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New Environmental Analysis for a Sustainable Indonesia

November 18, 2009

A new World Bank report launched today highlights the upstream policy challenges that Indonesia faces in attaining environmental sustainability, and thus freeing up funds for better development outcomes. The Country Environmental Analysis examines the economic costs of environmental degradation and offers options on how best to address priority issues of environmental governance and climate change mitigation and adaptation. The report was compiled through extensive consultations with the Indonesian government, non-government organizations and research institutes.

According to the analysis, the costs of environmental degradation to Indonesia’s economy can be summarized as follows:

  • Natural capital constitutes about one quarter of total wealth in Indonesia but is being rapidly depleted and not being offset by adequate investments in human or produced capital.
  • Climate change will result in a number of negative impacts on Indonesia, including reduced crop production, greater risks of flooding, and further spread of vector-borne diseases, with economic costs projected to reach 2.5-7.0 percent of GDP by 2100.
  • Poor sanitation is estimated to have led to major health, water, tourism and other welfare costs worth more than $6 billion in 2005, or more than 2 percent of GDP that year.
  • Outdoor and indoor air pollution is estimated to have led to health impacts worth about $5.5 billion per annum or about figure is 1.3 percent of GDP (2007).
  • Deforestation since 2001 reached over 1 million ha per year, This is reduced from historical highs over 2.5 million ha per year, but still very high compared to other tropical forested countries. Forest loss and peat land conversion cause environmental degradation, health and biodiversity losses, and greenhouse gas emissions.

“Environmental degradation has a high cost for Indonesia. However, with the recent passing of new laws in environment, electricity and solid waste management, Indonesia is clearly on the path towards a more environmentally sustainable future,” said Joachim von Amsberg, World Bank Country Director for Indonesia. “The next step in this transformation is to match this legal framework with adequate capacity and incentives at all levels of government, while at the same time take the appropriate adaptation and mitigation measures to address climate change.”

Indonesia has been identified as one of the countries in Asia most vulnerable to climate change hazards. Drought, floods, sea-level rise, and landslides are among the hazards that will affect mainly poor communities living on the coast and dependent on agriculture, fisheries and forestry for their livelihoods. However, with the right adaptation measures, the annual benefit of avoided damage from climate change is likely to exceed the annual cost by 2050 without adaptation investments.

“Climate change raises the stakes for achieving sustainable development, but also brings opportunities for lower carbon growth and climate finance for mitigation and adaptation. More importantly however, as evidenced by President Yudhoyono’s recent G-20 speech, Indonesia is deeply committed to achieving sustainability and is taking action,” said Timothy H. Brown, Senior Natural Resources Specialist for the World Bank in Indonesia. “International partners like the World Bank stand ready to help Indonesia achieve greater sustainability and realize its ambition of low carbon growth.”

At the G-20 Leaders Summit in Pittsburgh, President Susilo Bambang Yudhoyono among other things announced that Indonesia was willing to reduce emissions by 26 percent by 2020 from Business As Usual ; planning a billion ton CO2 reduction by 2050; aiming to make forestry a net sink sector by 2030; continuing its fuel efficiency policy; and working to make public transportation more environmentally friendly over the next 10 years.



Country Environmental Analysis: OptionsExpanding Access to Environmental Governance



  • Work with other stakeholders to monitor and appraise the performance of its own institutions in fulfilling access to information, participation and justice, and encourage the adoption of policies that better guarantee their fulfillment.
  • Encourage a process of legal reform so as to bring the de jure and de facto situations into line.
  • Provide an integrated system capable of guaranteeing access, especially for marginalized groups.
  • Develop the capacity of its institutions through the assignment of specially trained staff, the provision of the necessary infrastructure and facilities, and the allocation of adequate funding.
  • Improve collaboration with the media and NGOs, as well as other stakeholders that have the potential to encourage the fulfillment of access principles.


  • Actively and continuously scrutinize the performance of government on issues of access.
  • Increase the attention it pays to environmental issues, including making of decisions that are likely to have an adverse impact on the environment.


  • Monitor the process of legal reform so as to ensure that the gap between the de facto and de jure situations can be bridged.
  • Collaborate with Government and other stakeholders so as to encourage better access.
  • Encourage heightened public demand for access to information, to participate and to justice.
  • Develop own capacities, and the capacity of the public, particularly marginalized groups, to secure access to information, to participate and to justice.


Climate Change Adaptation




Water Resources

  • Protection of groundwater resources
  • Improved management and maintenance of existing
  • water supply systems
  • Protection of water catchment areas
  • Improved water supply
  • Groundwater and rainwater harvesting and desalination
  • Better use of recycled water
  • Conservation of water catchment areas
  • Improved system of water management
  • Water policy reform including pricing and irrigation policies
  • Development of fl ood controls and drought monitoring


  • Erosion control
  • Dam construction for irrigation
  • Changes in fertilizer use and application
  • Introduction of new crops
  • Soil fertility maintenance
  • Changes in planting and harvesting times
  • Switching to diff erent cultivars
  • Educational and outreach programs on conservation and management of soil and water
  • Development of tolerant/resistant crops (to drought,
  • salt, insect/pests)
  • Research and development
  • Soil and water management
  • Diversifi cation and intensifi cation of food and plantation crops
  • Policy measures, tax incentives/subsidies, free market
  • Development of early warning systems


  • Improvement of management systems including control
  • of deforestation, reforestation, and aff orestation
  • Promoting agroforestry to improve forest goods and services
  • Development/improvement of national forest fire management plans
  • Improvement of carbon storage in forests
  • Creation of parks/reserves, protected areas and biodiversity corridors
  • Identifi cation/development of species resistant to climate change
  • Better assessment of the vulnerability of ecosystems
  • Monitoring of species
  • Development and maintenance of seed banks
  • Forest fire early warning systems


  • Protection of economic infrastructure
  • Public awareness to enhance protection of coastal and marine ecosystems
  • Building sea walls and beach reinforcement
  • Protection and conservation of coral reefs, mangroves, sea grass, and littoral vegetation
  • Integrated coastal zone management
  • Better coastal planning and zoning
  • Development of legislation for coastal protection
  • Research and monitoring of coasts and coastal ecosystems


  • Public health management reform
  • Improved housing and living conditions
  • Improved emergency response
  • Development of early warning systems
  • Better and/or improved disease/vector surveillance and monitoring
  • Improvement of environmental quality
  • Changes in urban and housing design
Media Contacts
In Washington, DC
Mohamad Al-Arief
Tel : (1-202) 458-5964
In Jakarta
Randy Salim
Tel : (62-21) 5299-3259