Indonesia

Indonesia is the world’s largest archipelago comprising of over 17,500 islands, covering an area of about 790 million hectares with over 95,000km of coastlines and a land territory of about 200 million hectares. Indonesia is one of the 17 mega-diverse countries in the world, hosting 17 per cent of the world’s wildlife, such as mammals (515 species) and Palmae (400 species), reptiles (600+ species), birds (1519 species), amphibians (270 species), among others.

Indonesia's islands are home to a high variety of species, including many endemic types. However, the country’s biodiversity is at risk. To turn this around, BIOFIN Indonesia aims to strengthen the national biodiversity financing framework and close the financing gap for the conservation and sustainable use of biological diversity.

Key Results

  • The Policy Institutional Review (PIR) in Indonesia recommended a specialized biodiversity management institution to accelerate biodiversity utilization through research and industrialization, while promoting biodiversity conservation both at national and local levels. The institution should also play a role in managing the proceeds of biodiversity utilization for them to be reinvested for biodiversity management.
  • The Biodiversity Expenditure Review (BER) helped Indonesia track for the first time how resources from public and non-public sources were disbursed and spent on biodiversity. The analysis showed that most biodiversity budget came from the state budget. Biodiversity is still not the priority of the government compared to other sectors.
  • The Finance Needs Assessment (FNA) pioneered in a comprehensive estimate of the financial resources required to achieve Indonesia Biodiversity Strategy and Action Plan (IBSAP). IBSAP set out the biodiversity plans and alignment with national planning instruments, such as the National Medium-term Development Plan (RPJMN), only 8 of the 21 biodiversity national targets set out in the IBSAP were measured.
  • The Biodiversity Finance Plan (BFP) provided a comprehensive list of potential finance solutions (157 instruments) including existing instruments and new opportunities. BFP revealed that public fund mobilization can be more attractive by e.g., using sukuk and ecological fiscal transfer among others.
  • BIOFIN continue working on implementing finance solutions in Indonesia i.e., Unlocking Sukuk for Biodiversity Project Financing and Unlocking Islamic Social Funding for Biodiversity Programs. BIOFIN facilitated development and preparation of sukuk finance project proposal was approved for sukuk finance valued at around $2.7 million and will be constructed in 2021. A sukuk guideline for key line ministries was also developed with Bappenas and Ministry of Finance
  • Working with Baznas has succeeded in facilitating the preparation of programmatic approach to Islamic social fund and impact assessment Zakat Community Development (ZCD) which can identify direction towards SDGs financing opportunities for SDGs 13, 14, and 15.
Finance Solutions

1.     Unlocking Sukuk for Biodiversity Project Financing

Realizing the importance of the sukuk’s project preparation stage, the finance solution intends to institutionalize the process of accessing sukuk financing for biodiversity through provision of technical support to proponents and expanding the work with other interested ministries with biodiversity projects.

2.     Leveraging Faith-based Fund for Biodiversity

This solution intends to expand the work to explore other faith-based fund initiatives such as how much potential fund can be generated and whether the distribution of the fund would include environmental interest such as biodiversity and the way in which such fund be implemented as biodiversity financing.

3.     Ecological Fiscal Transfer

The finance solution intends to support facilitation of ecological fiscal transfer implementation at regional government mainly from the provincial government to the district and/or from the district to village level. Determining environmental/biodiversity criteria is instrumental to operationalize an effective transfer mechanism as well as ensuring the criteria are measurable. This will be mediated through intense policy advocacy and multilevel government’s capacity building.

4.     Institutionalize Result-based Budget Tracking for Biodiversity Expenditure

This solution intends to migrate the ongoing work of biodiversity expenditure assessments from a manual into the online system, with the aim to promote the institutionalization of the biodiversity expenditure into the performance-based budgeting system. This will be done by analyzing biodiversity expenditure classification at the Ministry/Institution while helping the relevant key ministries to implement biodiversity budget tracking through guideline and capacity development for key ministerial staffs. The existing online platform (KRISNA) will be enhanced to include biodiversity budgets.

5.     Debt for Nature Swap

This finance solution intends to promote debt for nature swap (DFNS) solutions for biodiversity conservation in Indonesia. Two models were implemented for DFNS in Indonesia. First, the line ministry implemented a program that is specific to the swap agreement, and second, the swap fund was managed by a fund manager and channeled through a grant-making organization and then solicited the proposal from NGOs/community groups for program implementation in the field. In this situation, the BIOFIN will facilitate the feasibility and option for DFNS implementation as well as capacity building and policy advocacy for government.

6.     National Gap Analysis of Indonesia’s Biodiversity Offset System

The finance solution intends to develop options for biodiversity offsets through understanding the institutional context to help build an enabling environment for offsets. Indonesia currently implements a quasi-offset policy in forestry sector. It is applied when the underground resources, such as minerals and geothermal sources beneath protected forests, need to be extracted. The government can release the use of forest for exploration and extraction with minimal impact. Thus, the project leases the forest and pays compensation to the government as another tax income.

7.     Developing a Financing Plan for Agro-Ecotourism in Bali

This finance solution intends to leverage biodiversity financing from private sector, particularly financial sectors. The solution focuses on facilitating village readiness and capacity building for agro/marine ecotourism. It also seek finance option with Financial Service Authority (OJK) guidance and implement them with finance institutions. Matching village projects with financial institutions will be followed by guideline development.

Key Documents
Policy and Institutional Review (PIR)

In this PIR process, the roles of Government institutions in financing and utilization of conservation areas mapped out. In terms of policy, threats to biodiversity still require supporting laws and regulations. Policy analysis reveals laws and regulations that have a negative impact on biodiversity and laws and regulations needed to support biodiversity conservation. Considering policy and institutional context in Indonesia, following are the key recommendation for biodiversity conservation and sustainable use of natural resources:

  • Use policy mix and proactive measures;

  • Synchronize of various biodiversity policies and institutions to ensure effective and efficient implementation for biodiversity protection and utilization. 

  • Appropriate special management institution for biodiversity conservation and utilization at national level and endorsed by government regulation