The need to sustain economic growth and further improve living standards in a resource-constrained environment is the key challenge facing the world in the next few decades. Resource-rich countries such as Indonesia will face specific challenges to reconcile required changes in land-use and energy intensity, while maintaining economic growth, meeting the demands of an ever-larger population and lifting thousands of people out of poverty.
The solution to this dilemma is increasingly sought in sustainable (or “green”) growth. This economic approach recognises the value of natural capital ( alongside other standard drivers of GDP) as a key element of economic competitiveness, and promotes long-term economic growth that will be both environmentally sustainable and socially inclusive. Indonesia has an opportunity to be among the leaders in this approach, and President Susilo Bambang Yudhoyono’s commitment to a “pro-growth, pro-job, pro-environment and pro-poor” agenda, along with a pledge to maintain economic growth of 7% per year while reducing emissions by 26% below business-as-usual estimates for 2020 (or 41% with appropriate international support), encapsulate the key messages of the new approach.
Delivering sustainable growth is not, however, a job for government alone. Business must play its part. The approach brings risks and opportunities – investment in clean technology and renewable energy sources such as geothermal or micro-hydro power could give the country an opportunity to follow China’s impressive growth trajectory. Delay, however, will carry significant costs as a failure to invest in clean technology now will simply result in Indonesia needing to buy more from others later. Scale matters too. As time goes by, damage caused by climate changes, water scarcity and deforestation will increase, making it more costly to alter policies and practices in subsequent years.
Business has a critical role to play in determining the path Indonesia takes. It can provide both the technological and financial resources needed to make this green economic vision a reality, but to do this it must become proactively involved in policy-making itself.
While some Indonesian companies are not yet convinced about the business case for sustainable growth, others, including members of the Alliance of Low Carbon Business in Indonesia (ALBI), a group of firms focused on the benefits of low carbon development across many sectors, stand ready to make their needs known and play their role in ensuring a prosperous future both in the short and the long term.
The government must play its role in creating the enabling conditions required for an effective public-private collaboration. Indeed, while recent surveys by ALBI on sustainable growth have seen many members of the Indonesian business community supportive of the concept, there continue to be calls for policy improvements, such as greater clarity around government decision-making processes, including responsibilities within and across departments.
Businesspeople also want improved alignment between national and regional government bodies, including joined up policy-making and improved coordination and communication. The increased stability of regulatory frameworks would help eliminate conflicting legislation and enable consistent enforcement. Also beneficial would be pricing structures and incentives conducive to doing sustainable business. This could include minimising up-front investments for capital intensive projects, such as those directed towards geothermal power generation. Finally, the business community would like to see more capacity building to enable people to make knowledge-based decisions.
Given that many of these challenges are already being considered by the government, business must also prepare to take up its own challenge to deliver sustainable growth. After all, it is only as the contributions of and benefits to both parties start to become better understood and the promises made by them start to be delivered that Indonesia can truly begin thinking of itself as a world leader for the new global economy.
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