Brighten-KRC: 2edition

Written by Dicky Firmansyah

Monday, 30 March 2009 14:34

dfh Review on Recent Issues of Agriculture, Forestry, and Bio-Energy Sectors in Indonesia
By: Dicky Firmansyah (leader), Dina, Indra

EXECUTIVE SUMMARY

Agricultural Sector
During the period of 2002-2007, foreign investment realization trend on food crops tended to increase. In 2002, there was only one foreign investment project implemented while in 2007 (as of October) there were 13 projects, implying a raise of 12 projects. Meanwhile, the value of projects in 2007 was more than 510 million USD, implying an increase of more than 398 percent from 102 million USD in 2002, but a decrease of about 4.2 percent from 533 million USD in 2006.

Indonesian statistical indicators in 2006 showed that the total land area in Indonesia was 186 million ha, but only 60.8 million ha or about 33% was utilized. Food crops area was 22.5 million ha or around 12% of total land in Indonesia. This number included paddy field which was about 7.7 million ha. Plantation area was 19.5 million ha (around 10.4% of total land), including palm oil, rubber, tea, tobacco, coffee, and cocoa. The growth of plantation area between 1995 and 2005 was 7.69% per year. The growth of plantation production between 1995 and 2005 was 8.69% per year. The average growth of urea fertilizer between 1995 and 2006 was 0.06% per year.

Forestry Sector
Every year, 2.72 million hectares of Indonesian forests are lost. Each minute, the forest areas as large as five soccer fields are destroyed that is equivalent to the loss of forest as large as Bali Island in a year. Considering that only 41.25 million hectares of remaining Production Forest reserves have good forest cover, the supply of timber inputs from industrial plantations are only sufficient to fulfill the needs of pulp industries. Bio-fuel will stimulate acceleration of zoning for oil palm plantations. It is estimated that the natural forests in Sumatra, Kalimantan and Sulawesi will be extinct by 2012. The price of timber from these islands, including Java, will escalate dramatically because all timbers will have to be shipped from Papua. In 2022, all natural forests in Indonesia will be extinct and the price of timber will climb once again because woods will have to be imported from China and/or Vietnam.
Initiatives, such as certification, will have no impact in solving the problems if they continue to be voluntary. Solving the problems of forestry sector will not be easy. Anti-poaching operations have addressed nearly 8.7 percent of illegal logging, and the operational cost of these programs is not trivial, although it is much lower than the losses caused by poaching activities themselves, which extend beyond the timber smuggling problem.
Efforts to revitalize and restructure the industry came into conflict with attempts to increase industrial capacity. After the auditing of industries, for which the results remain unknown, the government increased the pulp production capacity in Sumatra. In addition, they also planned to build pulp industries in Kalimantan and Papua.
A moratorium on logging was taken up as an alternative because many interests require some forms of improvement. The large number of agendas made it difficult to find a single solution. Through a moratorium, all of these agendas can be put together so that overlapping problems in administration and policy can be improved first.

Bioenergy Sector
During the period of 2004-2008, the bio-fuel production in Indonesia has increased from only 3.3 thousand kilo liters in 2004 to 2,558.7 thousand kilo liters in 2008. Meanwhile, the installed capacity for bio-diesel production, which was about 2 million kilo liters a year, did not show any progress in the period of December 2007-June 2008. From this fact, coupled with the significant increase in bio-diesel production from 1.7 million kilo liters in 2007 to 2.6 million kilo liters in 2008, it indicates that there was an increase in the actual capacity from the company (institution) that contributed to the bio-diesel production in Indonesia.
However, the installed capacity for Bio-ethanol production in Indonesia has shown some progresses. The data showed that the installed capacity as of June 2008 was about 20 percent increase compared to its previous installed capacity in December 2007. The volume of installed capacity in June 2008 was 192 million liters, whereas in December 2007 it was only 160 million liters.