March 3, 2020

Indonesia’s Omnibus Law to incentivize NDPE companies

JAKARTA ( - Indonesian Environment and Forestry Minister Siti Nurbaya has asserted that the move to enact an omnibus law includes granting a strong legal space to back up NDPE (No Deforestation, No Peat and No Exploitation) policies through the revision of the licensing system in the forestry and environment sector.

In the draft omnibus law, she continued, permits for a forestry and land-based concession will only use a single terminology, that is business permit, thereby providing companies with the leeway for optimizing their business objectives in a sustainable manner. 

For example, she explained, a company whose concession contains areas of good forest cover or peatlands but, due to regulations or an NDPE commitment, has not converted them, can use the areas for other business purposes, such as environmental services including carbon trading. 

“This move will ensure that areas with good forest cover and peatlands are protected as much as possible and receive legal support at a very high level. At the same time, it will offer sources of non-extractive business value for the corporate sector and also make a good contribution to the national economy,” she emphasized.

Minister Nurbaya conveyed these points in a recent legal discussion on the draft omnibus law in late February in Jakarta.

“The legal design is being prepared. The Omnibus Law is aimed at providing economic incentives, as extensively as possible, to companies committed to not developing areas of good forest cover and peatlands because of regulations and their NDPE policies," she explained.

The following photos depict areas of good forest cover consisting of high carbon stock (HCS) forests set aside and protected for almost a decade by Golden Agri-Resources (GAR/Sinarmas Group) in three of its palm oil concessions in West Kalimantan province.

Minister Nurbaya pointed out that through the Omnibus Law move, good forest cover areas or HCS forests - such as those found in the three palm oil concessions shown above - that are not converted into palm oil plantations can be used as alternative sources of business for companies, such as environmental services including carbon-related business initiatives. 

“The legal arrangements involved in the Omnibus Law also cover existing concessions,” she added.  

Carbon pricing

Minister Nurbaya also gave a technical explanation about how clear regulations are required for carbon pricing, given that countries have a mandate of reducing carbon by 29-41%, so that carbon-based business can be calculated and well managed in a systematic and jurisdictional manner. 

Carbon rules, she elaborated, will be subject to a presidential regulation, the process for which is currently under preparation by her ministerial team. 

Another example, according to the minister, is a logging concession (PT MPK) inhabited by more than a thousand Bornean orangutans in West Kalimantan that is also allowed to use the concession - which is still mostly composed of relatively intact peat forests - for environmental services business, including carbon trading. 

The photos below portray most of the PT MPK logging concession which has been acquired by PT IAR. It lies in the Sungai Putri landscape, the land cover of which remains dominated by relatively intact peat forests. 

“In addition to palm oil and logging concessions, pulpwood concessions that have set aside areas for conservation, due to both legal requirements as well as their NDPE policies, are also to be given robust legal room to conduct environmental services business, including carbon trading,” Minister Nurbaya confirmed.

“The granting of strong legal room with this single permit system is expected to add to new job creation as well as expand the corporate sector’s business opportunities in a way that they stay aligned with the objectives of the Omnibus Law,” she affirmed.

Long-term protection of wildlife, biodiversity

Minister Nurbaya said that the government’s legal efforts to provide reinforced legal space, through the Omnibus Law, for members of the corporate sector that have made NDPE policy commitments are aimed at prioritizing sustainability concerns. 

“In getting this strong legal protection, NDPE companies no longer need to hesitate about carrying through with their commitments and can utilize the areas of good forest cover and peatlands that they have set aside as one of their business sources,” she reiterated.

“If this happens, this move will prove very beneficial in the long-term protection of wildlife and biodiversity which is currently spread out in areas that have been and will be protected by these NDPE companies,” Minister Nurbaya said to wrap up her technical briefing.