- Global investors have joined local activists in raising concerns about the potential impact of environmental deregulation measures contained in a new law passed by Indonesia’s parliament.
- Among the many criticisms of the so-called omnibus law on job creation is that it restricts the public’s ability to consult on or challenge projects that may cause environmental and social harm.
- Provisions in the law also open the door for increased deforestation, which is the main driver of Indonesia’s greenhouse gas emissions.
- Activists say the law, ostensibly aimed at attracting foreign investment into Indonesia, is likely to draw investors who have little regard for environmental protection.
JAKARTA — The Indonesian government is trying to downplay the potential environmental fallout from a recently passed slate of deregulation, prompting criticism from experts.
Foreign investors have joined domestic groups — ranging from labor unions to university students to religious conservatives — in flagging concerns about the so-called omnibus law on job creation that parliament passed on Oct. 5. In a recent letter to the Indonesian government, a group that includes 35 global investors, managing a combined $4.1 trillion in assets, expressed worries that the new legislation will have damaging consequences for the environment.
“Specifically, we fear that proposed changes to the permitting framework, environmental compliance monitoring, public consultation and sanctioning systems will have severe environmental, human rights and labor-related repercussions that introduce significant uncertainty and could impact the attractiveness of Indonesian markets,” the investors wrote in the letter. “We recognize Indonesia’s progress in protecting tropical forests in recent years, yet the proposed legislation could hamper these efforts.”
Among their concerns is that the rollback of environmental protections might lead to greater deforestation, which is the main driver of Indonesia’s greenhouse gas emissions, and in turn jeopardize global efforts to mitigate climate change as called for under the Paris climate agreement.
“Failure to achieve the goals of the Paris Agreement poses a very real threat to the future stability and health of economies and society,” the investors wrote. “Cutting emissions from land use change is key to meeting these goals and while Indonesia can play a pivotal role in this field it is currently at risk of failing to do so, threatening the success of the agreement as a whole.”
Besides the 35 global investors, other foreign institutions such as global law firm Baker McKenzie, credit ratings agency Moody’s Investors Service and the International Monetary Fund have also raised concerns over the weakening of environmental protections in the omnibus law.
The government has responded through letters sent via the Ministry of Foreign Affairs and the Ministry of Environment and Forestry, which sought to play down the fears.
“The concerns can be understood but [they’re] baseless,” Deputy Foreign Minister Mahendra Siregar wrote in one of the letters.
In the other letter, Environment and Forestry Minister Siti Nurbaya Bakar reiterated the government’s commitment in contributing to the global fight against climate change and touted its achievements in reducing deforestation and forest fires.
But the omnibus law, with its raft of incentives for the coal industry and heavy deference to similar policies in the recently amended mining law, is far from being climate-friendly, according to the Indonesian Center for Environmental Law (ICEL). Among other things, the omnibus law exempts coal companies from paying royalties if they develop downstream facilities, such as coal-fired power plants, to add value to their commodity. Burning coal accounted for 58% of Indonesia’s electricity generation in 2017, and dozens of new plants are expected to come online over the next several years.
“There’s a concern that this will derail efforts to increase the percentage of renewable energy,” ICEL climate justice division head Grita Anindarini said.
Another provision in the new law that threatens to exacerbate emissions is the scrapping of a requirement for all regions to maintain a minimum 30% of their watershed and/or island area as forest area. Grita said this might encourage even greater deforestation.
“We know that land use, land use change, and forestry are the biggest contributors of emissions in Indonesia, around 40%,” Grita said. “Yet our environmental safeguards are being weakened. We are concerned that these are not in line with our commitments to reduce our emissions.”
Muhamad Ramdan Andri Gunawan Wibisana, an environmental law professor at the University of Indonesia, said the omnibus law also makes it harder for affected communities and NGOs to mount challenges to projects that pollute the environment and exacerbate climate change, such as coal plants, in court.
He cited a lawsuit in a long-running standoff filed by residents of Celukan Bawang, Bali, where a large coal plant is planned for construction. The lawsuit hinged on complaints that the local government, in issuing an environmental permit to the developer, failed to obtain the free, prior and informed consent of the affected communities, and also failed to include detailed assessments on the impact of the expansion on the environment, the health of residents, their livelihoods, and on climate change.
A court ultimately rejected the lawsuit, but Andri pointed out that other communities facing similar issues may never even have a chance to go to court under the provisions of the omnibus law.
“If lawsuits like that keep happening, I’m certain there will be a tendency among judges to approve them,” he said. “With this omnibus law, there might be no more lawsuits. Our concern is that these extractive activities, including coal power plants, can run without having to worry that there’s going to be a public lawsuit. As long as there’s an environmental impact assessment, it’s enough” for the project to persist, regardless of the quality of the assessment, he added.
Less public participation
Another contentious point in the omnibus law is the weakening of the environmental impact assessment process, known by its Indonesian acronym Amdal.
In their letter, the 35 global investors appeared to reference this by citing provisions in the omnibus law that might prevent effective consultation and limit the capacity of affected communities and other stakeholders to provide feedback on proposed projects.
The prevailing environmental law guarantees public participation in the Amdal process, with community members and civil society having a chance to weigh in. But the omnibus law, which trumps existing statutes, limits the participatory process to only those who will be directly impacted.
Environment Minister Siti said this limitation is “based on findings that the interests of directly impacted local communities have often been diluted by indirect outside interests.”
Firman Soebagyo, a lawmaker in parliament’s legislative committee which passed the law, echoed the reasoning. He said that while public involvement is important, criticism from those not directly affected, such as NGOs, should be limited if they “aren’t in line with national interests.”
“There are groups of people who prioritize the interests of foreign NGOs,” he said. “This is dangerous. There are some NGOs that criticize [government programs] but they don’t give solutions. We prioritize the state interest, but we can’t do that for others’ interests. This is a state [that] can’t be dictated to by NGOs. There has to be sanction against public participation [that’s not in line with state interests].”
An academic paper that the government submitted to parliament as part of the process of deliberating the omnibus bill spells out this rationale: “Public involvement is perceived by some parties as a factor that hinders investment, and thus there needs to be caution in drafting this article so that public rights are not gone completely.”
Totok Dwi Diantoro, an environmental law professor at Gadjah Mada University, slammed this take, saying an academic paper should be based on science and not assumptions. He said limiting public participation in the Amdal process appeared to be an effort to neutralize it as “an obstacle to investment.”
Grita from ICEL also said the government had failed to back up the statement in the academic paper with a comprehensive study.
“Who are these ‘some parties’? We don’t know either,” she said. “If that’s truly the problem, then there needs to be a thorough study in the academic paper. Will the limitation of public involvement solve the problem? Studies like this are missing.”
Andri from the University of Indonesia said he’s disappointed the government decided to include such a view in the academic paper, effectively appearing to endorse it.
“If I had written that academic paper, I would have said ‘there’s this view, but that’s not true,’” he said. “But the government didn’t argue against that. So in my view, that’s what’s in their mind. How can the government [draft legislation] because they’re suspicious of their people? The academic paper reflects that suspicion. If people are suspicious of their government, that’s normal. But the government being suspicious of their own people? I’m confused.”
Andri said limiting public participation only to those directly affected by a project could be disastrous for the environment and communities. He cited the case of the karst mountains of Kendeng in Central Java province, where a government-backed cement quarry and factory is at the center of one of Indonesia’s most high-profile land conflicts. Farmers in the area challenged the project’s environmental permit in court, saying they knew nothing of the project’s impact assessment until heavy machinery appeared at the site.
And it wasn’t until activists explained to them how the project would threaten the water supplies that hundreds of thousands of people depend on in the area that the farmers became aware of the risks posed by the project.
Andri said this is an example of how communities are often not properly informed and thus might not realize the environmental risks of a project until it’s too late. It also shows the crucial role of environmental activists in closing that information gap by advocating for communities, he added. In the case of Kendeng, the farmers’ lawsuit was supported by the country’s largest green group, the Indonesian Forum for the Environment (Walhi).
“We know that many Indonesian people are not well-informed in the environment sector,” Andri said. “It’s only when there’s advocacy or they’re accompanied [by NGOs] that they realize ‘oh, this [project] is actually dangerous.’ That’s what happened in Kendeng. They only read the Amdal [document] after other people had explained to them that this is actually dangerous.”
Totok questioned what would happen if a case like Kendeng happened in the future now that public participation had been limited by the omnibus law.
“Cases like that are very likely to happen again, and maybe when they do, there won’t be any room to object to or question the projects as early as possible,” he said.
No more Amdal commission
Minister Siti said the omnibus law would improve the quality of the Amdal process, with the central government being more involved in it. Amdal reviews are currently carried out by local governments, but under the omnibus law, the government will establish assessment teams consisting of officials from the central and provincial governments, as well as certified experts.
“Taken together, the broadened assessment team and standardized evaluations of Amdals introduced in the omnibus law should yield better quality results,” Siti said.
ICEL’s Grita, however, said the quality of Amdal reviews would actually decline because the public would no longer be involved in the process. Under the current environmental law, Amdal assessments are made by commissions whose members include affected communities, environmental experts, and activists, among others.
The omnibus law makes no accommodation for these groups in the new Amdal assessment teams.
“Public participation plays a very important role in the Amdal process, that’s actually the spirit of the Amdal,” Grita said. “When they are replaced by certified experts, can we guarantee that these experts can represent what’s truly felt by the affected communities?”
The omnibus law also scraps the public’s right to file objections against Amdal assessments once approved. Andri called this a massive setback, given that in the past, the public were able to participate in the entire Amdal process as well as challenge any that were approved.
“The omnibus law limits public participation only in the drafting process,” he said. “When the Amdal documents are to be reviewed by the assessment team, the public can no longer take part, and when the documents are issued, they can’t file an objection.”
Legal challenges ruled out
It’s not just in the Amdal process where avenues for legal recourse have been curtailed by the omnibus law. Prior to the passage of the law, environmental permits issued on the basis of Amdal approvals could also be challenged. These permits were themselves a prerequisite for the issuance of business permits.
But the omnibus law scraps the need for environmental permits altogether, despite widespread criticism from academics, and replaces it with an approval process based on developers’ self-declarations of compliance, called environmental approval.
This effectively eliminates any opportunity for the public to challenge environmental permits in court, which in the past has successfully been used to revoke business permits and stop a project. The omnibus law allows no mechanism for the public to challenge an environmental approval, even if the approved project can be demonstrated to cause ecological and social harm.
Siti said getting rid of environmental permits would make it easier for affected communities to challenge a project by allowing them to directly go after the project’s business permit. Previously, a project whose environmental permit was revoked could still continue as long as its business permit was valid, Siti said, and only by having its business permit revoked could a project be stopped.
“That argument is totally wrong,” Andri said. “It’s clearly stated that if an environmental permit is revoked, then the business permit is cancelled. Article 40 [of the environmental law] clearly states that.”
Totok from Gadjah Mada University also questioned the minister’s rationale, saying that communities opposing a project have frequently challenged the business permit directly without waiting for the environmental permit to be revoked.
Now that the opportunity to challenge a project has been limited to challenging only its business permit, affected communities might find it more difficult to prove that a project’s business permit is unlawful, according to Andri.
“The requirements are limited,” he said, noting that the omnibus law doesn’t specify that a project’s business permit may be revoked for violating disaster mitigation statues, for example. “It’s not clear and there will be many debates in interpreting this stipulation.”
In most cases, projects that have obtained business permits also have the necessary paperwork, including Amdal documents. From an administrative standpoint, therefore, they’re not in violation of any law, according to Andri. However, it’s precisely in the quality of those documents where communities have successfully challenged problematic projects, as in the case of the cement factory in Kendeng. In that instance, the Supreme Court ruled in favor of the farmers’ petition that the Amdal process was mired in irregularities and failed to involve affected communities.
The omnibus law makes wins like this virtually impossible by scrapping the opportunity to challenge the Amdal and doing away with environmental permits, Andri said. The omnibus law, he said, creates uncertainty where it should have brought clarity.
Attracting dirty investments
With all these changes in the omnibus law, it makes sense for global investors to be worried, according to ICEL executive director Raynaldo G. Sembiring.
He said companies seeking to make environmentally responsible investments look for the guarantee and availability of access to information, access to participation, and access to justice, including access to court processes, as stipulated in the 10th principle of the United Nations’ Rio Declaration on Environment and Development in 1992.
“Foreign investors who have their own safeguards, their own domestic regulations that are quite strong, must have these aspects, which if we see in the current omnibus law, are reduced, and some of them are scrapped,” Raynaldo told Mongabay. “So it makes a lot of sense when there are concerns over environmental impact [from the omnibus law].”
If even one of the three aspects, such as access to participation, isn’t implemented properly, there can be no guarantee of responsible environmental management, he added.
“Everywhere, we’re talking about access to participation,” Raynaldo said. “Especially in developed countries, access to justice and information is something that’s common.”
Bhima Yudhistira Adhinegara, an economist at the Institute for Development of Economics and Finance (INDEF), said the investors who wrote to the Indonesian government were the same ones who also sent letters to the Brazilian government in June this year to express their concerns over rising deforestation rates and forest fires in the Amazon.
“They also protested against [Brazilian President Jair] Bolsonaro,” Bhima said. “It means if they also filed protests to the Indonesian government, then our quality is the same as Bolsonaro’s in Brazil in terms of the environment.”
The omnibus law’s weakening of the three environmental guarantees of access to information, participation and justice might open up the country to unbridled exploitation by less scrupulous investors, Grita said.
“If we look at statements from economists, they are actually worried that [the omnibus law] will attract as much investments as possible,” she said. “Some economists said we can’t invite all investors, we have to choose which investments we’d like to invite to Indonesia. The problem is that the safeguards that initially could screen investors are being relaxed.”
Bhima said this would potentially attract investors who have little regard for environmental protection, at a time when other governments around the world are looking to draw environmentally responsible investments, such as in renewable energy, in a bid to recover from the economic slump caused by the response to the COVID-19 pandemic.
“It’s not really true that the omnibus law will fail to attract investment to Indonesia,” Bhima said. “There will be investors, but they’ll be dirty investors. Investors who have higher environmental standards will not like investing in Indonesia because they will face pushback not just in Indonesia, but back in their home countries.”
A campaign to kill environmental safeguards
Raynaldo from ICEL said efforts by the administration of President Joko Widodo to weaken environmental safeguards began in 2016, two years after taking office, when the government issued a regulation on waste-to-energy plants that allowed projects to proceed without environmental permits. That regulation was revoked in 2017 after it was challenged by a number of environmental groups, including ICEL.
Since then, the government has issued a number of regulations that have weakened various other environmental safeguards, including downgrading the importance of zoning plans, environmental permits and environmental impact assessments, according to Raynaldo.
Under a 2017 regulation, for instance, zoning plans that designate protected forest and coastal areas can be altered to accommodate projects deemed of “national strategic importance.” A regulation the following year, ostensibly to streamline the process for issuing permits, allows a project to start before an environmental impact assessment has been carried out, as long as the project developer commits to filing the necessary paperwork within 30 days.
In 2019, the government raised plans to scrap the Amdal requirement altogether, saying that environmental impact assessments slowed down the issuance of permits. That proposed change ultimately didn’t make it into the omnibus law.
“So from 2018 until 2020, the environment hasn’t been a priority,” Raynaldo said. “Is the president carrying out sustainable development? It doesn’t seem like it, as shown by these regulations.”
He pointed to Widodo’s own remarks during an interview earlier this year with the BBC, in which the president said his priority was to boost economic growth, and that “maybe after that [developing the economy], then the environment [will be my priority], innovation and then human rights. Why not?”
“So environment isn’t a priority,” Raynaldo said. “Even though it’s been said that these can’t be sidelined. Human rights, social and environmental issues, they’re all one package with the economy.”
He added that the deregulation push that culminated with the passage of the omnibus law is a worrying trend, and points to sustained efforts to further hack away at environmental protections.
“This omnibus law is a major problem, but it’s also become a trigger for other [efforts], and our energy as the public will be depleted in criticizing these efforts,” Raynaldo said. “That’s why I see this as a time for us to put out as much criticism as possible and voice our protests as loudly as possible.
“This is a huge problem, so don’t let this happen over and over again as there’s a potential for this to be replicated [in the future]. There could be other omnibus laws in the form of government regulations or other laws.”
Banner image: A labour union in Indonesia protesting with flags and posters that read “TOLAK OMNIBUS LAW” meaning “REJECT THE OMNIBUS LAW,” a term widely used among protesters. Image courtesy of Monitor Civicus/Wikimedia Commons.
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