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23148Cast cAsia EnvironIment
aod Soe'al Ogvvtopnment 7An;tEASES Discussion Paper Series
Decentralization of Natural ResourceSectors in
Indonesia:Opportunities and Risks
Jean Aden
September 2001
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This publication was developed and produced by the Environment
and Social Development Unit (EASES), EastAsia and Pacific Region of
the World Bank. The Environment, Rural Development, and Social
Development arepart of the Environmentally and Socially Sustainable
Development (ESSD) Network,
Papers in the EASES Discussion Paper Series are not formal
publications of the World Bank. They are publishedand circulated to
encourage discussion and comment within the development community.
The findings,interpretations, judgments, and conclusions expressed
in this paper are those of the author(s) and should not
beattributed to the World Bank, to its affiliated organizations, or
to members of the Board of Executive Directors orthe governments
they represent.
Copies of this paper are available fronrGiovanna DoreExt. 32934,
Room MC8-214Email: [email protected]
-
EASES Discussion Paper Series
Decentralization of Natural ResourceSectors in
Indonesia:Opportunities and Risks
Jean Aden
September 2001
Environment and Social Development UnitEast Asia and Pacific
Region
-
Abbreviations and Acronyms
AMDAL Environmental Impact AssessmentANDAL Detailed
environmental impact reportAPBD Anggaran Pembiayaan Belanja Daerah
- Regional budgetAPBN Anggaran Pembiayaan Belanja Negara - State
budgetASM Artisanal and small-scale miningBAPEDAL Environmental
Impact Management AgencyBAPEDAL Regional Branch Office of
BAPEDALBAPEDALDA Regional Environmental Impact Management
AgencyBAPPEDA Regional Development Planning BoardBAPPENAS National
Development Planning BoardBPN National Land AgencyBupati Kabupaten
(rural district) headDGM Directorate General of MiningDinas
Provincial or district agency reporting to governor, mayor or
bupatiDinas Pertambangan Regional Mining Agency reporting to
governor, mayor or bupatiDPRD Regional People's AssemblyGDP Gross
Domestic ProductHa HectaresINPRES Instruksi Presiden - ad hoc
budget transfer by presidential decreeKabupaten DistrictKandep
Kantor departamen - District office of a central line agencyKanwil
Kantor wilayah - Provincial office of a central line agencyKanwil
Pertambangan Provincial office of MMEKODAM Provincial AMDAL
CommissionMLH Ministry of EnvironmentMME Ministry of Mines and
EnergyMoA Ministry of AgricultureMoFr Ministry of ForestryMoMEx
Ministry of Marine ExploitationNGO Non-Governmental OrganizationPKA
Directorate General of Nature ConservationPROPER Prokasih BAPEDAL's
industrial water pollution control programRKL Rencana Pengelolaan
Lingkungan - Environmental Management PlanRPL Rencana Pemantauan
Lingkungan - Environmental Monitoring Plan
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Table of Contents
Executive Summary
.............................................................................................................................
1. I ntroduction ...................................... 1
2. The Legal Framework and Safeguards
...................................... 3
3. Technical Capacity .....................................
15
4. Environmental Constituencies and Accountability
..................................... 20
5. Regional Environmental Expenditure
..................................... 27
6. Conclusions and Recommendations
..................................... 28
Bibliography..31
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Acknowledgements
This report was prepared as part of the World Bank country
study, Indonesia -Environment and Natural Resource Management in a
Time of Transition, under the guidance of Ms.Kristalina Georgieva,
Director of the Environment Department (ENV), and Mr. Zafer
Ecevit,Director of the Environment and Social Development Unit
(EASES) of the East Asia & PacificRegion of the World Bank.
The report was prepared by Ms. Jean Aden (EASES). Contributions
by Ms. SampritiGanguli and Mr. Michael T. Rock are gratefully
acknowledged, as are valuable comments fromMr. Stephen Dice, Ms.
Giovanna Dore, Mr. Bert Hofman, Ms. Jacqueline Pomeroy and Mr.
TomWalton.
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Executive Summary
Indonesia has embarked on a major adequate enviromnental
safeguards in thedecentralization. The legal framework for regions.
The core safeguards are nationaldecentralization (Laws 22 and 25 of
1999) minimum environmental standards and aauthorizes the country's
districts consultative environmental assessment(municipalities and
rural kabupaten) to manage (AMDAL) process. The regional
environmentmost government services, and more than agencies
(BAPEDALDA) and natural resourcedoubles the subnational share of
public line agencies (Ministry of Forestry,expenditures to over 40
percent. This Directorate General of Nature
Conservation,reallocation would make Indonesia, now Ministry of
Mines and Energy) shareunusually centralized for its size and
diversity, responsibility for their proper application atone of the
most decentralized countries in the regional levels. Under one
scenario, newlyregion. empowered local authorities would
condone
or even invite more intensive local resourceIndonesia's economy
will remain natural use to boost local income and revenues,
resource-dependent over the next decade. without adequate
environmental safeguards.However, recent unsustainable resource use
Whether due to lack of technical capacity orlevels and degradation
threats raise concern sympathy for populist demands for access
tothat decentralization in the natural resource local resources,
this scenario would lead tosectors could lead to environmental
neglect resource depletion, devastated landscapesand further
undermine the sustainability of and long-term, perhaps irreversible
damagenatural resource use. This report analyzes to the regional
resource base. If exploitationopportunities and risks of
decentralization of rates in the resource-rich regions off Javathe
terrestrial natural resource sectors off remain at current
unprecedented levels, theseJava, with particular attention to
forestry, risks could play out quickly over the next fivemining and
conservation of terrestrial to ten years, ultimately narrowing
affectedbiodiversity. Its findings and recommenda- regions'
economic options.tions are summarized and updated from alarger
study of environmental and natural The benefits of decentralization
withresource management issues and options in safeguards could
include improved resourcepost-Suharto Indonesia.1 outcomes (more
efficient, sustainable resource
use and conservation of protected resources)Whether Indonesia's
drive to decentralize and improved governance (greater local
leads to more efficient, sustainable resource use participation
in resource allocation decisions,or invites serious environmental
deterioration greater accountability of regionalwill depend to a
large extent on whether governments, freeing of central agencies
todecentralization goes forward with or without concentrate on
policy and oversight).
However, to achieve these benefits, the key1 Indonesia:
Environment and Natural Resource actors - central ministries,
district andManagement in a Time of Transition, February 2001.
provincial governments, and localThis report updates and
supplements the commurnities - must undergo
substantialdecentralization chapter of the larger study, with an
institutional change. Because the benefits ofanalysis of regional
environmental mainstreaming sensible decentralization in the
naturalissues and opportunities in the mining sector, and asummary
of public environmental expenditure trends at resource sectors will
accrue in the long n,regional levels. there will be substantial
pressure for "quick
i
-
fix" decentralization, without regard to most countries that
have successfuLlypotential long-term negative impacts on the
pursued a decentralized approach toenviromnent. Unless these risks
on the road to environmental management have
devolveddecentralization receive priority attention in the
authority mainly to the provincial level.short term, they could
easily foreclose This is because provincial capital cities
andachievement of the long-term benefits. towns are much more
likely to be able to
afford highly trained environmentalThis report identifies four
factors that will personnel and sophisticated equipment,
largely determine whether decentralization in and to have the
institutional infrastructurethe natural resource sectors goes
forward for support of essential technical capacitywith or without
adequate environmental building and constituency building
(luringsafeguards and, ultimately, whether its decentralization. At
present, these elementsenvironmental outcomes are positive or are
less developed at the district level.negative. These factors
include: theincentives created by the legal framework for On the
other hand, the legal frameworkdecentralization; regional technical
capacity; creates several potential "checks andthe presence or
absence of a regional balances" to prevent or correctenvironmental
constituency and regional misallocation of functions (districts'
andaccountability; and public expenditure levels. provinces' option
to "upload" functions, the
Regional Autonomy Advisory Board, theThe evolving legal
framework for President's authority to veto regionaL
decentralization (Law 22/1999, Law 25/1999 regulations and
decisions, and the regions'and Government Regulation 25/2000) right
to appeal). To support sustainableappears to create incentives for
less resource use under decentralization, thesesustainable natural
resource use in two mechanisms need to be substantiallysenses.
First, Indonesia's approximately 350 strengthened.districts will
become more dependent onnatural resource-based revenues, and the
Overall, technical capacity forresulting perverse incentives to
accelerate safeguards application is limited atland conversion and
natural resource provincial and, to an even greater
extent,exploitation in the forestry and mining sectors district
levels, in both core environmentcould prove compelling for bupatis
in agencies and the natural resource agencies.revenue-starved rural
districts. Regional Given that their mandate and experiencerevenue
sources need to be vetted, and have focused mainly on industrial
and urbansafeguards need to be applied, in order to pollution to
date, core environment agenciesensure that natural resource-based
revenues at all levels lack knowledge and experienceunder the
decentralization reforms "do no in applying safeguards in the
naturalharm" to regional resource bases. resource sectors. Regional
environment
agencies' technical credibility with theSecond, the
decentralization strategy laid regulated community is an issue, and
is
out in the legal framework largely bypasses particularly acute
in regions where prioritythe country's 27 provinces and cedes
greater environmental issues and employment areautonomy to the 350
districts. Indeed, strong mainly in the natural resource
sectors.district level management capacity is a Although the
natural resource line agenciesmedium- to long-term objective and an
share responsibility for application ofindicator of a healthy and
mature natural safeguards, "mainstreaming" ofresource and
environmental management environmental policies and best
practicessystem. It should be noted, however, that
ii
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into their operations has been slow and will require significant
public and privateuneven. expenditure on preventive and
mitigating
measures. However, public expenditure onRegional environmental
constituencies environmental activities is extremely low in
are embryonic outside Java. A survey of Indonesia, in terms of
percentage of GDP,opinion leaders in three resource-rich percentage
of government expenditures, andprovinces off Java showed
significant per capita expenditure level as well asvariability in
their views of local resource relative to the other East Asia
crisis countries.depletion, causes of environmental damage
Moreover, environmental expenditures atand government's
environmental regional levels have suffered especially
deepperformance, with potentially important cuts since the crisis,
and the share of totalimplications for decentralization.
Significantly environmental budget allocated to regionalmore
opinion leaders shared core pro- activities relative to activities
at the centerenvironmental attitudes in some provinces has
decreased. Additional funding is neededthan in others. Moreover,
some provinces' to keep pace with major post-crisis increasescore
environmental constituencies were more in pressure on Indonesia's
forests,inclusive (that is, included government biodiversity stock
and land affected byofficials and businessmen as well as civil
mining operations, as well as urban andsociety, and therefore were
more likely to industrial pollution. Whether regionalinfluence
decision-makers) than others. budgets include environmental
expendituresNevertheless, a common denominator across commensurate
with increasing pressures onall three provinces was the weak link
between regional resource bases will be a criticalattitudes and
specific actions to support indicator of political will to support
adequatesustainable natural resource use. The survey regional
safeguards.results underline the fact that communitysupport for the
environment is significantly Recommendations. With thesemore
developed in some regions than in considerations in mind, the
reportothers, and needs to be encouraged as an recommends a
practical approach tointegral part of decentralization in the
natural decentralization of the natural resourceresource sectors.
sectors with adequate environmental
safeguards, which emphasizes:The heart of accountability is a
two-way
exchange between local communities and * First, a two-track
program of technicalgovernment, in which regional officials'
capacity and constituency building:engrained habits of seeking
higher-levelapproval and largely one-way - a technical capacity
building programcommunication with local communities are including
training in environmentalreplaced by two-way communication, in
aspects of the natural resource sectorswhich the official is
prepared to explain and should be a top priority. Strengthening
ofjustify government performance and use of safeguards capacities
of natural resourcepublic resources. Unless environmental agencies
and BAPPEDAs (Regionalconstituencies and accountability mechanisms
Planning Boards) is also needed.are functioning properly,
environmental Available technical capacity andsafeguards cannot
function properly. constituency-building resources - in
particular, the generally strongerAlthough a few of the measures
necessary institutional base for building capacity
for improved natural resource management and constituencies at
the provincial level -can be achieved at minimal cost, the majority
should be used to strengthen safeguards
iii
-
capacity for the benefit of the districts, in mine reclamation
bonds, establish credibleparticular, rural districts. District
staff environmental databases, build technicalcould be seconded
(magang) to provinces for capacity in govemment agencies,
andtraining and piloting; and support constituency building
programs.
Regional government officials and civil- a constituency building
campaign to spread society, who are about to assume increased
environmental knowledge, build pro- authority and responsibility
for naturalenvironmental attitudes, and forge links resource
management for the first time,between attitudes and proactive
behaviors need to be aware of the implications ofto improve
environmental quality should be environmental expenditure trends
andtargeted on key decision-makers in the options for their
jurisdictions. Asregions. Constituency-building should be
decentralization proceeds, the regionalaccompanied by
"accountability pilots," in share of public environmental
expenditureswhich regional officials explain and justify should
increase.government performance and use of publicresources related
to natural resource and * Fourth, an asymmetric approach,
whichenvironmental management. recognizes that some regions will be
ready
for natural resource and environmentalSecond, strengthening the
"checks and management sooner than others.balances" in the legal
framework to prevent or Assigning differentiated authority
tocorrect misallocation of functions among levels regional
governments based on politicalofgovernment. The adjudication role
of the commitment, constituency strength,Regional Autonomy Advisory
Board should technical capacity, population, revenuesbe
strengthened, by mandating proactive and environmental expenditure
levelsand systematic monitoring of regional can alleviate the
pressure of having toperformance of decentralized functions
implement a country-wide uniformgenerally, and relative to natural
resource decentralization program.and environmental management in
Decentralization support grants toparticular. A cross-sectoral
Natural provinces and districts that demonstrateResources Council
should be established, to commitment to capacity building,provide
technical advice to the Board on constituency building,
environmentalnatural resource management and expenditures and
regionalenvironmental safeguards at provincial and implementation
of safeguards could bedistrict levels. The Board and Council a
mechanism to facilitateshould include members from all levels of
decentralization, while recognizing thegovernment and civil
society, and local need for an asymmetric approach.communities
should have standing toappeal when regional natural resource and
Table 1 summarizes the suggested rolesenvironmental management
performance is of each level of government, cross-levelinadequate.
bodies and local communities in
decentralization of the natural resource* Third, additional
funding to keep pace with the sectors.
major increases in pressure on Indonesia's naturalresources
since the 1990s. Expenditures arerequired to rehabilitate degraded
forests,expand replanting programs, improve forestfire management,
protect and manage parksbetter, conduct mine inspections,
manage
iv
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Table 1. Decentralization of Natural Resource Utilizationand
Environmental Safeguards Functions by Level of Govermnent
Responsible Level Functions
Center * Provide legalframework that defines clearly
responsibilities and services to beprovided at central, provincial
and district levels, how each level will generaterevenues, and how
their performance will be evaluated. Set minimum nationalstandards.
Specify a notional timeframe for transition, recognizing
thatimplementation will necessarily be asymmetric.
* Set policy and get out of operations, except where functions
are specifically reserved tothe center or activities cross regional
boundaries (e.g. central responsibility for cross-provincial
activities), and reorganize central agencies and fiscal balance
accordingly.
* Deliver training (mainly training of trainers to provinces),
to build knowledge ofminimum standards and service delivery
capacity.
* Monitor compliance with national minimum standards (mainly
provincial complianceduring early decentralization), and be
prepared to recentralize functions wherecompliance is lacking.
* Perform provincial natural resource utilization and
safeguardfunctions, if "uploaded"from provinces and/or recommended
by Regional Autonomy Advisory Board.
Cross-level Regional * Evaluate regional service delivery and
performance, to determine readiness forManagement Autonomy
decentralization, and needfor recentralization in case of regional
failure to meetMechanisms Advisory national minimum standards.
BoardNatural * Conduct consultation with all levels of
government and civil society regarding naturalResource resource
utilization permitting, environmental safeguards and
monitoring.Council * Advise Regional Autonomy Board on permitting,
environmental safeguards and
monitoring.Province * Develop and implement integrated regional
planning, permitting, environmental safeguards
and monitoring of natural resource utilization, for
cross-district and mid-sizeactivities.
* Deliver transitional on-the-job training to district
officials, temporarily seconded toprovincial agencies, to prepare
for eventual full district autonomy. Working withdistrict
officials, assist pilots of integrated regional planning,
permitting,environmental safeguards and monitoring of natural
resource utilization to within-district and small-scale activities
at district level.
* Self compliance monitoring and reporting to community
organizations and center.* Build accountability to provincial
community and upward.* Asymmetric transfers of authority and
sharing of responsibility, based on different
natural resource endowments, population, capacity and
constituencies.* Perform district natural resource utilization and
safeguardfunctions, if "uploaded" from
districts and/or recommended by Regional Autonomy Advisory
Board.
District * Build capacity to deliver natural resource
utilization and environmental managementservices.
* Build accountability to local community and upward.* Pilot
integrated regional planning, permitting, environmental safeguards
and monitoring
of natural resource utilization for within-district and
small-scale activities.* Self compliance monitoring and reporting
to local community and upward to province
and center.* Asymmetric transfers of authority and sharing of
responsibility at district level, based
on different natural resource endowments, population, capacity
and level ofconstituency development.
Local community * Constituency building, moving from passive
acceptance of government's actions toinsistence on consistent
delivery of services tailored to local needs, andaccountability of
district and provincial officials.
v
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Decentralization of Natural Resource Sectors in
Indonesia:Opportunities and Risks
1. INTRODUCrION would lead to resource depletion,
devastatedlandscapes and long-term, perhaps
Indonesia has embarked on a major irreversible damage to the
regional resourcedecentralization. The legal framework for base. If
exploitation rates in the resource-richdecentralization (Laws 22
and 25 of 1999) regions off Java remain at their currentauthorizes
the country's 350 districts (cities unprecedented levels,2 these
risks could playand rural kabupaten) to manage most out quickly
over the next five to ten years,government services, and will more
than ultimately narrowing affected regions'double the subnational
share of public economic options.expenditures to over 40 percent.
Thisreallocation would make Indonesia, now On the opportunity side,
the benefits ofunusually centralized for its size and
decentralization with safeguards could includediversity, one of the
most decentralized improved resource outcomes (more
efficient,countries in the region. Over the next 3-5 sustainable
resource use and conservation ofyears, the balance struck between
the political protected resources) and improvedimperative for
visible action and the need for governance (greater local
participation instructured preparation will determine resource
allocation decisions, greaterwhether decentralization will improve
the accountability of regional governments,welfare of Indonesia's
people by encouraging freeing of central agencies to concentrate
onsustainable utilization of natural resources, or policy and
oversight). However, achievinginvite serious environmental
deterioration. these benefits will require all the key actors
-Local environmental constituencies and central ministries,
district and provincialimproved accountability will also be
critical governments, and local communities - tofactors. undergo
substantial institutional change.
Because the benefits of sensibleIndonesia's economy will remain
natural decentralization in the natural resource
resource-dependent over the next decade, and sectors will accrue
in the long run, there willdecentralization in the natural resource
be substantial pressure for "quick fix"sectors - forestry, mining,
fisheries - will decentralization, without regard to
potentialcreate both risks and opportunities. Given long-term
negative impacts on thethe potent mnix of the lingering
economiccrisis, political uncertainty and a partial2breakdown of
law and order, decentralization At present rates of forest
conversion (1.7 milion haof natural resource utilization and annual
forest cover loss off Java from 1988-2000),envirounmental
management could accelerate Sumatra will lose essentialy al its dry
lowland
forests soon after 2005, and Kalimantan will haveenvironmental
degradation. Under this very little lowland forest left by 2010.
Small-scalescenario, newly empowered local authorities mining
operations, which increased significantlywould condone or even
invite more intensive following the economic crisis, have
substantiallocal resource use to boost local income and
environmental impacts (sedimentation of water
bodies, mercury poUlution, total lack of landrevenues, without
adequate environmental reclamation after mine closure), but are
unregulatedsafeguards. Whether due to lack of technical and use no
environmental precautions. See Indonesiacapacity or sympathy for
populist demands - Environment and Natural Resource Management in
afor access to local resources, this scenario Time of Transition,
2001, pp. 7-13,67-70.
I
-
environment. Unless these risks on the road population provinces
that are our focusto decentralization receive priority attention
include most provinces in Kalimantan,in the short term, they could
easily foreclose several provinces in Sumatra, and
Irian.achievement of the long-term benefits. These provinces send
far more revenues to
the center than they get back.4 Given thatThis report focuses on
present many environmental problems found in
knowledge of the problems and prospects densely populated areas,
such as lack offor decentralization of natural resource sanitation,
solid waste, noise and odors, areutilization and environmental
management fundamentally local, and hence bestin Indonesia, the
critical issues to be addressed at the local level,
decentralizationdecided, and decentralization support of
environmental management in urban andstrategies for donors and for
the resource-rich, high population regions offersGovernment of
Indonesia. Decentralization substantial, visible benefits to local
residents.is inherently complex. One size fits neither However,
environmental issues in the naturalall sectors nor all locales.
This chapter resource sectors, such as destructive loggingtherefore
emphasizes the sectoral and practices, mining waste disposal and
effluentgeographic variations that must be from oil palm
processing, generally occur inconfronted when the theory of less
densely populated areas, where naturaldecentralization moves to the
reality of the resources may be virtually the sole source ofdiverse
Outer Islands. The concerned employment. Environment differs from
othergovernment agencies are the Ministry of service sectors in
developing countries, suchForestry (MoFr), including the
Directorate- as health, education or road-building, in thatGeneral
of Nature Conservation; the it ordinarily lacks a ready-made
constituency,Ministry of Mines and Energy (MME) and and this is
particularly true in resource-rich,their regional counterparts;
BAPPENAS and low population regions. The problem ofthe BAPPEDAs
(Regional Planning Boards); building pro-environmental
constituenciesand the Ministry of Environment, the receives
substantial attention in the analysisEnvironmental Impact
Management that follows.Agency (BAPEDAL) and their local
andregional counterparts (BAPEDALDA and Given district governments'
relative lackBAPEDAL Regional). The greatest short- to of technical
and managerial capacity, even onmedium-term opportunity of the
Java, it is unlikely that district governmentsdecentralization
process lies in improved off Java currently possess adequate
resources,accountability and coordination among such as well
trained officials, universitythese agencies, leading to
integratedplanning, permitting, environmental high population in
absolute terms but resource-poorsafeguards, and monitoring and
reporting relative to population (ava, Bali, South Sulawesi, someof
compliance with national miniimum regions in Sumatra, which have
abundant water and
coastal zones, some forests, and national parks); and
c)standards at district and provincial levels. resource poor, low
population (the Nusatenggara
provinces). Personal communication from Guy Alaerts.The
geographic focus of this report is one 4Many other provinces break
roughly even, and a few
category of Indonesian province, defined by would be even poorer
without the transfers they receivenatural resource endowment
relative to from the center. Although many findings of this
studymay also apply to the other two categories, the
fieldpopulation.3 The resource-rich, low studies conducted for this
report did not extend to those
areas. Further research is needed to assess
whetherdecentralization prospects for environmental and
3There are three basic types of province: a) resource- natural
resource management differ from the resource-rich, low population
(e.g. Kalimantan); b) resource- rich, rich, low population areas
targeted in this report
2
-
faculties, accredited laboratories, and political The report is
organized in five sections.leaders of sufficient stature to sustain
the Section 2 outlines the legal framework fornatural resource base
for use by future decentralization of natural resource
andgenerations. Capacity building will depend environmental
management, and identifieson resources such as these, which are
practical implementation issues and options.generally more likely
to be found in Section 3 discusses technical capacityprovincial
capitals rather than smaller district requirements. Section 4
presents results oftowns. opinion leader surveys designed to assess
the
strengths and weaknesses of provincialThe incentives and
penalties for environmental constituencies, and
sustainable resource use to be applied by recommends
accountability mechanisms.newly empowered local authorities have
yet Section 5 analyzes public environmentalto be determined. While
recent legislation expenditures, including shares of theseprovides
a formal legal framework, practical expenditures allocated to the
regions, relativemanagement instruments are still lacking, to the
center. The last section outlines aand once they are available,
their application strategy for decentralization of naturalwill
almost certainly be ad hoc and uneven. resource and environmental
management
with adequate safeguards (see also Figure 1).Preliminary
research on local constituency
building, described in this chapter, provides an 2. THE LEGAL
FRAMEWORK ANDunderstanding of differences among potential
SAFEGUARDSenvironmental constituencies in three
relativelyresource-rich provinces off Java. However, Three recent
pieces of legislation, Lawlittle is known about the other
twenty-three 22/1999 on Regional Govemance, Lawprovinces, not to
mention the approximately 25/1999 on the Fiscal Balance Between
the350 districts that are supposed to be the focus of Central
Government and the Regions, andpower and resources under the new
laws. Government Regulation 25/2000 on
Government Authority and ProvincialThis chapter lays out the
issues that will Authority as an Autonomous Region
be encountered during decentralization of comprise the main
elements of the post-Newnatural resource utilization and Order
legal framework for decentralization.environmental management
functions to the While this framework remains to beresource-rich,
low population regions off interpreted, it is useful to consider
its broadJava. These issues include: outlines.
* interpretation of the legal framework for Nevertheless, a
caveat is important here.regional governance and finance as it
Legal institutions have never been strong inapplies to the natural
resource sectors and post-independence Indonesia. Legal
rightsenvironmental management; and were repeatedly abrogated under
the New
Order, and courts have seldom been decisive.* the balance to be
struck between the While laws may set overall parameters,
political imperative for action and the need informal exchanges
of favors amongfor regional capacity and constituency government
officials, businesspersons andbuilding, so as to optimize the
political, local communities often have greater forceeconomic and
technical outcomes of than law in a particular matter. What
happensdecentralization. to the environment will probably be
determined mainly by businesspersons,
3
-
administrators, police and community the kantor departamen or
kandep and therepresentatives, acting informally, rather than
district executive (bupati or mayor) wereby lawyers arguing in
court. Moreover, when likewise charged with implementing
centralpractical outcomes of decentralization, such policies. The
other parallel structure, theas effects on environmental quality or
local "regional government," had its ownservice delivery, are
evaluated, variation by bureaucratic departments (dinas), which
weresector and locality will frequently be as largely a mirror
image of the kanwil orimportant, if not more important, than laws
kandep, plus a legislature (a Level I or Level IIwhose system-wide
applicability may be DPRD) and a regional executive called a level
Imore apparent than real. or level II regional head.5 Under
this
bifurcated organization, fiscal resources andPrevious regional
governance framework. executive authority were concentrated on
the
Except for two brief interludes in the 1950s, admninistrative
side, and legislative authorityweak regional authority has been the
norm in was confined to the "autonomous" regionalIndonesia.
However, both interludes continue government side, with the
Ministry of Hometo serve as benchmarks in public debate over
Affairs exercising close oversight of the DPRD.decentralization.
The first benchmark was thecountry's brief, reluctant adoption of a
federal In practice, implementation of Law 5/1974system as a
condition of Dutch recognition of emphasized mobilization of the
regions in theIndonesian sovereignty in 1949, which ended national
development effort, throughwith the adoption of a unitary system
the establishment of a hierarchical administrativefollowing year. A
lasting effect of the federal structure reaching from the center to
villagesinterlude has been the taboo on any mention of across the
archipelago.6 Despite variousfederalism as a regional governance
option for ministerial decrees ceding administrativeIndonesia. The
second interlude of functions to the regions and periodic
pilotstrengthened regional authority was the decentralization
initiatives such as theattempted secession of several provinces in
Regional Autonomy Program in the forestrySumatra and Sulawesi in
1956-57, which was sector, sectoral agencies in the regionssettled
by military force. remained essentially central "outposts,"
hobbled by many restrictions and stil largelyUnder the New
Order, a centralized dependent on "assistance" budget
allocations
system of governance was created, in manycases over the
objections of regional elites inthe Outer Islands. The legal
cornerstone of theNew Order's approach to regional governance S
This separation of administration and politics waswas Law 5/1974,
which confirmed regional breached in one key respect - that the
same person, theexecutives' appointment by and accountability
governor or bupati, served simultaneously as head ofto the national
government, in particular, the regional administration and regional
government In
some regions, the same official served as both kanwilDepartment
of Home Affairs. Law 5/1974 head and head of the corresponding
dinas, andcreated two parallel structures of regional reporting
both to the governor and the line agency atgovernance. One, the
"regional the center. However, this practice was uneven
acrossadministration," was comprised of branch sectors and regions.
See Michael Malley, "Regions:
Centralization and Resistance," in Donald Koffices of central
government departments Emmerson, ed., Indonesia Beyond Suharto:
Polity,(kantor wilayah or kanwil) and the governor at Economy,
Society, Transition (M.E. Sharpe), 1999.the provincial level, and
was an extension of 6 Terence H. Hull, "Striking a Most Delicate
Balance:central authority, charged with implementing The
Implications of Otonorni Daerah for the Planningcentral policies in
the regions. In the districts, and Implementation of Development
Cooperation
Projects," December 1999.
4
-
from the center.7 In the mining sector, MME no longer subject to
higher-level approval, andallocated resource use rights, while
local new responsibility for a broader menu of localgovemrnments
and local communities often services, as well as oversight of
village-levelleamed of new mining concessions after the govemment
(see Box 1).9 In theory at least,fact. Concession boundaries were
drawn Law 22 nurtures democratic accountability atwithout regard
for existing land uses or local the district level.communities'
customary rights to resources In contrast, the autonomy of the
27withiin those boundaries, provinces is sharply bounded under Law
22.
As Law 5/1974 did not address fiscal Governors remain primarily
accountable to thematters, a large share of central funding to the
President and the central ministries. Theregions during the New
Order was via provinces become residual service providers,
responsible only for cross-district matters andINPRES (Instruksi
Presiden) - ad hoc transfers whtvrsvieaedcoenaedbteby presidential
decree, in the form of general Agrants to provinces and districts
and funds for center or uploaded by the districts. As
bystanders in the decentralization process, thevarious specffic
purposes, such as education or provinces do not gain improved
capacity toroad building.8 Jakarta appropriated natural provesy to
emerging democrticresource revenues from oil and gas, forestry
constitue ctivesn La 22.and mining, income taxes and the value
addedtax, and returned only residual shares of While the district
is the default level to whichresource revenues to producing
regions. regional authority is assigned under Law 22,Inferior
sources of revenue, such as motor the law explicitly allocates
responsibilities forvehicle registration, were left to the regions.
natural resource utilization, conservation andThrough the 1990s,
the regions' capacity to environent across all levels of
governent.raise own revenues remained severely limited, In fact,
the natural resource sectors,with provinces raising only about
one-quarter conservation and environment are the onlyand districts
about one-fifth of their total sectors with functions assigned to
more thanbudgets. one level of government under Law 22.
While natural resource utilization is reserved
on Regional Govemance, enacted in May 1999 to the center, the
"regions" (presumably bothon Rgionl Goernace, nactd inMay 999
districts and provinces) are also authorized tounder President
Habibie and effective in 2001,abolishes the hierarchical
relationship between manage natural resources located in
theirprovinces and districts/cities and treats the area. Similarly,
conservation is reserved to
the center, but "environment conservation" istwo levels quite
differently. The country's dsgae adtr ucino happroximately 350
districts gain greater deigatd__ mndtoy_ untin_f_hautonomy, with
local elections of district heads 9 Law 22/1999 also provides a
foundation for
democratic accountability at the village level, which7 See
Hariadi Kartodihardjo, "Policies on Decentralized could have
important implications for natural resourceForest Administration in
Indonesia and Their utilization, but full examination of village
levelImplementation," 1999. Dinas, of course, had lesser governance
of natural resource use is beyond the scopefunctions and resources
than the kanwil all along. of this chapter. Articles 93-111 provide
two bases for8 The two natural resource and environment INPRES,
recognition of adat or long-established systems offor Regreening
and Replanting, date from the 1970s; the resource utilization,
which could support delineation ofProtected Areas and Environmental
Impact community resource use rights under subsequentManagement
INPRES, date from 1997. See Indonesia - legislation. The two bases
are genuine elections ofEnvironment and Natural Resource Management
in a village heads and a village council, and regional powersTime
of Transition, Ch. 5, "Environmental over natural resource
management, which districtsExpenditure." could devolve to
villages.
5
-
f
Box 1: Provincial versus District Goverance Under Law
221999Provinces Districts
* Retain both administrative and autonomous * Expand autonomous
functions, while sheddingfunctions; administrative ones;
* Governors are nominated and elected by the * Mayor/bupati are
nominated and elected by theprovincial DPRD, subject to President's
district DPRD, without outside approval;approval; * District
services are expanded to include 11
* The only mandatory provincial functions are mandatory
functionsa and all other functions notcross-district matters, plus
whatever functions reserved to the centerb or uploaded to theare
"uploaded" by districts or deconcentrated provinces.by the
center.
aThe 11 mandatory functions for districts are public works,
health, education and culture, agriculture,communication, industry
and trade, capital investment, environment, land, cooperatives and
manpoweraffairs. gee Law 22/1999, Article 11.2.b The 12 central
functions are international policies, defense and security,
judicature, monetary and fiscalauthority, and religion, as well as
national planning and macro national development control, financial
balancefund, state administration and state economic institutional
systems, human resources development, naturalresources utilization,
strategic high technology, conservation and national
standardization. See Law 22/1999,Articles 7.1, 7.2.
districts, and maintenance of environmental event of failure by
district or provincialconservation is assigned to the "regions"
authorities to maintain national minimum(again presumably both
districts and standards, but these provisions requireprovinces).' 0
For an overview of the strengthening; andallocation of functions
across levels ofgovernment under the main implementing * that the
new framework lacks transitionregulation to date, Government
Regulation arrangements, particularly with regard to(PP) 25/2000 on
Government Authority and the role of the provinces.Provincial
Authority as an AutonomousRegion, see Table 2. Safeguards and
integrated natural
resource management. The core elements ofThis evolving framework
for regional environmental safeguards are a set ofgovernance of
natural resource utilization national minimum standards and aand
environmental management raises transparent, consultative
environmentalthree practical implementation issues: assessment
(AMDAL) process. Under
national minimum standards, no province* that uncertain and/or
uneven application or district can legislate standards that are
of Law 22 and Law 25 of 1999 could result less demanding than
the national standards,in a de facto abandonment of though they may
enact stricter standards.environmental safeguards; Government
Regulation (PP) 25/2000
reserves national environmental standard-* that the new legal
framework provides for setting for pollution, conservation and
adjudication and recentralization in the natural resource
utilization to the center,and provides that provincial
standardsmust be based on national standards.
10 See Law 22/1999, Articles 7.1, 7.2, 10.1 and 11.2.
6
-
Table 2. Allocation of Natural Resource and Environmental
Management FunctionsUnder Government Regulation 25/2000, by
Sector
Sector Government Authority"1 Autonomous Regional Authority
Comments/Issues(province as 'autonomous"region) ...22
Forestry > determines forest areas, and > oversees
cross-district forests, Under PP 25/2000, MoFrchanges of status and
including: remains the most centralizedfunction; * granting
cross-district permits for of the natural resource sectors.
> manages and grants permits forest product use and The
center retains twofor management of manufacturing; operational
roles -conservation and protected * participating in Government's
determination of forest areasareas; determination of cross-district
and changes in status and
> sets criteria and standards for: forest areas and changes
of status functions, and conservation* forest management; and
function, together with and protected area* establishment of forest
districts; management. Another MoFr
exploitation areas, policy initiative, Perumisasi,conservation
areas; > manages setting and security of would maintain central
control
* tariff of business permit- forest boundaries; and of existing
forest concessionholders' contribution for areas. Perumisasi calls
forforest use, reforestation > supervises forest rehabilitation,
upgrading parastatal Inhutanifunds; reclamation, & choice of
forest companies to state
* business licenses for use of silviculture method. enterprises
(Perum), whichforest areas, forest products, would take over
existing forestenvironmental services. concession leases.
Mining > sets business work area > grants core business
permits Implies that district grants corecriteria; (exploration and
exploitation business permits for within-
> sets general mineral permits) for cross-district general
district general mining,exploration and processing mining.
regardless of scale of miningstandards. activity. Issue: need to
match
level of government engagedin negotiation of permit toscale of
mining activity.
Environ- > sets standards/guidelines for > sets
enviromnental quality Implies that district reviewsment pollution,
conservation, standards based on national AMDAL of
within-district
control of natural resources standards; activities. Issue: this
isand preservation of > reviews AMDAL of activities inconsistent
with the 1997environmental functions; covering more than one
district. AMDAL Regulation, which
> reviews AMDAL of activities devolves within-provincewith
potentially broad social AMDAL review to Provincialimpacts,
covering more than AMDAL Commnissionsone province and having
(KODAM), but not any lower
I security implications. than the provincial level.Spatial >
derives national spatial plan > determines provincial spatial
Issue: focus on district spatialPlanning from district spatial
plans. plans based on mutual plans could conflict with
agreement between provinces forestry article under PPand
districts. 25/2000 (Article 2.4c), which
vests authority to determineforest boundaries and changesof
status and function withGovernment
1" Government Authority is implementable either at the center or
by the province as an administrative function andextension of the
center (deconcentration).12 Authority of the province as an
autonomous region is distinct from administrative authority (per
ft. 5), and isimplemented by the regional head, DPRD and dinas
(devolution).
7
-
Table 2. ContinuedLand > Determines: > Local Land Office
(Dinas BPN proposes to retain
a requirements for issuance of Pertanahan): provincial kanwils
asland rights, land reform and * issues land tenure certificates
extension of central authority.National Cadastral on demand and in
"systematic" District kandeps to be mergedFramework; registration
campaigns; with dinas. Major reform of
* land administration * issues land acquisition and land
administration is astandards; development location permits priority
of current Gol
* land service cost guidelines; in accordance with local master
leadership, as land was a> manages "national lands," plans;
major factor in the corrupt
including government sites * supports local spatial planning,
activities of previous Gol.and facilities, national parks *
coordinates with land and Proposals for new landand preserves,
military building tax (PBB) office to legislation and majorlands
and forests; and prepare integrated cadaster; regulatory reform are
under
> develops oversight/ and active discussion. Bank
hassupervision system for * coordinates with local forestry
assisted in drafting policyperformance of office for uniform de...
of all discussion papers and reformdecentralized land offices.
lands in local govermnent area. options with the Land
Administration Project -Part C(Loan 3792-ND).
Regarding the AMDAL (environmental officials (see "Transition
arrangements andassessment) process, PP 25/2000 assigns the role of
the provinces" and Figure 1environmental safeguards review of
below). The resources of provincial capitalactivities that have
broad social impacts, cities and towns (universities,
laboratories,security implications and/or cover more NGOs,
constituencies for sustainablethan one province to the center. This
is resource use, more developed governmentconsistent with the
current AMDAL agencies) could be used as training
groundsRegulation, which places national-level to develop AMDAL
skills and proceduresenvironmental assessment review under a for
subsequent devolution to the districts.single Central AMDAL
Commissionmanaged by BAPEDAL. PP 25/2000 The variable allocation of
responsibilityfurther specifies that provinces will conduct for
natural resource utilization under PPAMDAL review of activities
covering more 25/2000 is demonstrated by the forestry andthan one
district. As the district is the mining sectors, which have
proposed quitedefault level to which authority is different
allocations of functions amongtransferred under Law 22, this
implies that levels of government. Such variation coulddistricts
will conduct AMDAL review of make cross-sectoral coordination
amongactivities within their boundaries. natural resource sectors,
safeguards andHowever, the current AMDAL Regulation spatial
planning at district and provincialdevolves within-province
environmental levels extremely difficultsafeguards review to
Provincial AMDALCommissions (KODAM), but no lower. In the forestry
sector, PP 25/2000 does
not devolve two primary functions -As a transitional measure,
AMDAL determination of forest areas and changes in
review of within-district activities could be their status and
function (includingconducted at the provincial level, as part of
conversion), nor does it devolvea larger provincial training effort
for district management of various conservation and
8
-
protected areas. It places these functions, as mining
operations, often can no longerwell as policy and standard setting,
under support the local population, and they leavedirect control of
the center, and assigns the area. Numerous examples of
suchcross-district functions, e.g. granting some dying towns can be
found in the miningcross-district permits, to the provinces. This
districts of West Virginia and Pennsylvania inallocation of most
planning and the United States. To avoid the adverseimplementation
functions to central and environmental effects of the
unequalprovincial levels under PP 25/2000 appears negotiating
position of a districtconsistent with the new Law 41/1999 on
government relative to a medium- or large-Basic Forestry. However,
while the Forestry scale company, the scale of proposed miningLaw
assigns the provinces a relatively activities should be a factor in
allocation ofsignificant role, Law 22/1999 casts the regulatory
authority among levels ofprovinces mainly as bystanders in the
government, with small-scale mriningdecentralization process.
regulated at the district level, and medium-
and large-scale mining regulated at higherIn contrast, in the
case of general levels. However, local government and
mining,'3 PP 25/2000 assigns standard- and communities should be
consulted andcriteria-setting functions to the center and
participate in government oversight ofcross-district matters to the
provinces. All mining activities, regardless of which levelother
operations, regardless of scale, are of government has lead
responsibility.implicitly devolved to the district. WhereasMoFr's
centralized approach appears to be Adjudication and
recentralization. Lawbased on Article 7.2 of Law 22/1999, which
22/1999 and PP 25/2000 provide severalreserves natural resource
utilization to the "checks and balances" to prevent or
correctcenter, this radical decentralization of misallocation of
functions. For example, ageneral mining under PP 25/2000 is pegged
district that will not or cannot implement ato Artide 10.1 of Law
22, which authorizes mandatory function can seek to
"upload,"regions to manage natural resources in their i.e., to
transfer implementing authority toareas, regardless of scale. the
province, and the province may in turn
seek to upload functions it cannot performIn transactions
between rural kabupaten to the center. The President may veto
and large- and medium-scale mining regional regulations and
decisions by headscompanies, the most likely outcome, given of
regions. The Law establishes a Regionalthe districts' limited
technical capacities and Autonomy Advisory Board, chaired and
co-likely absence of environmental chaired by the Ministers of Home
Affairsconstituencies, and the mining companies' and Finance
respectively, to advise theresources and significance to the local
President on fiscal relations and allocationeconomy, is a "company
town" scenario, in of functions between levels ofwhich the district
government, beholden to government.'4
the company for revenues and employment,gives little or no
attention to environmental Good governance in decentralizationand
social impacts of mining operations. requires adjudication and
"recentralization"When local mineral deposits are depleted,
mechanisms such as the Regional Autonomythe local resource base,
which typically Advisory Board. Two international examplessuffers
severe soil degradation during
14 See Law 22/1999, Articles 115-116 and Government13 All mining
other than oil and gas. Regulation 25/2000, Article 4.
9
-
of central governments retaining and using The structure of the
Regional Autonomythe recentralization option are relevant. In
Advisory Board established under Law 22the United States, the
federal government and PP 25 - its multi-level membership,delegates
environmental management including Ministries of Home Affairs,
Financeresponsibility to the states, contingent on the and other
concerned ministries, the Regionalstates' performance. Enforcement
of national Government Association (presumably bothminimum
standards may be delegated to district and provincial levels)
andstates, but not below the state level. State representatives of
regional legislaturesenvironment agencies must monitor and
(district and provincial DPRDs) - is sound.report to the US
Environmental Protection 'However, several additional provisions
areAgency (USEPA), and USEPA can rescind needed, to strengthen the
Board'sdelegation of functions for poor performance. adjudication
and recentralization roles, bothIf delegation is rescinded,
functions are in general and relative to natural resource
andordinarily taken over by one of USEPA's ten environmental
management in particular.regional offices, which are
deconcentratedbranches of USEPA, similar to Indonesia's * First,
the Board should monitor regionalBAPEDAL Regional. governments'
performance of decentralized
functions systematically and proactively,In Korea, the
recentralization option has instead of waiting for appeals from
regional
allowed the Ministry of Environment (MoE) governments. Such
appeals are likely to beto withdraw authority that was prematurely
infrequent, because governments rarelydelegated to regional
environmental agencies, give up functions and accompanyingthen
redelegate once local capacity improved. budget voluntarily, even
when theirMoE originally delegated broad air and water performance
is poor.pollution control functions to six regionalenvironmental
agencies, which were new and * Second, a cross-sectoral Natural
Resourcelacked experience, in 1986. In 1992, a toxic Council should
advise the Board on mattersspill in the Nakdong River, upstream of
related to natural resource management andKorea's third largest
city, drew national environmental safeguards at district
andattention to the regional agencies' weak provincial levels.
Given the Board's broadtechnical and coordinating capacities, and
mandate across all sectors, it will requireMoE recentralized many
previously specialist advice. The Natural Resourcedelegated
functions. Meanwhile, regional Council, comprised of government
agenciesand local environment offices worked to with natural
resource mandates (Forestry,build local capacity. Two years later,
when a Agriculture, Mining and Energy,second major spill occurred
at the same Environment, River Basin Agencies) atlocation on the
Nakdong River, MoE central and regional levels, plus NGOs
anddetermined that regional capacity had other stakeholders, would
assess regionalsubstantially improved, and re-delegated the
performance of natural resource andfunctions that had been
withdrawn at the environmental management functionstime of the
first spill. An important lesson of against national minimum
standards,Korea's experience is that transfer of consult with
regional stakeholders, andresponsibilities should be contingent on
provide technical inputs to the Board'sperformance, and
recentralization pending submissions to the President. The
Boardimprovement of regional capacity should and Council should
include informedalways remain an option. members of civil society
who are expert in
10
-
natural resource and environmental agencies) would be used as
trainingmanagement. grounds to produce both skilled
manpower and procedures that wouldThird, local communities at
both subsequently be devolved to the districts.provincial and
district levels should have Provincial agencies would be
responsiblestanding to submit appeals to the Board for providing
safeguards training towhen regional performance of district
officials. Secondment of districtdecentralized functions, including
natural officials to the provinces for trainingresource utilization
and environmental would be a condition for transfer ofmanagement,
is inadequate. If failure to authority to the districts.comply with
national minimum standardsis confirmed, recentralization should be
* During the third stage, district officials,an option. assisted by
provincial agencies, would
pilot integrated district planning,Transition arrangements and
the role of permitting, environmental safeguards and
the provinces. While the goal of the new monitoring of
within-district and small-legal framework - to devolve management
scale activities at the district level. Theseof most government
services to the districts temporary measures would satisfy both- is
clear, implementation mechanisms and the objectives of Law 22/1999
andtransition arrangements remain to be practical requirements for
successfulidentified. To reduce confusion in the early
decentralization. Authority in the naturalphases of
decentralization and minimize the resource and environment sectors
wouldneed for recentralization, devolution could be fully
decentralized when the Regionalproceed in stages. (See Figure 1
Strategy for Autonomy Advisory Board certifies that
aDecentralization of National Resource district has developed
adequate capacitySectors with Environmental Safeguards.) to handle
full decentralization.
* During the first stage, concerned Implementing regulations
could helpprovincial agencies (BAPEDALDA, clarify expectations
under Law 22/1999 andBAPPEDA, forestry, mining and other PP 25/2000
by establishing a notionalnatural resource agencies) would receive
schedule for staged decentralization over aintensive safeguards
skills training, 3-5 year transition period. However,
givenincluding training of trainers.15 inherent disparities in the
regions' local
capacities, natural and human resource* During the second stage,
district agencies, endowments, commitment to
anticipating eventual devolution of decentralization, and
ability to generateauthority for natural resource utilization own
revenues, uniform decentralizationand environmental management,
would across regions and across sectors is highlysecond district
environmental and natural unlikely. Assigning differentiated
authorityresource staff to interim district offices at to
subnational governments based onthe provincial level (magang),
where the regional political will, technical capacity,resources of
provincial capital cities population, resource endowment and
the(universities, laboratories, NGOs, like can alleviate the
pressure of having toconstituencies for sustainable resource
implement a country-wide uniformuse, more developed government
decentralization program for natural
resource utilization and environmental
15 See Figure 1 and Sections 3 and 6. safeguards. Under the
umbrela of
11
-
asymmetric decentralization, the pace and resource exploitation
in the forestry, miningsequencing of decentralization in the and
fisheries sectors, in order to generatenatural resource and
environment sectors local revenues. As the district head iscan be
tailored to local capacity, elected by and financially accountable
to theconstituencies and needs, while remaining DPRD, these
incentives are likely to provewithin the parameters of the notional
compelling for bupatis in revenue-starvedtransition schedule. rural
districts. In a context of poor
implementation of current laws, incompleteRegional Finance. Law
25/1999 on the national standards, underfunding of
Fiscal Balance Between the Central environmental services and
limited localGovernment and the Regions defines regional capacity,
the increased pressures on localfinancing mechanisms and
accountabilities resources resulting from reliance onfor the
restructured regions. Provincial and resource-based balance funds
are unlikelydistrict financing mechanisms differ to "rationalize"
use of natural resources.significantly under Law 25. While they may
fill district coffers, they are
unlikely to produce "win-win" results inAs autonomous regions
with terms of sustainable use of the local
decentralized authority, districts have their resource base.own
budgets (APBD). The districts' sourcesof revenue include: a) own
(locally The structure and environmentalgenerated) taxes, levies
and region-owned implications of regional finances under
Lawenterprises; b) "balance fund" allocations 25/1999 differ
significantly at the provincialfrom the State Budget (APBN), which
are level. The provinces' three principal sourcesshared between
districts and the center, and of revenue include: a) own revenues,
chief ofinclude the General Allocation and Special which is the
motor vehicle tax; b) allocationsAllocation; c) regional loans; and
d) other from the APBN via the sectoral ministries,legal revenues.
During the 1990s, districts which comprise a "deconcentration
budget";typically generated only a fifth of their total c) shares
of oil and gas revenues collected bybudgets, and depended on
sectoral and the center and remitted to the provinces; andINPRES
funds from the State for most of d) the General Allocation.
However, oil andtheir budgets. Under Law 25, INPRES and gas
revenues are significant revenue sourcessectoral allocations from
the APBN will be for the four main oil and gas-producingreplaced by
the General Allocation, Special provinces only (Riau, Aceh, East
KalimantanAllocation and other "balance funds." Two and Irian).
Most provinces will dependof the three types of balance funds are
land mainly on sectoral allocations from theand natural resource
revenues collected by ministries, for which the governor isthe
center - that is, taxes on land, property accountable to the
mninistries, and the Generaland transfer of land and property
rights, Allocation. Under these circumstances, theand shares of
forestry, mining, fisheries and governor's opportunities and
incentives toReforestation Fund revenues (see Table 3). generate
provincial revenues by acceleratingThe only balance fund not based
on land or exploitation of natural resources will beresource
revenues is the General Allocation. limited relative to the
compelling incentives
at the district level.The introduction of resource-based
balancefunds creates perverse incentives for Existing natural
resource chargesdistricts to accelerate or, more passively, beyond
the ones cited in Law 25 indudecondone land conversion and natural
park entrance fees, which are collected by
12
-
the center, and irrigation water use fees, positive ways, and
financing environmentalwhich are collected by provincial public
services. Districts have recentlyworks agencies. The Directorate
General of experimented with auctioning use rights toNature
Conservation (PKA) is conducting high-value forest products, such
as birds'experiments in revenue sharing with local nests, but the
results of these experimentscommunities and/or local government as
a have not been entirely satisfactory in termsmeans of improving
the sustainability of of sustainability.protected areas located
near ruralpopulations. These and other experiments Charges for
BAPEDALDAs' AMDALwith revenue sharing in buffer zones and review
and environmental monitoringprotected areas should be encouraged.
services could help recover costs at districtPotential
resource-based charges should be and provincial levels. Local
environmentevaluated in terms of their effectiveness in agencies in
New Zealand have had quitegenerating local employment and revenues,
positive experience with such charges.influencing behavior in
environmentally
Table 3. Distribution of Revenues between Center and Regions
Under Law 25/1999(percentage of revenue allocated b level of
government)
Type of shared fund Revenue instrument Center Regions
Region's share of natural Land & property tax 10*
90**resource-related revenues
Tax on acquisition of land & 20* 80**building rights
Natural resources: 20 80**forestry, mining, fisheries
Oil 85 15***
Gas 70 30***General allocation provinces 10
districts 90Specific allocation Reforestation 60 40****
*shared among all districts;'remitted to districts of
origin***remitted to provinces;****remitted to producer area
13
-
Figure 1. Strategy for Decentralization of Natural Resource
Sectors with Environmental Safeguards
Role of Provinces and Districts
Building Blocks Role of The Center Phase One Phase Two Phase
Three
SpatialSafeguards Districts second Districts Planning
Decentralization should be Concemed natural resources training
for BAPEDALDA, conductimDementedlization shouldbeagencies (MoFr,
MME, MoA, provincial natural safeguards andimplemented MoMEx and
BAPEDAL) BAPEDALDAs resource and integrated Monitoring
&asymmetrically provide: natural BAPPEDA staff planning and
enforcement
*training of trainers resource (magang) to permitting _otraining
to provincial agencies and provinces for pilots,
assistedcounterparts BAPPEDA safeguards by staff of AMDAL
Decentralization support *tedinical support to NRC __ training
concernedgrants to provinces and '\provincialdistricts that cormmit
to \TRACK ON0 agenciesi__
build: Technical Capacity/
~~~~~~~~~~~~~~~~~~~~Adequate*technical capacity
~~~~~~~~~~~~~~~~~~~~~~~~~Environmental
senvironmental Ministry of Home AfairDistrict civil Distrcts
Safeguardsconstituencies g and the Ministry of Finance BAPEDALDAs
society leaders conduct
Restabllsh the survey opinion join provincial
constituencyRegional Autonomyleaders on constituency building
and
Advisory Board natural building accountability aldecadvises
President on resources and training and pilots assisted
resource
Strengthen checks & l l all sectors environmental
accountabihty by provincial permittingbalances in the legal *
adjudicates knowledge, pilots constituercyframework by
establishing. decentralization and re- attitudes and members
proactv Regional centralization disputes actions Reporting
oneproactive Regional l I\ compliance with lAutonomy Advisory Board
national minimum*Natural Resources Council InrTRACK TWO
tionaliniudsm
Constituency Buildin standards
Local CommunityMinistry of Home Affairs, s identify provincial
environmentalMoFr, MME, MoA, and constituencyMoMEx establish the *
provincial constituencies assist districts
Natural Resources Council* advises Board on regional ave
standing to appeal poor regional
safeguards and natural resource and environmentalenvironmental
management performanceperformance
* consults with local l_l_lcommunities and NGOs
-
Vesting local property rights in pollution control than do their
national-resources such as forests and fisheries can level
counterparts. Under thesecreate positive incentives to offset the
circumstances, the strategy guidingperverse ones cited above, as
well as a local technical capacity building forrevenue base, but
the ongoing national decentralization of environmentalforestry and
land policy dialogues are likely safeguards and natural resource
utilizationto be long and difficult.'6 There is significant needs
to:risk that by the time these dialogues producenew,
consensus-based local property rights, * define clearly the skill
requirements of thelocal resource bases may be severely safeguards
services the provincial anddamaged or even exhausted. district
environment agencies are expected
to deliver; andOther proposed policy instruments
currently under discussion include a * articulate the
sustainability criteria thatperformance bond for production forest
need to be mainstreamed into theconcessionaires and a reclamation
bond for operations of the line agencies whose "biglarge-scale
mining activities. However, even ticket" decisions most affect
theif significant authority and oversight of sustainability of the
local resource base andmining are devolved to the district level,
as local pollution levels. Environmentalimplied in PP 25/2000, it
is important that sustainability has to be part of thesedistrict
leaders understand that the bonds agencies' decentralization
calculus.must be held in trust until expiration of theconcession or
mine closure, and cannot be The core environment agencies. There
areconsidered sources of local revenue. three levels of regional
BAPEDAL. The first,
the 27 provincial BAPEDALDA (BAPEDALIn the short to medium term,
districts Daerah) are under the "regional
and provinces will probably have to rely on
governmentY/"autonomous" side of thethe center to pay for regional
environmental provincial organization structure.17 Like
theservices, at least in part, through earmarked dinas
(bureaucratic departments of thegrants. To attract higher-level
financing for regional government), they report to thethese
services, regional officials and governor, and are not directly
orenvironmental constituencies will need to hierarchically related
to MLH or BAPEDAL atlearn to track environmental expenditures, the
center. In most provinces, small, low-justify them in terms of
results, and lobby for level provincial Environment Bureaus
(Birothem (see Section 5, Regional Environmental Lingkungan Hidup,
BLH), in place since theExpenditure). 1980s, were upgraded in
1997-98 to form
BAPEDALDAs, which have higher-echelon3. TECHNICAL CAPACITY
managers and more direct access to the
governor than did the BLH. Some of theAt provincial and district
levels, the largest provincial BAPEDALDA have as
fledgling environmental agencies will no many as 50 staff.more
control decisions on "big ticket" Second are the district
BAPEDALDAs,natural resource management issues and which report
directly to the mayor or bupati.
16For background on the forestry dialogue, see 17See the
description of the previous regionalIndonesia - Environment and
Natural Resource governance framework and organization of
theManagement in a Time of Transition, Ch. 2, "Forest provinces
under the new framework in Section 2, theResources." Legal
Framework and Standards, above.
15
-
District BLH, established in the 1990s, are capacities need
further strengthening at thecurrently being upgraded by the
Ministry of provincial level, and safeguards skills suchHome
Affairs into district BAPEDALDAs, as these should be a top capacity
buildingone by one. The larger municipal priority. As noted above,
safeguardsBAPEDALDAs typically have over 30 staff. experience is
even more scarce at the districtRural districts, particularly in
low population level, where BAPEDALDAs still lack aareas, are
likely to be among the last regions formal AMDAL review mandate
under theestablishing BAPEDALDAs. existing AMDAL Regulation.
The third type of regional BAPEDAL are Some regional staff have
receivedthe four BAPEDAL Regional (previously training in
monitoring methods, and in overknown as BAPEDAL Wilayah), which are
half the provinces, BAPEDALDAs havedeconcentrated branches of
BAPEDAL, gained industrial effluent monitoringlocated in Riau,
Bali, South Sulawesi and experience through participation
inJakarta. Like the regional offices of the BAPEDAL's PROPER
Prokasih industrialUSEPA, each BAPEDAL Regional has water pollution
control program. However,oversight over a set of provinces.
However, training in compliance and enforcementthe nature of the
BAPEDAL Regionals' skills such as inspection methods has
beenoversight and technical assistance functions limited mainly to
central BAPEDAL staff inremains to be defined. Jakarta.
Safeguards services the district and Establishing technical
credibility withprovincial BAPEDALDA are expected to the regulated
community is an issue fordeliver include an improved AMDAL regional
BAPEDALs at all three levels. Inprocess, improved monitoring of
Semarang, for example, industrial plantcompliance with national
minimum managers surveyed in 1998 generallystandards, and
enforcement services. The agreed that municipal Industry and
Tradeskill requirements will need to be clearly Office staff had
better technical skills anddefined, relative to level of government
and were better able to advise on pollutionthe mix of environmental
issues arising in prevention and mitigation than municipalspecific
localities. BAPEDALDA staff. The latter, they said,
tended to visit plants in response toAt all three levels,
regional BAPEDAL complaints from the community only, to
staff generally have university degrees in raise mainly legal
issues and to quicklynon-technical subjects.18 Most, if not all,
reach the limits of their technical knowledgestaff at all levels
have received advanced in discussions with plant managers.19
AMDAL training. As provincialBAPEDALDAs have had the mandate to
For BAPEDALDAs in resource-rich, lowmanage cross-sectoral
Provincial AMDAL population areas and rural kabupaten,Commissions
for only three years, not all where priority environmental issues
areprovinces have fully operational AMDAL mainly in the natural
resource sectors, theConmmissions. Hands-on AMDAL review technical
credibility challenge will be evenexperience and implementation
monitoring more acute. Given that BAPEDAL's
18 Regional BAPEDAL staff with biology or natural 19 See Jean
Aden, "A Rapid Appraisal of Industrialresource-related training are
few, and engineers are Pollution Abatement in Semarang, Indonesia:
Issueseven more rare. and Opportunities," 1998.
16
-
mandate and experience have focused center. In MIME, the
Environment andmainly on industrial and urban pollution to
Technology Bureau (Biro Lingkungandate, both BAPEDAL and the
regional Teknik) under the Secretary General's officeBAPEDALs at
all levels lack knowledge and in Jakarta, in cooperation with
donors, hasexperience in applying safeguards in the conducted
environmental training, mainlynatural resource sectors. The recent
for center staff, but including staff fromestablishment of
BAPEDALDAs in the twelve provincial kanwil as well.
MME'sresource-rich, low population provinces Mining Inspectorate
under the Directorate-and rural kabupaten poses a strategic General
of Mining (DGM), also in Jakarta, ishuman resource development
issue for responsible for incorporatingregional BAPEDALs - to what
extent environmental criteria into oversight ofshould BAPEDALDAs
develop specialized mining sites and mine closure. In MoFr,
theknowledge of environmental aspects of the Directorate General in
which sustainablenatural resource sectors, and to what extent
forest utilization practices is concentrated,should such knowledge
be outsourced? If the Directorate General of Naturethe outsourcing
option is chosen, without Conservation (PKA), operates
separatelydeveloping sufficient in-house expertise to from other
directorates general, and doesoversee natural resource safeguards,
not offer enviromnental training.regional BAPEDALs' technical
credibilitycould be seriously compromised. Progress in
mainstreaming
environmental knowledge and goodIn the 1990s, BAPEDAL developed
a practices in the line agencies has been slow
large stock of training materials, which have and uneven. A
brief review ofbeen underutilized to date. Development of
mainstreaming issues in the mining sectora capacity building
strategy that uses these can provide a glimpse of the
technicalavailable materials and develops additional challenges
facing the natural resource linetraining materials in the natural
resource agencies as they decentralize.sectors should be a top
priority. Throughtraining of trainers, the center should Under the
two parallel structures ofconsider mobilizing the BAPEDAL Regional
regional governance inherited from theand provincial BAPEDALDAs to
deliver New Order, regional governments have hadtraining to the
districts. two distinct agencies with responsibility for
mining: Kantor Wilayah (Kanwil)Natural resource and other
agencies. To Pertambangan, the representative of central
mainstream safeguards and best practices government (MME) in
each province; andinto their operations, the natural resource Dinas
Pertambangan, the correspondingline agencies will need
sector-specific department of provincial and districtworking
knowledge of national minimnum governrnents. Dinas Pertambangan
reportsstandards, AMDAL preparation, types of to the governor or
the district head (bupati)expected environmental impacts, and and
thus is indirectly under the Ministry ofprevention and mitigation
options in their Home Affairs. Each agency has differentsectors.
Efforts to mainstream responsibilities. Kanwil Pertambangan
hasenvironmental assessment review in the been responsible for
mining in categoriesmajor development agencies date from the "A"
(gold, uranium) and "B" (coal, oil, gas).1980s. Several ministries,
including MME Contracts in these categories have beenand the
Ministry of Industry, have managed almost entirely by MME
Jakarta,established environmental units at the ordinarily with
little or no consultation with
17
-
regional planners, mnining, or environmental communicate and
coordinate regarding theservices.20 Dinas Pertambangan is results
of the draft feasibility study and draftresponsible for mining in
category "C", ANDAL. As a result, the final feasibilitywhich
includes sand, gravel, marble, and study and the final ANDAL may
contradictsmall gold mines, and has permitting each other, even to
the extent that theauthority for these activities at the local
ANDAL could recommend against issuancelevel. Typically, the
coordination between of a permit which has already been
approved.kanwil and dinas has been very poor.Whether kanwil and/or
kandep and dinas A second disconnect, which foHlowswill be merged
in the course of from the first, is the poor
integrationdecentralization is not yet clear. What is between the
ANDAL and oversight ofclear is that mainstreaming in the regions
mining activities by the Directorate ofwill be subject to
substantial inefficiencies, Technical Mining, and the frequent lack
ofunless coordination improves. follow-up on the implementation of
the
environmental management andPersistent "disconnects" in
mainstreaming monitoring plans (RKL and RPL) that are
efforts at the center offer cautionary lessons attached to the
approved ANDAL. Thesefor mainstreaming in the regions. The failures
to communicate and coordinatedisconnect between the feasibility
study and must be recognized and addressed at thethe AMDAL under
MME's project approval regional level, if the regions are to grasp
theprocess is a case in point. The permitting greatest short- to
medium-term opportunityprocess requires preparation of a
feasibility of the decentralization process, which isstudy and
(depending on size and type of integration of planning, permitting,
andmine) an ANDAL,21 which are to be reviewed environmental
safeguards at district andtogether. However, a mining feasibility
study provincial levels.is often already submitted to DGM
andapproved before the related ANDAL is Another persistent
cross-sectoral issuebegun. The interaction between the preparers at
the national level - the endemic andof the ANDAL and the
feasibility study that highly problematic conflict betweenshould
lead to sound recommendations on between protection or production
forestryenvironmental management does not occur. and mining as
prospective uses of the sameMoreover, the two studies are not
examined tract of land - is also a priority concern atby the same
reviewer - the feasibility study is the regional level. Many mining
locationsapproved by the Director General of Mining, are pinjam
pakai (loaned for use) from thewhereas the ANDAL is approved by the
Ministry of Forestry (MoFr). AgreementsSecretary General after
review by the MME between the ministries specify that pinjamAMDAL
Commission, with the Environment pakai land should be returned to
MoFr in theand Technology Bureau providing the same state in which
it was received.technical analysis. The Director General and
However, a long-standing Presidentialthe Secretary General often
fail to Decree gives mining priority over all other
land uses, and a recent inter-mninisterial20 decree regarding
small-scale mining fails toThe single exception is small-scale gold
mining,gieMFavocinteprtigpoeswhich is under jurisdiction of the
Dinas give MoFr a voice m the permittig processPertambangan for
small-scale mining. Citing the decree for2 1 An ANDAL is a detailed
environmental impact small-scale mining, the provincial
Forestryreport, which is required for larger, more complex Service
of South Sulawesi recently issued 14projects, and is not to be
confused with AMDAL, theenvironmental impact assessment process.
rnining exploitation permits in a
18
-
geologically unique karst area of South and uncertainties
surroundingSulawesi that is under protective forest
decentralization, which have given rise tostatus. Given cases such
as this and the new claims by local communities overrudimentary
state of reclamation plans and resource use rights and revenues
from miningtheir implementation, the requirement that projects.
Additional factors include powerfulland "borrowed" for mining
should be interests' support for substantial ASMreturned in its
original state lacks operations, and a general sympathy
forcredibility. Another participant in the anyone trying to survive
the crisis. Underregions' efforts to resolve cross-sectoral these
conditions, it is unlikely that the end ofconflict should be the
Regional Planning the crisis will bring a decline in ASM.Agencies
(BAPPEDA) at provincial and Instead, ASM activities seem likely to
increasedistrict levels. The BAPPEDAs have the over the medium
term.mapping and overlay skills that are key todevelopment of
integrated planning, While small-scale mining may
increasepermitting, environmental safeguards and rural incomes in
the short term, increasedmonitoring practices at both levels. The
reliance on mining relative to agricultureBAPPEDAs have already
conducted combined with significant environmentalprovincial joint
planning exercises - called damage during the mining phase may
havepaduserasi - with MoFr in the 1990s, but lasting impact on the
potential for a morepending forestry reforms, paduserasi has
balanced rural development in mined-overproduced limited results.
To facilitate areas. Better practices and available,integrated
regional planning, managed by affordable technologies can greatly
reducethe BAPPEDAs, forestry reform is critical. mercury use and
health impacts in the case
of artisanal gold mining, and several donorThe most urgent
environmental challenge assistance initiatives are being considered
to
for regional mining agencies under reduce or eliminate mercury
use in golddecentralization is likely to be artisanal and
processing in Indonesia.small-scale mining (ASM). Although
regionalDinas Pertambangan already had permitting The recent entry
of mining issues intoauthority over Category "C" mining the
national environmental agenda and theactivities, including
small-scale gold mining, pressing need to address the health
risksprior to the current decentralization, they are associated
with ASM offer an opportunityunprepared to address the exponential
to make the mining sector a model forgrowth of small-scale mining
that has sustainable decentralization of authorityaccompanied the
economic crisis. Small-scale and responsibility in the natural
resourceminers typically take no environmental sectors, with
adequate environmentalprecautions. The environmental damage
safeguards. Using past capacity buildingassociated with ASM,
including initiatives as a foundation, MME'ssedimentation of water
bodies, mercury environmental units at the center shouldpollution
and total lack of land reclamation proactively train trainers in
environmentalafter closure, is well known. However, with safeguards
and best practices at thethe exception of approximately 400 legal
provincial level. Partnerships withtraditional small-scale mining
sites BAPEDAL to disseminate environmentaldesignated by DGM, ASM is
essentially safeguards and with health agencies andunregulated. The
inaction of the Dinas NGOs to spread knowledge of the
healthPertambangan is partly due to larger issues - and
occupational risks of mining to thespecifically, the sweeping
political changes
19
-
district level and below should be actively mineral deposits.
And, as noted above, thepursued. new fiscal arrangements under Law
25 could
create perverse incentives for regional leaders4. ENVIRONMENTAL
CONSTITUENCIES to accelerate natural resource use in order toAND
ACCOUNTABILrrY generate regional revenues. On the other
hand, experience has shown that urban areas,Whether
decentralization delivers positive with their institutional
infrastructure
environmental outcomes or causes lasting (universities,
laboratories, NGO branches,damage to regional resources will depend
not relatively well-trained officials and politicalonly on the
legal framework and regional leaders with a broader world view)
aretechnical capacity, but on what regional ordinarily the earliest
incubators ofleaders and their constituencies know, think
environmental constituencies. If emergingand do to influence
natural resource environmental constituencies are present
atutilization in their regions. In countries all off Java, they
would likely be found in thearound the world, emergence of capital
cities of the largest provinces.environmental constituencies armed
withknowledge of environmental cause and effect, Constituency
survey. To provide anwell-articulated pro-enviromnental a