remain and require adequate treatment

and management.

Industry and Mining The MP3EI offers an opportunity to introduce and replace existing inefficient and

disproportionate polluting technologies in Indonesia. This chance is not yet, however,

recognised. The current MP3EI Policy also needs to emphasise the possible introduction of

cleaner industrial technologies that are commonly referred to as Best Available Techniques

(BAT).

2.2 MP3EI Policy Recommendations

2.2.1 Key Recommendations for Adjusting Policy

Besides recommendations related to the specific economic sectors there are several issues

which would need to be properly emphasised by the MP3EI overall policy and/or addressed in

the upcoming RPJMN:

Preventing or minimizing forest and peat land conversions

• MP3EI, and/or the upcoming RPJMN, should – among its main principles – emphasize

the importance of protecting the forest (especially primary forests) and peat land with the

aim to prevent (or minimize) its conversion

• MP3EI, and/or the upcoming RPJMN, should promote the sustainable forest management

principles (PHPL or Pengelolaan Hutan Produksi Lestari) for primary, secondary, and

production forests2

• Besides MP3EI, and/or the upcoming RPJMN, the policies and regulations in relevant

sectors should be adjusted accordingly, and operations and activities in forests should

follow provisions of the President Instructions No. 6/2013 the Delay of New Permit

Issuance and Improving the Management of Primary Forest and Peat Land, and related

2 In accordance with Regulation No.43/ Menhut-II / 2014 on Assessment of Sustainable Forest Management Principle

(PHPL) and Verification of Wood Legality (VLK).

9

Indicative Map of the New Permit Delay (PIPIB or Peta Indikatif Penundaan Izin Baru)

revision IV.

Reducing reliance on non-renewable natural resources

• MP3EI, and/or the upcoming RPJMN, should strongly emphasize necessity of increasing

the energy efficiency of the entire country´s economy (especially in industry and transport

sector) and higher utilization of renewable energy resources as the only ways how to, in

long-term perspective, minimize reliance on the non-renewable natural resources.

Considering the Climate Change and its likely consequences

• MP3EI, and/or the upcoming RPJMN, should clearly claim that it intends to contribute to

fulfilling the country´s commitments regarding the GHG emissions – and subsequently

also adjust planning for the most relevant sectors (industry, energy, transport). In result,

the list of the MP3EI projects should include larger number of the projects having

relationship with Indonesia´s Nationally Appropriate Mitigation Actions (so far there are

only three such projects within MP3EI)

• Since Indonesia may be significantly affected by the consequences of the changing

climate, MP3EI (and/or the upcoming RPJMN) policy should clearly stipulate a necessity

for proper consideration of the risks likely related to the changing climate in the MP3EI

sectoral planning and – similarly to the GHG emissions – make further adjustments in

policies and regulations for relevant sectors (tourism, agriculture, connectivity etc.).

General principles of environmental management

Implementation of the MP3EI projects should follow the following key principles to ensure it

properly considers relevant environmental, social and health concerns:

• Protected or ecologically sensitive areas and biodiversity hotspots should be primarily

considered as “no-go-areas”, their status maintained or enhanced and these areas should

be prioritized to be protected (if it is not the case yet)

• Suitable brownfield areas or already degraded land should be reclaimed and primarily

used for relevant MP3EI projects

• Existing tools and approaches for good planning should be utilized i.e. applied for

planning and implementation of the MP3EI projects and the development stipulated by the

upcoming RPJMN – namely Integrated Coastal Zone Management, River Basin

Management Planning etc.

• Sensitivity of area to and likely impacts of natural disasters and likely consequences of

the climate change (sea-level rise etc.) should be considered for planning location for

specific economic developments

• The appropriate capacity of health and educational services, water supply and

waste/waste water management systems have to be ensured before or in parallel with the

MP3EI, and/or the upcoming RPJMN, related developments.

2.2.2 Recommendations for Enhancing the Institutional Context

Considering existing problems with environmental management in Indonesia, it is probable that

the implementation of the projects under the MP3EI (and/or RPJMN) would face similar

difficulties. Therefore, the MP3EI SEA provides related recommendations to enhance the

structures coordinating the MP3EI implementation.

Among others, these may entail establishing ‘institutional space’ for better coordination among

MP3EI governmental stakeholders, as well as non-governmental organizations, to ensure

proper implementation of the relevant MP3EI social and environmental measures. Considering

its position in the governmental scheme, it is obvious that the Ministry of Environment (KLH)

10 SEA for Indonesian Master Plan for Accelerated Economic Development / 2014-09

should play a pivotal role and be involved (as part of the KP3EI) in recommended activities,

such as the:

• Development, adoption and application of downstream MP3EI “planning guidelines”

• Monitoring the SEA and EIA processes related to the MP3EI projects in order to ensure

their appropriate quality including extensive involvement of relevant stakeholders and

transparent disclosure of reports and results

• Ensuring transfer of MP3EI SEA recommendations to provincial plans and related SEAs

• Ensuring the environmental compliance of the MP3EI projects

• Establishing web-based EIA/SEA Information System (optimally within the KP3EI

website), where information and documents related to SEAs/EIAs for MP3EI projects

would be publicly available and which could later-on be used for all SEAs/EIAs conducted

in the country

• Developing and applying mandatory guidelines for Keystone MP3EI projects on social

aspects to be applied in associated planning, project design and related environmental

assessments

• Strengthening implementation of “moratorium” on primary natural forest and peatland

(Presidential Instruction No. 10/2011) for the MP3EI projects

• Allocating appropriate funds and human resources to protected areas management to

strengthen the control of illegal logging and poaching likely to be linked to the MP3EI

projects.

2.2.3 Recommendations for Specific Categories of Economic Activities

This section provides examples of the recommendations for main MP3EI economic categories.

Agriculture and Forestry • Guidelines integrating Principles and Criteria developed by the Indonesian Sustainable

Palm Oil (ISPO) should be legislated

• A clear decision should be made on size of ‘productive plantation areas’ in the upcoming

RPJMN and introduce intergovernmental cooperation to maximize efficiencies while

reducing the area of existing plantation concessions

• Before allocating public funds for further Oil Palm (or other plantation) development, the

review of existing land use conversion concessions shall be performed in order to avoid

conflicts and inefficiencies in territorial development and infrastructure investments. The

relevant sectoral plan should elaborate necessary procedure to ensure the above-

mentioned.

Industry • Reduce MP3EI-related (and/or that of the upcoming RPJMN) public funding for extractive

resource use and shift it to dedicated projects for sustainable peat land management,

development of carbon sequestration projects in forestry and agriculture

• Use of BAT should be obligatory for relevant MP3EI projects as well as BAT application

should be subsidised among existing industries to create additional carrying capacity for

new industries.

Mining • The licensing mechanism for mining should be revised to make the procedure of issuing

the mining license as an administrative process as well as to clarify the permitting

procedure for mining areas within forest areas.

11

• Elaborate and enforce controlling scheme and provide financial framework to ensure that

mine closure plans and reclamation plans are implemented.

Energy • Emphasize necessity of increasing the energy efficiency of the entire country´s economy

and higher utilization of renewable energy resources to target at a minimum of 30% of

feasible non-fossil fuel energy

• Through the upcoming RPJMN, elaborate options for developing the pricing mechanisms

for energy and gradual phase out of fuel subsidies.

Fisheries • The upcoming RPJMN could promote a shift in fishery management practices, focusing

on sustaining fish stocks as a contributor to economic growth, rather than continuing the

present approach that prioritizes growth in production with only limited consideration to

sustainability of fish stocks.

• Amend the Fisheries Act to further integrate the Precautionary Principle and EAFM

approach (Ecosystem Approach to Fisheries Management).

Tourism • Make a clear commitment to application of Integrated Coastal Zone Management

Planning as a basis for development of tourism facilities and related infrastructure (for

MP3EI projects as well as for entire economic sector) to avoid current rather haphazard

location of tourism facilities.

• Introduce permitting regulations that require tourism developments to prove sufficient

capacities of water supply, and appropriate solid waste and wastewater management

systems.

Connectivity • Where technically possible, reposition ports / marine navigation routes away from

sensitive coastal habitats

• Where possible re-route roads, railways and transmission lines away from sensitive or

protected habitat

2.3 Main Findings and Recommendations for MP3EI Economic Corridors

This section provides an overview of the conclusions for MP3EI Economic Corridors (EC).

These mainly planning-related issues occur due to the cumulative or interactive stresses that

MP3EI projects, KPI’s or nodes have on physicochemical, ecological and social conditions. After

carrying out expert and stakeholder scoping workshops and exercises, key risks and impacts

were identified and further categorised in Areas of Concern´ (AoC) within each Economic

Corridor. Further analyses of the scoped impacts and risks provided additional tangible evidence

and verification that these issues required additional planning attention.

It is beyond the scope of the Executive Summary to explain all identified impacts and risks.

Therefore, to gain a full perspective of the detailed Economic Corridor SEA analyses, it is

recommended that the reader refer to the full SEA documents for each EC. In addition, a brief

synopsis of the key planning mitigation recommendation is offered.

12 SEA for Indonesian Master Plan for Accelerated Economic Development / 2014-09

2.3.1 Java Economic Corridor

The Java EC has been assigned by the MP3EI to act as the “driver of national industry and

service provision”. The aim is therefore to further diversify service-based industries within the

currently predominant manufacturing-based economy. Thus, in general, the MP3EI Policy has

resulted in Java EC Connectivity planning that centres on energy, transport, and water

sanitation projects. In terms of economic activities, the focus is on heavy and light industry

expansion, and 23 prioritised Zones of Investment Focus (i.e. KPIs), and 3 Potential KPIs have

been established, among others, the investment focus includes oil and gas, food and beverage

industry, defence equipment, transportation equipment and textile. The Java EC also includes

the Greater Jakarta (Jabodetabek) Special Area3.

Scoping identified eight Area of Concern (AoCs), comprising of Bandung, Cilacap, Greater

Jakarta, Pantura East Java, Pantura West Java, Semarang, Wonogiri – Jogjakarta; where the

most significant instances of strategic MP3EI impacts were related to air and water pollution that

were assessed to have corresponding impacts to ecological and social receptors.

For example, air quality problems were verified in the Greater Jakarta, Bandung and Pantura

East Java AoCs (as estimated through IPC/DSS4). Jakarta is perhaps the most obvious concern

where well - documented existing air quality problems will clearly be exacerbated by substantial

additional atmospheric emissions from MP3EI developments. Water quality issues are more

widespread as the MP3EI sources of water pollution and existing non-compliant water quality in

Java waters is also widely distributed.

Figure 2.1 Estimated MP3EI related air pollution quantities in the Greater Jakarta Area

Land subsidence from excessive groundwater extraction puts large coastal areas at risk from

flooding, especially along the northern coastlines where previous urban and industrial

development has taken place on extensive areas of peatland. Without adequate water supplies,

added industrial activities and expanding urban populations will further accelerate this process.

3 The special area Jabodetabek KSN (Jakarta, Bogor, Depok, Tangerang, Bekasi) general has the similar investment focus scheme for

the Java economic corridor. 4 Integrated Pollution Control Decision Support System

0.000001

0.0001

0.01

1

100

10000

As

Cd

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Cu

Hg

NH

3 Ni

NM

VO

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NO

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Pb

PM

10

PM

2.5

SOx

TSP

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l Em

issi

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g)

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13

Figure 2.2 Estimated magnitude of coastal impacts from MP3EI projects in the Pantura East Java AoC

Impacts and risk were assessed to ecosystems due to MP3EI project footprints and the

physicochemical changes they cause (i.e. poor air and water quality) at ecological and social

receptors. Risks to coastal systems were especially evident in Java, as demonstrated by the

example coastal threat assessment result of the Pantura East Java AoC coastline where,

among other stressors, water pollution impacts to coral and mangroves were analysed (see

Figure 2.2).

Java’s existing population pressures influence the magnitude of likely social impacts resulting

from the implementation of MP3EI. Apart from the impacts on human health from excessive air,

water and land pollution, other negative social issues are likely to occur from the introduction of

large numbers of migrant workers. For some, this will be somewhat counter-balanced by

additional employment opportunities, expected rise in the standard of living and enhanced social

mobility.

In general, Greater Jakarta and Pantura East Java were assessed to have the most serious

negative strategic impacts, while by the environmental receptors across the whole Java EC,

water quality has the highest negative impact with air quality and human health also being of

concern.

Recommended Mitigation Measures

Following the full analysis of the Java EC, a wide selection of planning mitigation

recommendations was developed for each AoC. An example of the most relevant measure

included reorganising envisaged industries in the Java EC into zones, thereby making their

cumulative impacts easier to manage; and relocating them away from areas with existing air and

water quality non-compliance issues. An offered option could be to subsidise the implementation

of Best Available Techniques (BAT) pollution abate among existing industries, thus allowing new

industries to develop without exceeding quality tolerances. The Policy recommendation to apply

BAT and stricter environmental quality standards is ultimately needed to realise the necessary

level of sustainable planning in this regard. Related to this, it is recommended that investment in

water resources and wastewater treatment to be prioritised beyond Jakarta to other emerging

urban centres such a Surabaya and Bandung.

Integrated Coastal Zone Management (ICZM) and Integrated Catchment Management (ICM)

plans are suggested as the vehicles by which decision-making is made for required detailed

planning improvements. This particularly applies to Jakarta Bay and Madura Straits (ICZMs) and

Bengawan Solo and Citarum watersheds (ICMs) where multiple projects pose serious risk of

cumulative water quality impacts.

14 SEA for Indonesian Master Plan for Accelerated Economic Development / 2014-09

2.3.2 Sumatra Economic Corridor

The Sumatra Economic Corridor (EC) has the theme ‘Centre for Production and Processing of

Natural Resources as the Nation’s Energy Reserves’. Sumatra is also expected to be the

‘Gateway to the national economy markets of Europe, Africa, South Asia, East Asia, and

Australia’. The combination of MP3EI economic activity and Connectivity projects reflect the

mixed character and designs for this region and focus upon oil and gas, coal, oil palm and

energy production / processing; and road construction. The 13 priority KPIs, and 2 potential

KPIs, mimic this focus, with - among others - oil palm, rubber and coal, shipping and steel

investment themes. The Sumatra EC also includes the Selat Sunda Special Area5.

The scoping process identified seven Areas of Concerns (AoC) that were largely confirmed to

experience significant cumulative and interactive impacts from MP3EI activities. The seven AoC

include Cilegon–Banten Bay, Lampung Bay, Medan - Lhokseumawe, Muara Enim - Prabumulih,

Palembang, Sibolga - Aceh Singkil, Tanjung Api Api - Bangka.

While lesser air quality risks was assessed for emerging mixed urban and industrials areas such

as Medan, water quality is expected to be significantly impacted by MP3EI in at least two AoCs

(Cilegon–Banten Bay AoC and Muara Enim – Prabumulih AoC) with lesser negative impacts in

four other AoCs (Lampung Bay AoC, Medan – Lhokseumawe AoC, Palembang AoC, and

Tanjung Api Api – Bangka AoC). This was assessed due to multiple and significant sources of

MP3EI water pollution such as oil palm plantation expansions and timber and rubber plantations.

All of which will, when combined with expected deforestation, contribute to reduced water

quality. Other sources included industrial development, particularly where MP3EI investments

tend towards heavy industries such as oil and gas, iron and steel, and coal and include

improperly planned urban growth resulting from economic migration towards larger cities.

In relation to ecosystem impacts, it was observed that relatively large portions of Sumatra EC

conservation areas and protected habitats (including those for ‘flagship’ species) are threatened

by the implementation of MP3EI projects and the related oil palm and mining activities (i.e.

concessions). This mainly stems from planning conflicts where envisaged development result in

deforestation and habitat loss, i.e. mostly by deforestation and habitat fragment for the

expansion from projects such as road development, oil palm and mining. One AoC that

highlights this issue is Cilegon - Banten Bay (see Table 2.1) where analysis suggests a potential

loss of over 50 percent of certain habitats. Habitat fragmentation from roads, railways or

transmission line construction is also expected to affect biodiversity, as well as the negative

impacts of illegal poaching or logging that occur when accessibility to remote areas is opened.

Table 2.1 Potential incursion of MP3EI development in Cilegon – Banten Bay AoC habitats

Category of Receptor Original Area (ha) Area at Risk from MP3EI (ha) % Area at Risk

Primary/Secondary Forest 1,514 850 56

Important Bird Areas 2,776 1,080 39

Mangrove Forests 300 190 63

Impacts of development will also be felt on environmentally sensitive coastal habitats such as

coral, seagrass and mangroves, which will arise predominantly from the direct MP3EI

development footprint and broader-scale indirect effects from pollution and/or sedimentation.

Coastal Habitat Threat analysis in the Tanjung Api Api – Bangka AoC (Figure 2.3), for example,

estimated that approximately 5,500 hectares of mangrove were at risk from direct impacts and a

further 12,000 hectares were at risk of moderate or limited damage from indirect impacts.

5 The special area is a KSN that includes the potential development of the Selat Sunda Bridge, and also the iron and steel industry in

Cilegon (Banten, Java) area.

15

Figure 2.3 Estimated magnitude of coastal impacts from MP3EI projects in the Tanjung Api Api –

Bangka AoC

Damage is not constrained to the coastal environment but, as livelihoods are affected, it is also

felt in terms of negative social impacts. These impacts and other development and land

conversion related social tensions (i.e. as evident in a multitude of existing cases of social

conflicts) were therefore highlighted in relevant AoCs.

Also, as with several other AoCs, health impacts are assessed in relation to worsening

environmental quality. This is also the case for the Sumatra EC where, as mentioned, existing

urban pollution coupled with additional heavy industries and energy plants pollution is expected

to lead to areas of non-compliant air quality. For example, calculations of MP3EI-related

atmospheric emissions in Medan - Lhokseumawe AoC showed the largest contribution from

particulate matter (PM2.5, PM10 and Total Suspended Particles) predominantly from automotive

use and open-burning. These pollutants will have impacts on human health, contributing to

incidences of respiratory diseases, but also on the economy through lost production from

sickness, increased health costs, etc.

Recommended Mitigation Measures Following comprehensive analysis of the available data for Sumatra a number of

recommendations were made to address the planning challenges.

To reduce urban air pollution, for example, it is recommended that investments into public

transportation be made in emerging Sumatran urban areas to reduce the numbers of vehicles

on the road. As with the Java EC, it is also proposed to avoid planning heavily polluting

industries near urban areas. The policy recommendation to implement stronger emission

controls and incentivising the use of renewable energy sources will support this and, to some

extent, additional wastewater treatment requirements.

To ensure the protection of conservation related sites, new protection or buffer areas are

proposed in the most significantly affected AoCs to hold back or push deforestation related

activities to less impacting areas. Where this is not possible, other project related mechanisms,

such as maintaining or establishing ‘ecological’ corridors, is recommended, such as for road

construction projects.

In relation to the clear social threats, it was recommended that planning conflicts with customary

land be addressed, and that, at a minimum, a dedicated ‘Social Impact Assessment’ be carried

out for each MP3EI project to ensure that the programs are developed to either protect local

communities or ease their necessary transition.

16 SEA for Indonesian Master Plan for Accelerated Economic Development / 2014-09

2.3.3 Kalimantan Economic Corridor

The objective of MP3EI Economic Corridor (EC) planning in Kalimantan is to develop a centre

for ‘Production and Processing of National Mining and Energy Reserves’. The planned

developments are dominated by, or based on, extractive industries such as oil and gas, coal, oil

palm, iron-steel, bauxite and timber. With increased economic efficiency as a core goal,

envisaged Connectivity projects include road extensions and upgrades (including bridges),

power generation, water resource infrastructures (e.g. dams and reservoirs), and ports. In

addition to individual MP3EI Projects, there are 36 KPIs that range in focus from oil and gas,

coal, bauxite, and agroindustry (oil palm and timber). It is also clear that Kalimantan MP3EI EC

aims to add formerly absent down-stream processing of raw resources into the future growth of

the corridor.

Altogether five Areas of Concern (AoCs) were identified in the EC, along with several strategic

issues outside of these AoCs; namely Balikpapan-Samarinda-Bontang, Kutai Timur, Kotabaru-

Tanah Bumbu-Tanah Laut, Central Kalimantan, and West Kalimantan. The scoped and

strategically confirmed ecological and social risks are diverse. On one hand, city centres such

as Balikpapan and Samarinda, are expected to experience typical air - water quality problems;

along with health and other social issues associated with unabated urban expansion. On the

other hand, there is strong evidence that MP3EI planning, and the related spin-off growth (e.g. in

mining and oil palm concessions), will lead to significant deforestation. It is ultimately clear that

MP3EI deforestation intensifies threats to sensitive terrestrial habitats rich in biodiversity and, if

left unattended, a host of social issues; i.e. including social conflict, may arise.

In terms of physicochemical issues, air and water quality problems were confirmed for

Balikpapan-Samarinda-Bontang AoC and Kotabaru-Tanah Bumbu-Tanah Laut AoC; and to

slightly lesser extent for Kutai Timur AoC. It is also apparent that certain watersheds in the

Balikpapan, Kotabaru, and Central Kalimantan AoCs are at risk due to the individual or

combined effects of planned ‘water resource’ infrastructure and anticipated intensive

agroindustry or mining. The amount of peat land that would be destroyed from these activities,

especially in Central Kalimantan, is a serious issue; as it would not only impact biodiversity but

also be responsible for substantial GHG emissions and land subsidence.

Serious threats to biodiversity from deforestation and coastal degradation were assessed for all

AoCs and several other locations. Of these areas, Central Kalimantan AoC is one clear example

of potential habitat destruction (including habitat fragmentation) and clear planning conflicts with

protected areas (i.e. see Table 2.2).

Table 2.2 Estimated MP3EI direct impact in various sensitive habitats in Central Kalimantan

Category of Receptors Original Area (Ha) Area at Risk from MP3EI (Ha) % Area at Risk

Forests 4,559,561 728,000 16

Important Bird Area 57,759 3,100 6

Mangrove Forests 23,847 360 2

Orang-utan Habitat 5,816,296 1,436,000 25

Peat land / Wetland Areas 2,664,759 480,000 18

Likely coastal degradation in the Kalimantan EC is related to the direct footprint of MP3EI

Projects such as ports and coastal developments; as well as environmental quality stressors

(e.g. water pollution and shipping activities). Significant strategic impacts in this regard were

assessed in all AoCs. Figure 2.4 shows the example of various degrees of impact severity to

coral, seagrass and mangrove in Kotabaru Regency.

17

Figure 2.4 Estimated magnitude of coastal impacts from MP3EI projects in Kotabaru Regency

While increased economic opportunities and growth were generally assessed to have positive

impacts; altered social dynamics and negative impacts to environmental quality and important

customary lands will affect some communities or portions of Kalimantan society negatively.

Among others, pressures from the influx of migrant workers is expected to lead to several

unwanted side effects (e.g. competition for jobs, inflation, the spread of disease), and worsening

environmental quality will impact the health of populations in growing urban centres. Land

conversion for MP3EI related developments is also expected to exacerbate existing, or create

new, social conflicts over land; especially in West and Central Kalimantan.

Recommended Mitigation Measures A selection of planning related measures were recommended to lessen the assessed risks or

impacts in the Kalimantan EC. To address water and air pollution, similar measures as that

suggested for the Java EC (i.e. establishing industrial zones and/or relocating industries,

subsidising cleaner production in existing industries). Also, emerging urban centres in

Kalimantan are recommended to be prioritised for investment into additional industrial and

domestic wastewater treatment. In addition, planning watersheds at risk should be routed

through BPDAS (River Basin Management Body) and based on sufficient technical analysis.

In relation to deforestation / land conversion, measures aim at correcting planning conflicts in

protected areas, and where necessary creating social or ecological buffer zones and/or

additional conservation areas to restrict MP3EI intrusion into biodiversity and/or social-conflict

sensitive areas; e.g. Central and West Kalimantan. Routing coastal development decision-

making for especially sensitive coastlines (i.e. and eventual long term management) via

Integrated Coastal Zone Management, e.g. Balikpapan, Kotabaru, and Kutai Timur, was

proposed to address both ecological and social issues.

The Policy recommendation to apply BAT, stricter environmental quality standards, and

Sustainable Palm Oil production support and/or are needed to realise the necessary level of

sustainable planning. In relation to mining sites, better project level environmental management

is recommended (e.g. water management, tailing ponds and post project rehabilitation), namely

for projects in all AoCs, and especially Kotabaru.

18 SEA for Indonesian Master Plan for Accelerated Economic Development / 2014-09

2.3.4 Sulawesi Economic Corridor

The objective of Sulawesi EC planning is to develop a “Center for Production and Processing of

National Agricultural, Plantation, Fishery, Oil and Gas, and Mining”. The primary planned

economic developments include projects in agriculture, cocoa, fisheries and nickel mining

sectors. Thirty one Zones of Investment Focus (KPI) within the economic corridor are also

envisaged with the themes ranging from fisheries, cocoa, and food agriculture, to gold, nickel,

iron-steel and oil and gas industries. In addition, substantial investment into Connectivity

infrastructure is planned that predominantly entail projects in the transport and energy sectors

that create synergy with the envisaged economic activities.

Altogether seven AoCs were determined within the Sulawesi EC; i.e Greater Makassar, Manado

- Bitung, Towuti – Matano, Greater Gorontalo, Greater Palu, Mamuju – Mamasa, and Southeast

Sulawesi. Several risks and/or impacts outside of these AoCs were also identified.

Concerning issues were situated in both rural and urban settings and include a variety of

potential planning challenges. Air quality and water quality problems were the key

physicochemical issues; and deforestation and coastal degradation were again confirmed as

issues, along with the related threats to biodiversity and social issues associated with land

conversion.

Greater Makassar Area AoC and Manado-Bitung AoC were assessed to have a high risk of air

quality problems due to their emerging urban centres and the estimated quantity of air pollution

added to these ‘air sheds’ from MP3EI developments (see Table 2.3 below). Water pollution and

water resource degradation (e.g. from agroindustry, food processing, aquaculture, mining and

metal processing pollution) is also assessed as a strategic problem. For example, nickel mining /

production in Towuti - Mahalona Lakes AoC or gold mining in Gorontalo AoC, coupled with the

estimated increase in waste-water production in growing urban areas, are the main reason for

determining significant and widespread water quality risk for certain rivers, lakes and coastlines.

Table 2.3 Estimated sum of air emissions from the MP3EI-related activities in Greater Makassar Area

Pollutant Emission from MP3EI (kg/year)

Non-methane volatile organic compounds (NMVOC) 1,927,500

Nitrogen Oxides (NOx) 3,149,300

Lead (Pb) 7

Particulate Matter-10 (PM10) 265,500

Particulate Matter-2.5 (PM2.5) 242,400

Sulfur Oxide (SOx) 109,700

Further deforestation due to implementation of MP3EI projects can be expected, together with

degradation of coastal ecosystems leading to loss of biodiversity. For example, in the Towuti -

Mahalona AoC alone, as much as 4.28% of the total forests are at risk from MP3EI

Developments. In terms of coastal systems, analysis of the Mamuju-Mamasa AoC suggests that

approximately 3,500 ha of coral reefs may be subjected to severe impacts, along with more than

1,000 ha of mangrove forests.

Strategic social risks and impacts for the Sulawesi EC are similar to those of other ECs, and it is

likely that some would benefit while others would not. For example, anticipated MP3EI

contribution to urban population growth reinforces existing demographic trends that are the main

cause of health impacts (e.g. from insufficient management of liquid and solid wastes, and the

spread of diseases), livelihood conflicts (e.g. migrant workers), and stress on public

infrastructure. Outside of cities, land conversion for MP3EI related developments are expected

to lead to similar, yet less concentrated social issues and conflicts. For example, the Greater

Palu AoC includes oil palm concessions on customary lands and further migratory induced

population growth is also expected (see Figure 2.5). It is estimated that this will very likely fuel

existing social conflicts in Poso Regency.

19

Figure 2.5 Significant indigenous communities and customary lands versus MP3EI planning in Palu Greater Area

Recommended Mitigation Measures In order to avoid or mitigate identified risks and likely impacts, a number of recommendations

were formulated. To curb urban air pollution, for example, strengthening of Connectivity

investments for mass transportation systems in the Greater Makassar AoC and Manado-Bitung

AoC is one of the proposed measures. Integrated Watershed Management, through which

additional watershed planning analysis and improvement is vetted, was recommended for,

amongst others, Jeneberang and Tallo watersheds. Integrated Coastal Zone Management for

the Greater Makassar and Manado-Bitung AoCs was also recommended to ensure sufficient

consideration of MP3EI related risks to sensitive coastal ecosystems. In relation to mining sites,

better project level environmental management is recommended (e.g. water management,

tailing ponds and post project rehabilitation), namely for projects in the Towuti-Mahalona AoC.

Correcting land conversion planning conflicts is a key measure to address assessed social

conflict. For example, the overlap between oil palm concessions and customary land in the Lore

Lindu region (Greater Palu AoC), and the overlap between mining concessions and forest land

and conservation areas in the Mamuju-Mamasa AoC.

2.3.5 Bali – Nusa Tenggara Economic Corridor

The MP3EI economic development theme for Bali – Nusa Tenggara Economic Corridor is to be

the ‘gateway for tourism and national food support’. The main MP3EI planned economic

activities recognise this theme by concentrating on three major economic sectors; namely

tourism, fisheries, and animal husbandry - with lesser investments planned in timber plantations

and mining (gold, copper, oil and gas, and manganese). The economic activities are supported

by Connectivity infrastructure developments including construction, expansion and maintenance

of ports and ferry ships, airports, roadways, power plants, and water infrastructure (dam,

reservoir, treatment and distribution). Most of the economic and connectivity projects are located

within 24 KPIs (8 priority KPIs and 16 potential KPIs), that are closely related in the envisaged

economic activities.

Following an initial scoping process, six AoCs were identified where MP3EI induced strategic

risks and impacts can be expected. The AoCs include Southern Bali, South-North Lombok, KNP

Area, Sawu Sea, Bima Bay, and Sumbawa Barat.

Air quality parameters (i.e. particulate matter) already exceed threshold limits in areas of Bali

and analyses suggest that MP3EI traffic, industry and waste-burning emissions will only worsen

20 SEA for Indonesian Master Plan for Accelerated Economic Development / 2014-09

the situation. Water pollution, both in river basins as well as in coastal areas, was identified as

an important environmental issue in all AoCs - most significantly in Southern Bali and Lombok.

Specialist analysis (IPC DSS6) of key water pollutants and wastewater volumes (see Figure 2.6)

supported analyses in the Southern Bali AoC where poor water quality is already documented.

Here was confirmed that MP3EI activities, such as food and drink production / processing and

increased domestic wastewater discharge, will worsen water quality problems particularly in

Benoa Bay, Badung Regency, Denpasar City, and Gianyar Regency. The expansion of tourism

and tourist facilities, particularly on Bali, is also likely to lead to additional pressures on water

supplies.

Figure 2.6 Estimated MP3EI related water pollution quantities in Southern Bali

Figure 2.7 Estimated magnitude of coastal impacts from MP3EI projects in Lombok area

While impacts to forest ecosystems were identified only in two AoCs (i.e. Bima Bay and

Sumbawa Barat), e.g. from mining activities and conversion to commercial timber plantations,

degradation of coastal ecosystems and related loss of biodiversity are present as strategic

issues for all AoCs. For example, despite many coastal localities already being in poor condition,

large areas of mangroves, seagrass and coral reefs can be found in the Lombok AoC. Coastal

Threat Analysis showed (see Figure 2.7) that planned MP3EI development stressors, such as

6 IPC DSS = Industrial Pollution Control Decision Support System

21

water pollution and/or sedimentation, will cause degradation of these coastal habitats.

Estimations suggest that up to 1,500 Ha of coral, large areas of mangrove and significant

seagrass beds in Lombok Barat are at risk from the development of tourism zones, timber

plantations and port development.

While many already have and will continue to benefit economically from development in the EC,

social pressures are already apparent in Bali and Lombok. Increased tourist developments and

pressures are therefore expected to heighten related social problems such as the spread of

HIV/AIDS, erosion of cultural values, and economic inflation. An example of social conflict is

tension between local communities and the tourist industries in Southern Bali AoC, which is

predicted to continue. Related ´EC-wide´ social issues include vulnerability to sea-level rise and

the risk of overfishing. Many MP3EI projects will also increase water demand, despite

decreasing levels of water availability and certain cases of water scarcity. Coastal ecosystems

and biodiversity receptors have the most negative impacts, while air and water issues are most

prevalent in Southern Bali and South-North Lombok AoCs.

Recommended Mitigation Measures In order to avoid or mitigate identified risks and likely impacts, a number of recommendations

were formulated. For example, it is proposed to prioritise investments to wastewater treatment

facilities, mass transit, and solid waste management projects in, among others, the Southern

Bali AoC. To deal with increased tourism and related coastal developments risks in the Southern

Bali and Lombok AoCs, it is proposed that necessary planning improvement and management

be routed through Integrated Coastal Zone Management (ICZM) processes.

It is also suggested that financial allocations be made for awareness-raising activities among the

providers of tourist services, visitors, and the general public regarding the environmental issues

in the area, namely water, energy savings and biodiversity protection.

2.3.6 Papua – Maluku Economic Corridor

The objective of economic development in Papua – Maluku Economic Corridors (EC) is to

create a centre for Development of Food, Fisheries, Energy, and National Mining. The planned

economic development is dominated by projects such as in agriculture, copper, nickel, oil and

gas and fisheries. Connectivity projects generally include port development, new and upgraded

roads, power plants, and water supply infrastructure. In addition to the agglomeration of MP3EI

Connectivity and economic activity projects, there are also 22 KPIs located throughout the

Economic Corridor; which, among others, includes animal husbandry, fisheries, cement,

agroindustry and mining investment themes.

Altogether five Areas of Concern (AoCs) were identified in the Papua – Maluku EC in relation to

the above-mentioned plans; these include Halmahera, Sorong – Manokwari, Fakfak - Bintuni -

Cendrawasih Bay, Timika, and Merauke. The expected strategic risks and impacts in these

areas were, however, somewhat different than those associated with other Economic Corridors.

While risk of cumulative impacts typical of other ECs was assessed; Papua, in particular, is

sparsely populated and is still relatively ‘untouched’ by dense urban expansion and development

projects. As such, strategic biodiversity and social assessments were more associated with the

scale of disrupting remaining and relatively pristine environments.

Water quality impacts were assessed for several AoCs (especially Halmahera AoC and Timika

AoC, followed with Sorong - Manokwari, Fakfak - Bintuni - Cendrawasih Bay, and Merauke

AoCs) due mainly to runoff from agriculture and mining developments, and air quality is only

deemed relevant in the Timika AoC because of existing pollution levels and expected MP3EI –

related atmospheric emissions. Habitat and biodiversity degradation will occur at varying levels,

where the most concerning terrestrial biodiversity impacts are evident in the Merauke AoC (see

Table 2.4) from the habitat destruction and fragmentation related to planned agroindustry

developments (e.g. MIFEE7, oil palm - mining concessions, and road development).

7 Merauke Integrated Food and Energy Estate

22 SEA for Indonesian Master Plan for Accelerated Economic Development / 2014-09

Table 2.4 Estimated MP3EI direct impact in forests in the Merauke AoC

Forest Classification Original Area (Ha) Existing Concessions (Ha) % Area at Risk

Total Forest 2,639,239 558,400 21

Primary Dry Land Forest 961,054 20,600 2

Primary Swamp Forest 286,815 80,900 28

Secondary Dry land Forest 946,883 220,100 23

Secondary Swamp Forest 442,668 85,500 19

Total Mangrove 188,042 12,100 7

Primary Mangrove Forest 167,066 11,500 7

Secondary Mangrove Forest 20,977 700 3

MP3EI related coastal degradation, and related biodiversity loses, are strategic in the Fakfak-

Bintuni - Cendrawasih Bay AoC and Sorong - Manokwari AoC due to the areas’ respective

importance for the ecological functionality of the coral triangle and/or overlap with migratory

routes of threatened and endangered marine mammals and turtles. Impacts to coastal habitat in

Halmahera from port development and, among others, predicted water quality impacts should

also be mentioned; as well as the Fisheries KPI related threat of over fishing in Maluku waters.

Strategic biodiversity impacts are deemed to be significant in all AoCs.

Strategic social risks and impacts for the Papua – Maluku EC are, in general, deemed to be

more intensive as aboriginal communities may be more vulnerable to changes in their

environments and existing social structures. Thus, for example, typical livelihood and cultural

risks associated with the influx of migratory workers are considered to be more significant.

Health impacts can also be expected from worsening environmental quality, and interactions

with expected newcomers. An analysis of important traditional sites and customary lands in

relation to planned MP3EI also illustrates significant planning conflicts, as exemplified in the

Merauke AoC planning (see Figure 2.8).

Figure 2.8 Map of MIFEE Planning incursion in Merauke AoC Traditional Sites

Recommended Mitigation Measures A selection of planning related measures were recommended to lessen the assessed risks or

impacts in the Papua- Maluku EC. For example, limiting agroindustry or mining land allocation in

primary forests or peat land was recommended to limit biodiversity impacts and social conflicts

in Merauke AoC, and also for avoiding habitat fragmentation in sensitive terrestrial areas. To

protect sensitive coastal areas, dedicated project requirements, such as strict wastewater

management or tailing ponds, and strict avoidance of especially sensitive habitats were offered.

23

In relation to the clear social threats, it was recommended that planning conflicts with

traditionally relevant sites be corrected, and that dedicated ‘Social Impact Assessment’ be

carried out for each MP3EI project to ensure that that programs are developed to either protect

local communities or ease their necessary transition.

2.4 MP3EI Impacts and the Economic Value of Natural Resources

An estimate of the potential MP3EI risk to Indonesia’s natural resources was undertaken to

provide a general illustration of costs typical excluded in economic planning. Based on estimates

of MP3EI impacts on habitats of various types across the six Economic Corridors (EC), the

value of Indonesia’s national ‘natural capital at risk’ was calculated and is summarized in the

following table.

Table 2.5 Estimate of the value of National ‘natural capital at risk’

BY ECONOMIC CORRIDOR Value of Natural Capital at

Risk ($m)

EC as % of MP3EI

Total

BALI-NT 10,149 2.16% JAVA 10,757 2.29% KALIMANTAN 185,503 39.46% PAPUA-MALUKU 82,527 17.56% SULAWESI 28,160 5.99% SUMATRA 152,970 32.54%

INDONESIA/ALL MP3EI 470,067 100%

BY TYPE OF HABITAT Value of Natural Capital at

Risk ($m)

Habitat as % of MP3EI

Total

Combined Conservation Area (CCA) 34,824 7.41% Coastal Wetlands 220,190 46.84% Coral Reefs 41,381 8.80% Inland Wetlands 115,501 24.57% Marine 336 0.07% Tropical Forest 57,835 12.30%

ALL BIOMES/CCA 470,067 100%

On this basis, the estimated value of Indonesia’s ‘natural capital at risk’ is likely to be around

$470 billion annually. The analysis suggests that the largest impacts in monetary terms on

natural resources may be in the ECs of Kalimantan, Sumatra, and Papua-Maluku, and that

monetary impacts on coastal and inland wetlands account for some 60% of all impacts. The

interpretation of these results in economic terms is essentially as follows:

• the figure of about $470 billion annually reflects the estimated economic value of natural

resources which may be considered to be ‘at risk’ from the set of MP3EI investments over

the whole 15-year plan period

• the actual level of impact will likely be less than this (unless planned investments are

increased in scale), because not all MP3EI infrastructure, economic and mining projects

will actually result in the loss of all components of TEV (Total Economic Value). It is also

the case that not all projects will start immediately, so – at least in early years – the scale

of impact will be less than that envisaged at full MP3EI implementation

• although a direct comparison is not advised, certain imbalances in sustainability may be

evident in noting the annual value of ‘natural capital at risk’, the estimated MP3EI total

investment value of about $340 billion8 and Indonesia’s annual GDP of about $880 billion

(in 2012).

8 As provided by the MP3EI, p. 49, but this value has not yet counting the value of income generated from new

businesses and created employment.

24 SEA for Indonesian Master Plan for Accelerated Economic Development / 2014-09

3 Conclusion

The systematic and dedicated MP3EI SEA Policy and Economic Corridor analyses has revealed

that, in its current state, the MP3EI mainly entails intensification of ‘business as usual’

development policy and plans that do not yet properly address the clear environmental and

social issues associated with rapid economic development.

Examples of this were abundant in the MP3EI policy where a range of challenges to align the

MP3EI with national commitments to sustainability are apparent. These policies have been

translated into somewhat unrefined Economic Corridor planning, where planning conflicts or the

combined consequences of MP3EI developments to physicochemical, ecosystems and social

receptor were verified to lead to risks or impacts that cannot be adequately addressed in EIA

(AMDAL) procedures and contradict national planning requirements (e.g. Indonesian SEA

Principles, Article 16 of Law No 32/2009).

Ultimately, in its present state, the MP3EI Policy and Economic Corridor Planning exacerbates

existing environmental problems, leads to very high environmental and socio-economic costs,

and poses a significant challenge for future governments and citizens in Indonesia to correct.

The SEA process, through concerted analyses and stakeholder consultation, has developed

comprehensive policy and planning specific recommendations within a mitigation framework

(see section 1.3) that cumulatively address the identified environmental and social challenges.

These, however, cover various levels of governance, planning and project execution and are not

a so-called ‘easy fix’. Their inclusion in the MP3EI or the upcoming RPJMN would be the first

positive step in a roadmap of actions that require cooperation and continued dedication on many

fronts.

In recognising the problems and committing to the mitigation actions, however, it is believed that

the MP3EI Policy and Economic Corridor Planning has an opportunity to be transformed into a

strong mechanism that equally accelerates the necessary investment, policies, planning and

regulations needed to deal with the impacts associated with rapid economic growth.

DHI Water & Environment (S) Pte Ltd• 1 Cleantech Loop • #03-05 CleanTech One • Singapore• 637141

Telephone: +65 67776330 • Telefax: +65 67773537 • dhi@dhi.com.sg•

The technical contributions in this document were prepared by the consortium of DHI Water and

Environment (S) Pte. Ltd. and Integra Consulting Ltd. under the Environmental Support Program 3

(www.esp3.org). This initiative is part of the Indonesia - Denmark ESP3 development grant

cooperation.

This technical contributions in this document have been prepared under the DHI Business Management

System certified by DNV to comply with

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