STRATEGIC ENVIRONMENTAL ASSESSMENT MASTERPLAN FOR ACCELERATION AND EXPANSION OF INDONESIA'S ECONOMIC DEVELOPMENT (SEA MP3EI)

Transcription

1 STRATEGIC ENVIRONMENTAL ASSESSMENT MASTERPLAN FOR ACCELERATION AND EXPANSION OF INDONESIA'S ECONOMIC DEVELOPMENT (SEA MP3EI) EXECUTIVE SUMMARY MINISTRY OF FOREIGN AFFAIRS OF DENMARK DANIDA INTERNATIONAL DEVELOPMENT COOPERATION

2

3 FOREWORD The Master Plan for Acceleration and Expansion of Indonesian Economic Development (MP3EI) aims to achieve economic connectivity and accelerated growth in Indonesia in order to transform the country into a developed country by 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 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) 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

4 CONTENTS 1 Introduction Project Background Objective Approach Overview of the Main MP3EI SEA Findings Policy Related Risks Water Air and Climate Land and Soil Forests Coastal Areas Biodiversity Human Health Livelihood and Local Communities Environmental Management & Horizontal Key Activities MP3EI Policy Recommendations Key Recommendations for Adjusting Policy Recommendations for Enhancing the Institutional Context Recommendations for Specific Categories of Economic Activities Main Findings and Recommendations for MP3EI Economic Corridors Java Economic Corridor Sumatra Economic Corridor Kalimantan Economic Corridor Sulawesi Economic Corridor Bali Nusa Tenggara Economic Corridor Papua Maluku Economic Corridor MP3EI Impacts and the Economic Value of Natural Resources Conclusion SEA for Indonesian Master Plan for Accelerated Economic Development /

5 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 (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 (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 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, 1

6 o o o Determine, via scoping and stakeholder consultation, EC-specific strategic issues and Areas of Concern, Verify the scoped strategic impacts linked to the EC MP3EI planning, and 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 Planning 1 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. 2 SEA for Indonesian Master Plan for Accelerated Economic Development /

7 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 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. 3

8 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 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) 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 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 4 SEA for Indonesian Master Plan for Accelerated Economic Development /

9 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 ) 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 forestbased 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 counterbalance 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 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, 5

10 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) 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 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 forestryrelated 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 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 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 6 SEA for Indonesian Master Plan for Accelerated Economic Development /

11 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 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 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 7

12 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 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 forests 2 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). 8 SEA for Indonesian Master Plan for Accelerated Economic Development /

13 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 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) 9

14 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 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 abovementioned. 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. 10 SEA for Indonesian Master Plan for Accelerated Economic Development /

15 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. 11

16 As Cd CO Cr Cu Hg NH3 Ni NMVOC NOx Pb PM10 PM2.5 SOx TSP Total Emissions (kg) Millions 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 Area 3. 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/DSS 4 ). 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 Pollutants 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 12 SEA for Indonesian Master Plan for Accelerated Economic Development /

17 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. 13

18 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 Area 5. 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, Important Bird Areas 2,776 1, Mangrove Forests 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. 14 SEA for Indonesian Master Plan for Accelerated Economic Development /

19 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 (PM 2.5, PM 10 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. 15

20 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, , Important Bird Area 57,759 3,100 6 Mangrove Forests 23, Orang-utan Habitat 5,816,296 1,436, Peat land / Wetland Areas 2,664, , 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. 16 SEA for Indonesian Master Plan for Accelerated Economic Development /

21 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 decisionmaking 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. 17

22 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 (NO x) 3,149,300 Lead (Pb) 7 Particulate Matter-10 (PM 10) 265,500 Particulate Matter-2.5 (PM 2.5) 242,400 Sulfur Oxide (SO x) 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. 18 SEA for Indonesian Master Plan for Accelerated Economic Development /

23 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 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 19

24 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 DSS 6 ) 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 20 SEA for Indonesian Master Plan for Accelerated Economic Development /

25 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 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. MIFEE 7, oil palm - mining concessions, and road development). 7 Merauke Integrated Food and Energy Estate 21

26 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, , Primary Dry Land Forest 961,054 20,600 2 Primary Swamp Forest 286,815 80, Secondary Dry land Forest 946, , Secondary Swamp Forest 442,668 85, Total Mangrove 188,042 12,100 7 Primary Mangrove Forest 167,066 11,500 7 Secondary Mangrove Forest 20, 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. 22 SEA for Indonesian Master Plan for Accelerated Economic Development /

27 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 ($m) EC as % of MP3EI Total BALI-NT 10, % JAVA 10, % KALIMANTAN 185, % PAPUA-MALUKU 82, % SULAWESI 28, % SUMATRA 152, % INDONESIA/ALL MP3EI 470, % BY TYPE OF HABITAT Value of Natural Capital at Risk ($m) Habitat as % of MP3EI Total Combined Conservation Area (CCA) 34, % Coastal Wetlands 220, % Coral Reefs 41, % Inland Wetlands 115, % Marine % Tropical Forest 57, % ALL BIOMES/CCA 470, % 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 billion 8 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. 23

28 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. 24 SEA for Indonesian Master Plan for Accelerated Economic Development /

29 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 ( 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 Quality Management Environmental Management Occupational Health and Safety Management ISO 9001 ISO OHSAS DHI Water & Environment (S) Pte Ltd 1 Cleantech Loop #03-05 CleanTech One Singapore Telephone: Telefax: dhi@dhi.com.sg