Business Case
Summary Sheet
Title:
Forestry, Land-use and Governance in Indonesia
Project Purpose:
To reduce greenhouse gas emissions and deforestation in Indonesia as part
of the UK’s efforts to avoid catastrophic climate change that would hit the
very poorest first and set back global efforts at poverty reduction.
£32.5m
Country/ Region: Indonesia
Senior Responsible Owner: Tom Owen-Edmunds1 (Head of UKCCU)
Start Date:
End Date:
Project Code: 204623
April 2015
March 2018
Programme Value:
1
Tom Owen-Edmunds assumed the role of SRO of the programme in February 2015. This Business Case was
written by Mark George, the previous SRO.
1
Intervention Summary (2 Pages)
What support will the UK provide?1. DFID will provide £32.5m from financial year2015/16 to financial
year 2017/18 to an Indonesia Forestry Land-use and Governance (FLAG) programme that will support
action to reduce the rate of deforestation and peat land degradation in Indonesia. It will make a
significant contribution to the Government of Indonesia’s ambitious greenhouse gas emission reduction
targets and contribute directly to the UK’s own ambitions for supporting developing countries to reduce
greenhouse gas emissions.
2. This business case was developed following Ministerial approval in October 2014 to continue a
forestry-related programme in Indonesia. It builds on a Concept Note that was submitted to the
International Climate Fund (ICF) in March 2014 which, after consideration alongside all other bids from
DFID, DECC and DEFRA, was given a “green” approval.
What are the main programme activities?
3. The programme’s main activities will be the provision of technical assistance to a range of partners
including government, communities, civil society and the private sector. Specifically it will:
 Improve information systems, accountability and transparency on land licencing decisions that
protect and promote the rights of forest-dependent people, particularly women, in Indonesia. This
will address a number of the key governance failures that are contributing to unsustainable
deforestation and address the problem that government does not always adequately take into
account the views of those holding indigenous rights to forests, particularly women.
 Improve the land-use planning process and licencing of forested areas in at least three of
Indonesia’s largest forested provinces. It will have a specific focus on Papua Province, where
effective land-use planning will help preserve at least 90% of the 32m ha of standing natural
forest over the next 18 years.
 Support the development of sustainable and responsible business, particularly in palm oil, that
promote alternative approaches to large scale deforestation and deliver stronger benefits to
forest-dependent communities - women will be a particular target for business support.
4. The programme will be carefully monitored internally by the DFID team based in the British Embassy
in Jakarta. In addition there will be a discrete monitoring, evidence generation, lesson learning and
dissemination component that will ensure wider influence is obtained from the proposed programme not
only in Indonesia but also for the benefit of other countries where DFID works on forestry issues. Sex
disaggregated data of all beneficiaries will be collected at the national and sub-national level and the
programme will ensure that at least 50% of all support will be delivered to women.
Why is UK support required?
5. Forests are a vital natural resource. They support the livelihoods of hundreds of millions of people who
live in or next to them, or work in forest-related sectors. As well as timber and other forest products, they
provide watershed protection, flood management, landslide prevention, climate mitigation, recreation,
eco-tourism, and other economically valuable services. Between 2000 and 2010, the world lost on
average 13 million hectares (gross) of forest each year to deforestation, as a result of the clearing of
forests and subsequent conversion of land to other uses, most commonly agriculture.2
6. Indonesia is a top-5 global emitter of greenhouse gases. Deforestation is currently responsible for
85% of these emissions. Despite high level commitments to reduce emissions, the Government of
Indonesia (GoI) is facing difficulties in meeting these. Indeed, deforestation has begun to show an
upwards trend – independent estimates suggest Indonesia lost 2m hectares of forest in 2012.3
Indonesia’s communities, private sector, civil society and government need international support to
transform performance.
7. There are huge stores of carbon locked into tropical forests and even greater quantities in tropical
peatland (of which Indonesia has 70% of the world’s total). When forests and peatland are logged or
2
3
Better Growth, Better Climate, Global Commission Climate Economy Report, September 2014.
Margono et al. 2014. Primary forest cover loss in Indonesia over 2000–2012. Nature Climate Change.
2
degraded, this carbon is released into the atmosphere. The UK, and the world’s, ambitions for limiting
the growth of greenhouse gas emissions will be severely challenged if countries such as Indonesia do
not substantially reduce deforestation and the conversion of peatlands. This is recognised specifically by
HMG in its recently launched strategy to achieve a global climate change deal in 2015.4 Continued
emission of greenhouse gases will cause further warming and long-lasting changes in all components of
the climate system, increasing the likelihood of severe, pervasive and irreversible impacts for people and
ecosystems. Limiting climate change needs substantial and sustained reductions in greenhouse gas
emissions which, together with adaptation, can limit climate change risks.5
8. The UK is already responding through innovative global funds supported by the International Climate
Fund (ICF) that have activities in Indonesia, but these are not enough. Indonesia is a huge country (the
fourth most populous in the world) and it needs on-the ground bilateral support in its decentralised
forested provinces to make real change. Since 2011, DFID has been delivering such a bilateral
programme through a cross-Whitehall team located in the British Embassy. This programme includes
support to forestry and land-use planning. In its recently released Review of the International Climate
Fund (ICF), the Independent Commission for Aid Impact (ICAI) found strong evidence of positive
national impact from this programme.6
What are the expected results?
9. The intended impact of the proposed programme is reduced rates of deforestation and improved
peatland management that lead to reduced greenhouse gas emissions and so supports the UK’s global
efforts to avoid catastrophic climate change that would hit the very poorest first and set back global
efforts to reduce poverty. The full economic value of the emissions that would be reduced under this
programme would be over £250m.The intended outcome is the sustainable management of forests and
land-use in Indonesia that improves the livelihoods and security of forest communities. The specific
results that will be delivered by the programme by March 2018 are:
 at least 42,000 ha of avoided deforestation;
 £60m of leveraged private sector finance to support responsible and sustainable business;
 16,000 forest-based individuals (at least 50% who will be women) supported to hold decision
makers to account when they issue land licences and concessions in forest areas; and
 improved sustainability standards for oil-palm from Indonesia (the world’s largest exporter).
10. These results will directly contribute to the aggregate targets set by DFID for the ICF (particularly in
forestry when results are lagging). Further results will also continue to be generated beyond the end of
the proposed programme. The proposed programme will be independently verified at regular intervals
under a discrete monitoring component. The planned interventions in this business case have been
judged to represent good value for money, but if impacts are considerably below expectations, they will
be scaled-down or abandoned and resources redeployed.
How does the project fit with the Operational Plan?
11. This programme will be the centre piece of DFID bilateral support to forestry in Indonesia. It is
consistent with the current Operational Plan and with the UK’s ICF which has a major focus on forests,
with an earmarked allocation of 20% of total resources for this purpose. The programme will also
contribute to all five pillars of DFID’s new Economic Development Strategic Framework. Through
strengthening property rights and the rule of law, the programme also delivers directly on the ‘Golden
Thread’ for development by helping to build open economies and open societies.
What are the key risks to the success of the programme?
12. Government buy-in is crucial: if GoI’s high-level commitments to reduce emissions and control
deforestation are abandoned, this would undermine the programme. A global economic downturn would
put more pressure on natural resource extraction. Conflict in programme sites and target areas would
undermine results – this is a risk in all forest communities particularly in Papua Province. Finally there is
a risk that women will be excluded in decision making in programme activities which would generate
sub-optimal results and undermine the long-term effectiveness of DFID investments. Ways to manage
these risks have been developed in the programme plan.
4
HMG - Securing Our Prosperity Through a Global Climate Change Agreement, September 2014.
Intergovernmental Panel on Climate Change Fifth Assessment Synthesis Report, November 2014.
6
Independent Commission for Aid Impact’s review of the International Climate Fund, December 2014.
5
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Strategic Case
THE CONTEXT
GLOBAL PICTURE
13. HMG’s most recent strategy document on climate change, “HMG - Securing Our Prosperity Through
a Global Climate Change Agreement” was published in September 2014. It noted that:



the recent assessment from the Inter-Governmental Panel on Climate Change (IPCC)
demonstrates the overwhelming scientific evidence that climate change is happening and that it
is extremely likely that man-made emissions of greenhouse gases (GHGs) are the dominant
cause;
without significant and sustained global action, climate change poses great risks to human
health, global food security, and economic development; and
we cannot undo the warming from past emissions but we can control the levels of future warming
in the decades to come.
14. DFID’s Secretary of State, in her speech in New York in October 2014 noted that:



climate change is one of the most urgent and pressing challenges that we face. Without action in
the coming decades the world will get hungrier, poorer and more dangerous. It will be the very
poorest who will be hit first and hardest by climate change;
not only is deforestation the second largest source of greenhouse gas emissions, more than the
entire global transport sector, it is a disaster for the 1 billion plus people who depend on forests
for food, fuel and for a living; and
that DFID is making reducing carbon emissions, reducing the impact of climate change and
tackling deforestation a core part of our business.
INDONESIA CONTEXT
Why is Indonesia important?
15. Indonesia is the world’s fourth most populous country (242m), a continent-sized archipelago of
17,000 islands spanning more than 5000 km from East to West. It is the third largest democracy in the
world, the biggest economy in SE Asia; and a Lower-Middle Income Country (average per capita income
in 2014 equal to around $4000). It has the sixth largest number of people living in poverty.7
16. Indonesia is the world’s 5th largest emitter of greenhouse gases with estimated greenhouse gas
emissions of 2 Gigatonnes CO2e in 2005 accounting for 4.5% of global totals. Over 85% of Indonesia’s
current emissions come from deforestation or land-use change.8 Land-use change on Indonesia’s
tropical peat landscapes (which contain huge amounts of carbon – see below) is of particular
significance. If Indonesia does nothing to address its growing emissions and continues on a “business as
usual” trajectory, emissions will grow to 3 Gigatonnes CO2e by 2020.9
17. Indonesia currently has around 90m hectares of standing forest. Over the last decade, there has
been considerable disagreement on actual levels of deforestation in Indonesia – with government figures
differing substantially from other sources. Recent analysis confirms that Indonesia now has the highest
annual deforestation rate in the world overtaking Brazil, losing almost twice as much primary forest
(0.84m ha and 0.46m ha, respectively) despite Brazil having five times the natural forest cover of
Sumner, A. (2012) Where Do the World’s Poor Live? A New Update. IDS Working Paper 393.
Margono, B.A, et al. (2014) Primary Forest Cover loss in Indonesia over 2000-2012. Nature and Climate Change.
4, 730-735
9 DNPI (2010) Indonesia’s greenhouse gas abatement cost curve. National Climate Change Council (DNPI),
Government of Indonesia.
7
8
4
Indonesia.10 Between 2000 and 2012, Indonesia lost more than 6m hectares of primary forest – an
area half the size of England.
18. The Foresight Report (2011) by the UK Government’s Chief Scientist notes that there are strong
environmental grounds for limiting the further conversion of rainforest for agricultural land. Sustainable
intensification of production on existing sites will be essential to meeting needs for increased production
while restraining future expansion of area. Moreover, forestry and peat, in the context of Indonesia’s
current development, are the two land uses with the most potential to deliver and achieve substantial
greenhouse gas emission reductions, as shown in the diagram below. Or, turning this around, the two
land-uses that are driving high emissions in Indonesia.
10
Margono, B.A, et al. (2014) Primary Forest Cover loss in Indonesia over 2000-2012. Nature and Climate Change.
4, 730-735
5
19. Indonesia therefore is globally significant and has great potential to deliver results, but it is also a
very challenging place to realise such results, not least because the drivers of deforestation and
peatland degradation are still powerful.
Government commitment to address emissions
20. In 2009 the former Indonesian President committed to reduce national greenhouse gas emissions by
26% against “business as usual” by 2020 through domestic efforts, and an additional 15% (to 41%) with
international support. The mandate for UK and other donors to support action on climate change in
Indonesia stems from this commitment to deliver additional action with external support.
21. Indonesia has been introducing changes in national, provincial and district legislation and law
enforcement in the forestry sector. It is also directly assisting poor communities through recognition of
their rights to land and forest resources. It has developed a national and sub-national emission reduction
action plan (RAN-GRK and RAD GRK) through the budget to try to deliver the commitment to a 26%
reduction on “business as usual” emissions.11 Indonesia aims to achieve 87% of this goal by reducing
emissions from deforestation and peat land conversion.12 At the same time, Indonesia aims to increase
agricultural production of 15 major crops, including doubling of palm oil by 2020 from 2009 levels as part
of achieving a 7% annual growth of GDP target alongside its climate goals.
22. In order for Indonesia to achieve its growth whilst not impeding its climate goals, Indonesia issued a
moratorium in 2011 on new concessions to convert primary natural forests and peatland to oil palm and
timber plantations as part of an overall partnership with the Government of Norway. In May 2013, the
moratorium was extended for an addition two years.
Indonesia’s new government
23. In October 2014, Indonesia elected a new government under the leadership of President Joko
Widodo. With a strong position on delivering sustainable improvements to livelihoods for poor people,
the new government is in the midst of an important set of reforms that are reshaping the policies and
institutions that are relevant for land-use, forestry and sustainable development. The ambitions for
reductions in emissions remain intact. Following his election, the President made a public commitment to
promoting a sustainable approach to development and its previous international commitments on
emission reductions have been retained.
24. It is still early days, but the prospects for delivering these commitments look positive based on a
number of key new policy announcements and approaches of the new government that better align
Indonesian and UK objectives. For example:

The Ministries of Environment and Forestry have been merged, strengthening jurisdiction
over forested lands. The new Ministry has already signalled a stronger commitment to
sustainability by issuing an enhanced moratorium on deforestation to suspend new licences on
secondary forest and revoking licences already issued for areas of natural forest, together with a
commitment to develop stronger policies on peatland management.13

The creation of a new Ministry of Agrarian Reform and Spatial Planning and the elevation of
the planning agency (Bappenas) to the President’s Office provide a foundation for improving
the implementation of spatial planning. Already, the new ministry has signalled that it wants to:
- grant and protect the rights of indigenous people;
- to integrate spatial planning with the ‘One Map’ initiative;14
- align provincial programmes with national programmes;
GoI (2011) Indonesia’s Guideline for Implementing Green House Gas Emission Reduction Action Plan (RANGRK).
12
DNPI (2010) Indonesia’s Greenhouse Gas Abatement Cost Curve. Indonesia National Climate Change Council.
13
http://www.thejakartapost.com/news/2014/11/28/jokowi-s-move-protect-peatland-praised.html
14
The “One Map” initiative is a cross-sectoral movement towards better natural resource governance through a
single, all-encompassing map of Indonesia that aims to contain all relevant information linked to forest licensing
and land use claims.
11
6
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help address land disputes, overlapping licence issues; and
improve the coherence of planning processes.
25. The passing of Law no 23/2014 to revoke land-licencing at the district level and move it to the
provincial level, not only increases the likelihood of better oversight but also promotes greater adherence
to the spatial plans.
26. In addition, President Joko Widodo’s move to send all the credentials of his ministerial candidates to
the powerful Indonesia Anti-Corruption Commission (KPK) and the Indonesia Anti-Money Laundering
Office (PPATK) shows a strong commitment to bureaucratic reform. This has set a precedent for other
public official selection processes. This was followed by a bureaucratic reform law (Law no. 5/2014) for
the civil service to establish a merit-based bureaucracy and root out poor performance and waste.
27. The new Government has also shown it was not afraid of taking unpopular decisions by reducing the
government fuel subsidy to free-up budget to deliver social objectives and to reduce ballooning budget
and trade deficits.
28. Despite all these very good signs, Indonesia still faces huge challenges in state capability,
accountability and responsiveness, particularly at local government level and in remote areas. Most of
government regulation issued beyond 2010 embrace better stakeholder engagement, yet the skills and
experience in multi-stakeholder approaches are limited and happen mostly at project intervention level.
The importance of forest livelihoods in Indonesia
29. According to the Ministry of Environment and Forestry, approximately 90 million people (40% of
Indonesia’s population) derive their livelihoods or have some dependence upon forests (including
agroforests). Incomes vary, but on average the majority are living on less than US$2 a day. As such,
changes to land-use and rates of deforestation will directly impact the livelihoods of a substantial
proportion of Indonesia’s population – particularly those at the lower end of the income scale.
Sustainable management of land-use change will present opportunities for enhancing income and
improving livelihoods, whilst unsustainable approaches will hold significant threats.
Why is unsustainable deforestation and peatland degradation taking place in Indonesia?
30. There are no straightforward answers to this. There are a range of market and governance failures
that drive unsustainable deforestation and peat land degradation. These are illustrated in Figure 1 and
then explored in more detail below.
7
Why markets are failing
31. The primary market failure affecting forests is the lack of value attached to the many social and
environmental benefits and costs. This distorts markets, affecting purchasing decisions and the
allocation of capital. Forest and agricultural commodities produced in ways that cause deforestation cost
less than they would if the full value of external costs was incorporated in the price. Demand for these
products in turn provides an incentive for further unsustainable investment and further deforestation.
Why governance is weak
32. Poor governance of key sectors such as mining, palm oil, pulp and paper, and timber, have enabled
deforestation and forest degradation in Indonesia to continue at high rates despite high-level
Government commitment to address the problem.
33. Legal and illegal deforestation caused by private companies is enabled by the low technical capacity
amongst government regulatory agencies and law enforcement institutions. Community-based forest
management outside of Java is being piloted by the government, but the schemes have not yet proved
accessible to forest communities due to lengthy bureaucratic procedures.
34. Indonesia has significantly decentralized authority, yet the lack of coordination and control between
levels of government, poor accountability to the public, and high levels of corruption has resulted in the
central government’s inability to effectively slow down deforestation. Internal government accountability
mechanisms are generally weak and whilst civil society pressure for accountability can be effective it
also needs to be significantly strengthened.
Why local planning struggles to secure the high-level commitments made by Indonesia
35. Local planning agencies are often under-resourced, lacking in capacity and operating with unclear
remits. Coordination across local government around natural resource management can be poor and
conflicting. Meanwhile, there is disturbing evidence that potentially destructive exploitation permitted by
the present natural resource licensing regime, directly (mining, logging, plantations and fishing) or
indirectly (road-building), remains insufficiently well-aligned with strategic spatial plans. Rent seeking
amongst local elites is significant and a contributory factor in how land is valued and managed.
8
The challenges of palm oil
36. Indonesia is currently the world’s largest producer of palm oil. Global demand for palm oil doubled
from 2000-12 and prices tripled to more than $930 per tonne across the same points of comparison. The
FAO and OECD forecast that demand will continue to remain strong through to 2020-21, due to growing
population, rising incomes in emerging economies and the increasing use of biofuels. As a result,
production is forecast to rise from 49.3m tonnes in 2011-12 to 65.8m tonnes in 2020-21,15 which could
lead to an additional 8 million hectares of land converted for palm oil.
37. Certification schemes have grown in popularity over the past decade as a mechanism for
encouraging and enforcing the sustainable production and sourcing of key commodities, such as palm
oil, timber, and soy. The Roundtable on Sustainable Palm Oil (RSPO) is the main certification standard
for palm oil, and uses a multi-stakeholder, business-to-business model to encourage the adoption of
sustainable practices by members (particularly producers) and promotes the uptake of certified
sustainable palm oil internationally. Many large companies have adopted the schemes, but further
progress is still required. As of June 2014, 11.2m tonnes of oil palm was RSPO certified comprising
18% of global production of which Indonesia is the largest producer of certified sustainable palm oil
(CSPO) with 5.54 tons.16
38. In 2009, the Government of Indonesia launched the mandatory Indonesian Sustainable Palm Oil
(ISPO) standard based on existing Indonesian legislation. It is designed to ensure that all Indonesian oil
palm growers conform to higher agricultural standards. Standards need to be raised progressively to
improve environmental and social outcomes associated with their use. Whilst markets for oil palm from
non-certified sources are weakening as concerns from zero-deforestation commitment companies
increase, demand for cheap oil palm is increasing from China, India and Indonesia itself.
Problems with peatlands
39. Indonesia has more than two-thirds of the world’s known tropical peatland covering between 15 and
20 million hectares or about 10 percent of the country’s land area and two-thirds of its lowland area.
These peatland ecosystems are covered in tropical peat swamp forest (PSF) but logging, conversion to
acacia and oil palm plantations and other crops, with their associated drainage canals, have led to an
irreversible process of peatland degradation. Once cleared and drained, oxygen enters the peatland
surface and the peat begins to decompose releasing carbon dioxide. This oxidation process, combined
with physical compaction of the peat, causes the land surface to subside with significant long-term
implications for economic production and flood control. Furthermore, the majority of ‘forest fires’ and
associated haze that make international headlines are mainly ‘peat fires’ in peatland areas.17
Why small scale sustainable business struggles in forest communities
40. No access to finance, limited collateral, small-scale, poor infrastructure, low levels of humandevelopment and limited business support services all contrive to create barriers to alternatives to the
business-as-usual development model that has seen large tracts of Indonesia’s forests destroyed in
Sumatra and Kalimantan and replaced with large-scale mono-cropping, resulting in large-scale
emissions and environmental damage.
15
OECD & FAO 92012). OECD-FAO Agricultural Outlook 2013-2022. OECD, Paris, France. [online] Available at:
http://www.oecd.org/site/oecd-faoagriculturaloutlook/
16
Roundtable for Sustainable Palm Oil (RSPO) (2014) RSPO 2014 Impact Report.
http://www.rspo.org/about/impacts
17
Sizer, N., A. Leach, S. Minnemeyer, M. Higgins, F. Stolle, J. Anderson (2014) Preventing Forest Fires in
Indonesia: Focus on Riau Province, Peatland, and Illegal Burning. World Resources Institute.
http://www.wri.org/blog/2014/04/preventing-forest-fires-indonesia-focus-riau-province-peatland-and-illegal-burning
9
Problems arising from land conflict
41. Disputes over land and resources are common throughout Indonesia. State forestry laws and maps
are used to define and claim commercial rights, while indigenous communities claim that customary
(adat) rights give them title over the land that their ancestors have lived on. Land tenure risk 18 is driven
by the weak identification of rights which is largely a result of state-created property rights overlapping
with adat ownership and rights, and ineffective land-use planning (particularly between regional and
central government) that hampers structured spatial economic development. The allocation of
commercial concessions within state forest-lands has compounded this situation by not taking into
account the distribution of local people or their rights. This has led to escalating conflict between
companies and communities. More recently, the land Constitutional Court ruling MK35 (2012) has
validated indigenous peoples’ rights over ‘State Forest Areas’ by, at least on paper, taking such areas
out of government control.
42. Unaccountable decisions to allocate large tracts of forest for conversion to timber plantations and oil
palm have a severe impact on forest-dependent people and the environment. According to the National
Land Bureau (BPN), there are currently some 3,500 land disputes related to palm oil in Indonesia,
including many violent conflicts. A recent World Bank study reported that nearly 25 million ha of
designated forest lands (kawasan hutan), more than 20 percent of the total forest area, and affecting
nearly 20,000 villages (desa) is in conflict due to competing legal claims.19 Land conflict has a damaging
impact on development. Farmers and forest-dependent people face the loss of their livelihoods and
companies risk incurring serious losses. Neither party has the incentive to manage land and resources
sustainably, with a long-term perspective.
43. The conflicts are often violent and costly in every way, and likely to undermine long-term investment
in protecting and managing forests. They may stem from land grabs, boundary disputes, displacement
as a result of man-made or natural disasters, government resettlement policies, climate change or other
factors. The Institute for Policy Analysis of Conflict (IPAC) emphasize that ‘land and resource conflicts
are becoming a major source of lethal violence in Indonesia and there are no good mechanisms for
resolving them’. 20 IPAC defines three types of land conflict that are particularly prominent in Indonesia:
i.
ii.
iii.
local communities are denied access to or otherwise excluded from land by agribusinesses or
extractive industries to which the state has granted concessions;
disputes related to Indonesia’s process of administrative fragmentation by which a group of
sub-districts can petition to become a new district or several districts can petition to form a
new province; and
disputes over land between indigenous peoples and migrants from elsewhere in Indonesia.
44. All of these conflicts are often complicated by multiple and competing groups of farmers, legitimate
and spurious claims, overlapping and contradictory laws, different parts of the government speaking with
different voices, new actors coming into the picture, the involvement of private security forces, poor
dispute resolution mechanisms and corruption. Solutions include the clear mapping of actors and the
evolution of the dispute over time, and then breaking down the issues into component parts that are
more susceptible to short-term negotiated agreements. The skills and processes to do this work are in
short supply and desperately needed across government, industry and civil society.
How are other donors responding?
45. There are a number of other donors supporting the Government of Indonesia in the forestry and
land-use sector. The main donors and their programmes are listed below.
Norway
18
Land tenure risk here is defined as the danger of a dispute between the concession holder and others who
believe they have a legitimate claim to use the land for their own purposes, usually for reasons of traditional usage.
19 World Bank, 2014. Towards Indonesian Land Reforms: Challenges and Opportunities. A Review of the Land
Sector (Forest and Non-forest) in Indonesia, World Bank, Jakarta.
20
http://www.understandingconflict.org/conflict/index/3/Land-and-Resource-Disputes
10
46. In May 2010, Norway and Indonesia concluded a “Letter of Intent” under which Norway pledged to
provide $1 billion in REDD+ assistance in stages, contingent on Indonesia taking a number of policy
steps including instituting a two-year moratorium on forest and peatland conversion; establishing a
REDD+ agency; establishing a credible institution for monitoring, reporting and verifying (MRV)
reductions in GHG emissions; and proposed to establish an acceptable financial intermediary. The
REDD+ Agency was established in 2013 and continues to be the focal point for Norwegian support. After
the general election the Agency was moved to the Ministry of Forestry & Environment.
United States (USAID)
47. USAID’s current FOREST Programme will end in in mid-2015. It has included:



Indonesia Forest and Climate Support (IFACS) US$ 40 million (2010-14)
Sustainable Landscape Partnership – PPP with Conservation International & Walton Foundation
US$ 10 million (2011-16)
University Partnerships: 6 Partnerships with Columbia, Rutgers, Oregon State, Texas A&M and
others Approximately US$ 6 million (2009-15)
48. A new forestry programme will start first/second quarter of 2015 and will focus on the following four
priority areas: (i) forest and land-use governance, policy and advocacy; partnering with the private
sector; community conservation, participation and livelihoods; and protecting key species.
Australia (Department of Foreign Affairs and Trade)
49. The Australian and Indonesian Governments signed a Letter of Intent in November 2008 concerning
cooperation in forestry which primarily focuses on capacity building and verifying the legal origins of the
timber products. The Indonesia–Australia Forest Carbon Partnership (IAFCP) came to an end in June
2014. It supported strategic policy dialogue on climate change, the development of Indonesia's National
Carbon Accounting System, and the trialing of approaches to reducing emissions from deforestation and
forest degradation (REDD+) in Central Kalimantan. A new suite of programmes called the AustraliaIndonesia Partnership for Rural Economic Development (AIP-Rural) is currently out for tender. AIP-Rural
aims to achieve a sustainable 30% increase in the net incomes of 1,000,000 male and female smallholder farmers in eastern Indonesia by 2022. It includes the following programmes:




Promoting Rural Income through Support for Markets in Agriculture (PRISMA)
Tertiary Irrigation Technical Assistance (TIRTA)
Applied Research and Innovation Systems in Agriculture (ARISA)
Strengthening Access to Finance in Rural Agriculture (SAFIRA)
50. These programmes will operate in eastern Indonesia, specifically East Java, West and East Nusa
Tenggara, Papua and West Papua. Australia also funds an $8 million Illegal Logging: Regional Capacity
Building Partnership, which aims to build capacity in the Asia Pacific region to implement timber legality
verification systems. It is unclear how much of these funds are directed towards Indonesia.
Germany
51. The Forests and Climate Change Programme (FORCLIME) is Germany’s main programme dealing
with forestry and land-use in Indonesia. It started in 2009 and is scheduled to run until 2020 with a
budget of EUR 20 million. It comprises five components:
1. National and subnational regulatory framework (advisory services on forestry and climate
policy), including the establishment of a REDD+ mechanism
2. Development of Forest Management Units (FMUs), including the development of three Model
Forest Management Units (FMUs) in Malinau and Berau Districts in East Kalimantan Province
and Kapuas Hulu District in West Kalimantan Province
3. Sustainable forest management in cooperation with the private sector
4. Integration of biodiversity protection and development (Green Economy)
5. Support for training institutions
11
52. In addition, the German Development Bank KfW finances two projects, the Harapan Rainforest
Project (7.575 million EUR) in Sumatra and the 0.878 million EUR project “Securing natural carbon sinks
and habitats in the Heart of Borneo“, implemented by the WWF.
Denmark
53. Danish support to Indonesia takes the form of its US$ 50 million Environmental Support Programme,
which is currently in its third phase running from 2013-17. It comprises three components of which the
third focuses on forestry. This component includes the following five sub-projects:




Danida Support to Harapan Rainforest implemented by Burung Indonesia
Locally Appropriate Mitigation Actions (LAMA) implemented by World Agroforestry Centre
(ICRAF)
REDD+ Support Facility implemented by the World Bank
Support to Indonesia Forest Investment Programme implemented by the World Bank.
54. The Harapan Rainforest Project (HRF) is the first project in Indonesia to be implemented under an
ecosystem restoration license, allowing the management of production forest for restoration rather than
logging. The project aims to restore 100,000ha of dry lowland forest in Sumatra.
World Bank Group
55. The World Bank deploys Climate Investment Funds in Indonesia through the £42m Forest
Investment Programme (FIP). This programme has been through significant gestation, but is expected to
start implementation in 2015/16. A ‘preparation team’ has been in place since February 2014, leading
gap analysis and scoping options for WB led activities on FIP. The focus will be on FMU roll-out,
including institutional capacity building at the Ministry and demonstrating scalability.
56. The World Bank also manages the Improving Governance for Sustainable Indigenous Community
Livelihoods in Forested Areas funded by a US$ 3 million grant provided by the Japan Social
Development Fund. This programme was approved in January 2012 and will run until February 2015.
Other projects that focus on land-use include:
 Sustainable Management of Agricultural Research and Technology Dissemination Project
(SMARTD) funded by a US$80m loan out of a total project cost of US$ 106 million
 Third National Program for Community Empowerment in Rural Areas - Disaster Management
Support funded by a US$ 14.1 million grant.
57.The International Finance Corporation (IFC) currently works with Indonesia’s financial regulators to
mainstream sustainability into the operations of banks and other financiers of investment. This is cofunded between the IFC and Switzerland.
Asia Development Bank
58. The Asia Development Bank (ADB) has over twenty projects in the agriculture, natural resources and
rural development sectors. These include two dedicated forestry programmes:


Community-Focused Investments to Address Deforestation and Forest Degradation worth US$
17 million approved in June 2014. It is a technical assistance programme with the goal of
reducing emissions from deforestation and forest degradation (REDD+) in West Kalimantan.
Sustainable Forest and Biodiversity Management in Borneo is another TA programme that aims
to strengthen the management capacity of GoI on natural resources management.
59. There are also grants in the pipeline for two programmes:
 Community-Focused Investments to Address Deforestation and Forest Degradation
 Sustainable Livelihood Systems for Indigenous Peoples in Indonesian Heart of Borneo.
United Nations (UN)
60. UNDP’s main forestry programme is the Strengthening Community Based Forest and Watershed
Management (SCBFWM) project in partnership with the Ministry of Forestry which concludes this year.
SCBFWM is designed to enhance and scale-up the GoI’s programs on community-based forest and
watershed management, by addressing inequitable distribution of benefits from forest resources and lack
12
of coordination among stakeholders and sectors, as major underlying causes of land and forest
degradation. It covers six watersheds across Sumatra, Java, Sulawesi, Lombok and Timor.
61. In addition UNDP also addresses mangrove degradation through two projects: Mangroves for the
Future (MFF) and Sustainable and Integrated Management of the Mahakam Delta, as well as being the
transitional fund manager for the Indonesia Climate Change Trust Fund (ICCTF).The UN closed down its
US$ 5.6m REDD programme in June 2012. Amongst other objectives this project prepared a REDD+
implementation plan for its pilot project in Central Sulawesi.
62. In September 2014, UNDP and the Ministry of Agriculture announced plans to launch a National
Platform for Sustainable Palm Oil. The platform aims to ensure that plantations are developed in nonconservation areas and will support 3 million smallholders across Indonesia. This is still at an early stage
of development, but it is likely that it will be complementary to the work that FLAG will undertake on palm
oil.
Global Green Growth Institute
63. At UNGA this year the former President of Indonesia was appointed the next Chair of the Council of
Global Green Growth Institute (GGGI). In 2013 a comprehensive programme, the GoI – GGGI Green
Growth Programme was established to provide technical support to both the national-level government
and the sub-national governments of Central Kalimantan and East Kalimantan. The overall goal of the
GoI – GGGI Green Growth Program is to promote green growth in Indonesia that recognizes the value of
natural capital, improves resilience, builds local economies and is inclusive and equitable. The
implementation of this goal is achieved through three components:



Green growth mainstreamed within Indonesia’s economic development planning processes;
REDD+ finance, programmes and policies catalyse green growth in Indonesia, and;
Support to the provincial governments of Central and East Kalimantan to prioritise and implement
green growth activities.
64. The above shows that key donors are active in the sector – but the scale of support required to have
impact in Indonesia (particularly because of the very wide geographical spread of the country), means
that this sector is regarded as relatively under-funded. In the context of relatively weak donor
coordination, an important job for UKCCU will be lead efforts at coordination and support relevant
ministries, particularly the Ministry of Environment and Forestry, to do this. That way, the synergies and
complementarities of the various programmes can be maximised.
THE NEED AND RATIONALE FOR DFID INTERVENTION
65. If the UK did not work in Indonesia on deforestation issues, it would miss the opportunity to work with
a country that could make a very significant impact on global efforts to reduce emissions and therefore
avoid catastrophic climate change.
66. As the Global Commission Climate Economy Report noted, a failure to reduce and halt deforestation
will significantly undermine global efforts to deal with climate change. It concluded that slowing down and
ultimately halting deforestation can be achieved if strong international support is combined with strong
domestic commitment to forest protection and rural income development.21
67. The International Climate Fund (ICF) has specifically earmarked 20% of its budget to work on
forestry in countries like Indonesia. HMG, as part of its global approach to reducing emissions,
recognises that action to reduce, halt and reverse deforestation is an essential part of the overall
strategy required to tackle the growth of emissions.22 The ICF has an ambition to work with international
efforts to see global deforestation rates reduced by 50% by 2020.
68. Indonesia has overtaken Brazil with the highest deforestation rates in the world. Large scale
deforestation is occurring because markets fail to value the many social and environmental benefits
21
22
Better Growth, Better Climate, Global Commission Climate Economy Report, September 2014
HMG - Securing Our Prosperity Through a Global Climate Change Agreement, September 2014
13
which they provide. This also distorts markets, affecting purchasing decisions and the allocation of
capital. Forest and agricultural commodities produced in ways that cause deforestation cost less than
they would if the full value of external costs was incorporated in the price.
69. All of the above suggests that, because of Indonesia’s global significance for forestry and emissions,
working in Indonesia is the right way to target UK climate change spend. Since its inception, the ICF has
identified Indonesia as a priority country for its forestry programmes. The new reformist government
provides a significant opportunity due to the stronger alignment of UK and Indonesian priorities in
the context of mitigating against climate change and the impact on the poor.
The rationale for a dedicated bilateral programme
70. There are a number of global programmes funded by the ICF that are seeking to improve carbon
markets, global governance, and trade and standards in timber, other forest products and agricultural
commodities such as palm oil. All of these programmes are important for making progress in the global
architecture to support more sustainable land-use and reduced deforestation. In addition the ICF,
through the Climate Investment Funds is supporting a global Forest Investment Programme (delivered
by the World Bank) that has important activities in Indonesia that will be delivered by the multilateral
development banks. This investment is set to deliver important results, but in itself will not be sufficient to
address the scale of support needed in Indonesia.
71. A bilateral programme can be justified because DFID now has a track record and strong
relationships stemming from a first phase of ICF support between 2011-2015 and the Multi-stakeholder
Forestry Programme which started in 2000. This ICF support has enabled DFID to continue to
strengthen UK relationships in the Ministry of Forestry and to establish new relationships with other
Ministries and agencies and in Papua Province and other forested provinces. This puts the UK in a
strong position relative to others to influence key players in government and the private sector.
72. Indeed, FLAG represents an opportunity to scale-up and expand an innovative set of activities
supported with the first tranche of funding from the International Climate Fund (ICF) in Indonesia (20112015). The portfolio of live projects implemented by the UK Climate Change Unit (UKCCU) has
established strong proof of concept and built up robust relationships with government and civil society
which are crucial for success in this complex sector. FLAG would allow this forestry and land-use work to
be continued and scaled up.
73. Building on past ICF investment in Indonesia, the most effective focus for future bilateral support
would be on:
Transparency and accountability
 working with sub national governments (provinces and districts), providing technical assistance to
encourage greater consultation and transparency in decision-making, reinforced through
partnerships with national and local NGOs, progressive elements in parliaments, the media and
the private sector, building alliances to foster transparency, consultation and participation in landuse decision making.
Spatial planning and capacity development
 working to increase transparency and accountability in land-use decision-making across a
number of forested provinces by supporting the development and implementation of provincewide Spatial Plans. Spatial plans are a legal requirement and an important tool used by district
and provincial governments to allocate land for development. They can be a tool for reducing
deforestation and empowering local communities, and for negotiating and resolving conflict
between the interested parties.
Mobilising the private sector in support of good governance and sustainable natural resource
management
 continuing and expanding community-based enterprise development in Papua and other
provinces, and increasing private sector incentives and opportunities to implement sustainable
practices in the oil palm and forestry sectors,
14

working with progressive banks to develop safeguards and transparency systems which will help
inform investment choices in natural resources in Indonesia and explore supporting this through
work with the Ministry of Finance and Financial Regulatory Authority on creating better incentives
for sustainable management of natural resources.
IMPACT AND OUTCOME THAT WE EXPECT TO ACHIEVE
74. UK intervention is guided by the ICF strategy, which emphasises doing the right things, in the right
places, in the right ways. It is also guided by the golden thread of conditions that allows countries and
communities to thrive: the rule of law, and the presence of strong property rights and institutions; as well
as support for sustainable economic development and gender equality.
75. For this programme, the impact and outcome we expect to achieve are:
Impact
Outcome
Reduced GHG emissions (supporting the UK global efforts to mitigate against climate
change & impacts on the poor)
The sustainable management of forests and land-use in Indonesia that improves the
livelihoods and security of forest communities
Outputs
76. The outputs to be delivered under the programme would be:
Output 1
Output 2
Output 3
More effective & transparent land-use
Strengthened government and other stakeholder capacity on natural resource
governance
Improved environment for sustainable & responsible business
Results
77. Modelling undertaken to support the appraisal of the programme suggests that the headline results
up to March 2018 would be:
 at least 42,000 ha of avoided deforestation;
 a minimum of £60m leveraged from the private sector into sustainable investment;
 16,000 forest-based individuals (at least 50% whom are women) are supported to hold decision
makers to account; and
 improved sustainability standards for oil-palm exports from Indonesia (the world’s largest
exporter).
78. Other tangible benefits to wildlife, biodiversity and the environmental services that forests provide
would also be generated. In addition, the linkages UK has with key government ministries and local
government means that the demonstration effects of this intervention will have significantly wider and
longer-term impact in other districts and provinces not targeted by the programme.
Reducing gender inequality
79. This programme will comply with the International Development (Gender Equality) Act 2014,
ensuring that programme outcomes contribute towards gender equality as follows:
 sex-disaggregated data will be collected for all interventions;
 sex-disaggregated targets will be established for each component of the project to ensure that
gender dimensions are at the forefront about decisions of who to consult, who to work with, and
who to support;
 specific efforts will be made to target women during programme consultations, creating specific
space, if necessary, to allow their voice to be heard;
 gender mainstreaming in partner institutions - partners will be encouraged to change the
stereotype that gender issues are “soft” and apolitical. Partners will be supported to see the
15


connection between gender and the suffering of women, through the use of gender analysis and
use this to convince policy makers that gender analysis is essential for improving forest and land
management;
the monitoring component of the programme will establish baselines and collect sexdisaggregated data and feedback progress during implementation; and
a particular focus of component to support alternative business development that avoid
deforestation will be to target women entrepreneurs and businesses that offer income earning
and livelihood improvements for women.
The case for funding beyond the current spending round
80. There is a strong case for funding beyond the current spending round because:
 In November 2014, DFID Ministers gave approval to develop a new business case for a
programme from 2015/6 to 2017/8. This business case is the response to that approval and
government counterparts have been informed of this decision;
 current ICF bilateral funding in Indonesia will largely end by mid-2015, without a future
commitment, the DFID team in the embassy would have to be downsized and experienced and
expert programme management and advisory staff (who are in short supply) would be lost;
 current working relationships with Ministries and other stakeholders would be broken until a
future programme was delivered. This gap would damage the UK’s credibility, especially in a year
(2015) when the UK is striving for an ambitious global climate change deal at the UNFCCC.
16
Appraisal Case
INTRODUCTION
81. The design of the programme was conducted by a team of DFID livelihoods, economist and
governance advisers drawn from Indonesia and across DFID’s network of forestry and economic
advisers who have experience of working on forestry programmes.
WHAT EVIDENCE HAS BEEN USED TO PREPARE THE APPRAISAL?
82. Background studies were commissioned on planning, land conflict, peatland management, palm oil
development and a review of current donor activities in the sector. Extensive use was made of
documents generated from current DFID programmes in Indonesia. Discussions were also held with
informants from governments, donors, companies, NGOs and research organisations.
83. Evidence to support the programme is assessed as medium. Strong evidence is available in some
areas, while in other areas it is more limited.
THE PROGRAMME’S THEORY OF CHANGE
84. The following theory of change was developed for the programme.
Strategic case for action
Emissions of greenhouse gases
are causing climate change which
will impact the global poor first
and hardest
Forests and peatlands in
Indonsia contain large amounts
of carbon, but are being
degraded at unsustainable
rates, causing greenhouse
emissions to grow sharply.
Indonesia is a top five emitter,
largely from land-use change
UK ambitions to contain the
growth of emissions, must
include a focus on tropical
forests because the volume of
carbon wrapped up in their
ecosystems is globally significant
85. Unsustainable deforestation is taking place in Indonesia because of the inherent complexity of both
the drivers of deforestation and the search for viable alternatives. Deforestation is being driven by weak
governance, marginalisation of forest communities, weak government capacity at the local level, poor
planning, and limited alternatives to deforestation and palm oil development (See Figure 1 for more
detail). Real change can only take place if any proposed programme has essential components that:
 work with the private sector to improve their supply chains, particularly with smallholders, to
remove and reduce deforestation from these and promote sustainable approaches that increase
yields and incomes. The private sector exports about £6 billion worth of forest products and about
£18 billion worth of crude palm oil from Indonesia annually. Working with the private sector is a
key part of any strategy that is seeking to promote a more sustainable approach to forestry and
important commodities such as palm oil. The private sector are the main economic actors and
their support for reform is vital;
 work with national and local government to promote more effective land licencing to enable
national targets for reducing deforestation and emissions to be realised on the ground;
 work with communities to promote alternatives to deforestation; and
 work with civil society organisations to drive change in improving transparency and accountability
in forestry sector to prevent state revenue loss from forestry-related corruption
17
UK Forests and Land Governance, Indonesia:
ACTIVITIES
INPUTS
UK funding
UKCCU staff and
leadership
Context
High Levels of
Deforestation
Weak Natural
Resource
Governance
Limited
alternatives to
deforestation
New Reformist
Government in
power
New Ministries in
place
ASSUMPTIONS

National oversight
institutions remain
powerful

Civil Society organisations
exist & are able to be
effective

Companies continue to
have an interest in
reporting

Continued economic
growth

Finance institutions
implement regulations

Companies being
financed are committed

Regulations can be
developed
ASSUMPTIONS

Government of Indonesia
resources used to
implement spatial plan

Licenses follow the spatial
plan

Provinces influence
central ministries

New administration will
deliver on law tenure
reforms as promised
What’s lacking?
Effective
Implementation of
Government Policy
Models of
alternative
development
Finance and
business support
for SMEs
Banks capacity to
support
sustainable
approaches
Theory of Change
OUTPUTS
OUTCOME
IMPACT
Strengthen sub-national govt. &
national govt. oversight institutions
Strengthened Voice of non-State
actors in land management
More effective &
transparent landuse
Corporate reporting on social &
environment commitments
Greening finance for forest & agrarian
investments
Work with 3 provinces to strengthen
capacity to implement spatial plan
Land-use based pilot projects to
reduce emissions
Support Govt. of Indonesia Ministries
to think strategically about peat
Strengthened
government and
other
stakeholder
capacity on
natural
resource
governance
Supporting Govt. of Indonesia on
land tenure reform & conflict
resolution
Sustainable*
management
of forests
and
peatlands
Reduced
GHG
emissions
(supporting
the UK global
efforts to
mitigate
against
climate
change &
impacts on
the poor)
Set up Forest Management Units
which are commercially viable
ASSUMPTIONS

Pipeline of viable FMUs
can be established and
are bankable

Companies & banks
interested in sustainability

Market driver for inclusive
palm oil standard

MoF is both influential &
interested
Influence banks on palm oil
investments
ISPO opened up to multi-stakeholder
approach
Technical Assistance to MoF to
improve coordination & delivery on
natural resource & coordinate better
18
Improved
environment for
sustainable &
responsible
business
*Sustainable here
includes social,
economic, and
natural
The evidence in support of the Theory of Change
86. The evidence used in support of the theory of change was derived from:



experience of existing programmes – including annual reviews, monitoring and independent
reviews of how activities have generated results and impacts;
studies commissioned in the preparation of this business case including on palm oil, peatland
and spatial planning; and
findings from focus group discussions conducted for this business case on Papua and on palm
oil.
87. Because a major part of this programme builds on four years of experience of working on climate
change, the evidence for the theory of change is considered to be medium.
IDENTIFICATION OF A PREFERRED OPTION
What are the feasible options that address the need set out in the strategic case and follow the
theory of change?
88. The options explored in this business case are:
-
OPTION 1: do nothing
OPTION 2: make a payment to the GoI for verified emissions reductions;
OPTION 3: financial support to the Government of Indonesia’s climate change fund; and
OPTION 4: building-on and deepening existing partnerships on forestry and land-use.
89. A description of each option is presented. This is then followed by a comparison of options on the
basis of a multi-criteria analysis that assesses the prospects for delivering results for each option. From
this analysis a preferred option is then identified.
DESCRIPTION OF OPTIONS
OPTION 1: DO NOTHING
How would it work?
90. In this option, Indonesia does not require bilateral support from the UK to help it tackle deforestation.
UK support to existing global programmes would be considered sufficient. This would mean that DFID’s
existing programmes would be completed by the end of 2015 and that DFID staff working in the
Embassy in Jakarta would end their posts by March 2016.
91. This option was rejected in appraisal because:

Indonesia’s scale is too important for the DFID bilateral programme to end – the size (90m
ha of tropical forest), the opportunity (to reduce and help halt deforestation, currently running at
up to 2 million Ha a year) and the global significance of emissions from deforestation (the second
largest source of greenhouse gas emissions, more than the entire global transport sector) make
Indonesia a prime target for forestry programmes in the ICF;

Complexity on the ground – the impact of global forestry programmes can be enhanced by onthe-ground support tailored to a specific country context. This means that the impact of ICF
funded programmes such as the World Bank’s Forest Investment Programme can be increased.
Essentially DFID bilateral support can develop experience and knowledge that can then feed into
global programmes.

Securing wider ICF spending – a bilateral programme will help secure the results that the ICF
is seeking to deliver through its global programmes by providing bottom-up activities that mean
19
that Indonesia can be part of global efforts to build an architecture for sustainable timber, forest
products and palm oil

Relationships and influence - DFID has carefully established and nurtured relationships in for
example the Ministries of Forestry, Finance, Home Affairs, Planning and in Papua Province,
putting the UK in a strong position relative to others to influence these key players. This influence
would largely disappear without the presence of a bilateral programme that delivers advice and
support to a wide-range of influential stakeholders in government, civil society, communities and
the private sector.
OPTION 2: MAKE A PAYMENT TO THE GOVERNMENT OF INDONESIA FOR VERIFIED
EMISSIONS REDUCTIONS
How would it work?
92. In this option, the ICF would make a payment for verified emissions reductions to the GoI for
confirmed avoided deforestation and thereby secure emission reductions that could contribute to the ICF
goal of halving deforestation rates. It would require limited staff engagement – depending upon thirdparty reporting to confirm the emission reductions.
93. Since 2010, the Government of Norway has been working with the Government of Indonesia to
develop such a programme using the Reducing Emissions from Deforestation and forest Degradation
(REDD+) process as an anchor point. Norway has committed US$ 1 billion over the course of a 7-8 year
period to help it develop the scheme, with the vast majority of the 1 billion then used to purchase the
verified emissions over a number of years.
94. REDD+ is a mechanism that has been under negotiation by the United Nations Framework
Convention on Climate Change (UNFCCC) since 2005, with the twin objectives of mitigating climate
change through reducing emissions of greenhouse gases and removing greenhouse gases through
enhanced forest management in developing countries.
95. Previous reforestation schemes have failed to deliver in Indonesia and the newly formed REDD+
Agency is attempting to develop national funding mechanisms that have the confidence of international
donors. To date, most REDD+ projects have been directly funded or undertaken in collaborative
partnerships with government or local participants.
96. This option has appeal in the long-term, if it can be established and becomes operational. But at the
time of appraisal, there remained a number of difficulties:





whilst the concept for it is agreed and preparations have been made, for example a REDD+
Agency was established in 2013, it is not yet fully operational;
there is no agreement on how and who will verify emissions reductions – this is a very large and
complex task that will take time to establish;
it has not established how it will channel funding to the communities that would be delivering the
emissions reductions; and
Norway’s planned spend into the partnership has been much lower than originally anticipated
because delivery is more complex than had been anticipated.
There are alternative multilateral funding pathways for this kind of approach.
97. It may be that by 2017, this mechanism will be up and running and able to offer verified emissions
reductions and an effective mechanism for distributing funds to communities. Future funding from the
ICF may well be appropriate at that time.
20
OPTION 3: FINANCIAL CONTRIBUTION TO THE GOVERNMENT OF INDONESIA’S CLIMATE FUND
How would it work?
98. The UK would make a financial contribution to a trust fund that has been established by the GoI to
channel international donor finance on climate change to Indonesia’s climate change mitigation (i.e.
reducing emissions) and adaptation (dealing with the impacts or future impacts of climate change)
priorities.
99. Launched by the National Development Planning Agency (Badan Perencanaan Pembangunan
Nasional – Bappenas) in 2009, the Indonesian Climate Change Trust Fund (ICCTF) was under interim
management by UNDP for 5 years. By the end of 2014, it will have completed its full legal establishment
as an independent National Trust Fund and Bank Mandiri has been appointed as fund manager. In 2015,
ICCTF will be allocated $1.5m from the national budget. These funds will be used for operational
expenses, a small grant program and to cover some of the costs of implementing the RAN/RAD-GRK
(emission reduction programme). The ICCTF has also secured technical assistance funds provided by:



USAID ($5m for programme activities over 3 years)
BMZ (Germany) ($5m for programme activities over 4 years)
DANIDA (Denmark) ($65,000 to support management and operations).
100. Option 3 was given serious consideration in appraisal. In 2009, DFID and other donors worked with
Bappenas and encouraged it to establish ICCTF, DFID also provided seed funds from the ICF for an
initial tranche of activities that were managed by the ICCTF. This has given DFID a long and valuable
insight into the creation and development of the ICCTF and, through membership on various working
committees, insights into the effectiveness of ICCTF to deliver on its mandate.
101. The key appraisal question is whether ICCTF is sufficiently capable to deliver a complex
programme of support with multiple partners in government, civil society and the private sector and in
remote forested provinces such as Papua and to do this in a way that could have high prospect of
delivering the results required by the ICF. Appraisal concluded that, at the present time, the ICCTF
would struggle to deliver a large scale programme using ICF funding. However it would be able to be an
effective partner for a more modest contribution of funds and there is a strong case for the UK to
continue to support this important institution as it gears up to be the (future) conduit for donor support
into climate change in Indonesia.
OPTION 4: BUILDING-ON AND DEEPENING EXISTING PARTNERSHIPS ON FORESTRY AND
LAND-USE
How would it work?
102. DFID would build on its foundation of forestry, land-use and governance programmes and
relationships and networks in Indonesia to develop activities (long-term and short-term) with key
stakeholders to deliver the results outlined in the strategic case.
103. FLAG activities would have a direct focus on results and would represent the best approach to
delivering impact. They would look to add scale to previous investments and maintain important
relationships to support efforts by a range of stakeholders in Indonesia. They would focus on delivering
the outputs highlighted in the theory of change, namely:
Output 1
Output 2
Output 3
More effective & transparent land-use
Strengthened government and other stakeholder capacity on natural resource
governance
Improved environment for sustainable & responsible business
21
Output 1: More effective & transparent land-use
104. Unaccountable decisions to allocate large tracts of forest for conversion to timber plantations and oil
palm have a severe impact on forest-dependent people and the environment. According to the National
Land Bureau (BPN), there are currently some 3,500 land disputes related to palm oil in Indonesia,
including many violent conflicts.
105. As highlighted in the strategic case - transparency is lacking across all aspects of land use and
forestry governance, and hence community participation in how land is allocated and used remains
superficial and ineffective. In particular, communities do not have access to information on spatial
planning, permits for land conversion, how much revenue is accrued by local government from forestry
and land use change, and how forest infractions are handled.
106. The programme will work with sub national governments (provinces and districts), providing
technical assistance to encourage greater consultation and transparency in decision-making. This will be
reinforced through partnerships with national and local NGOs, progressive elements in parliaments, the
media and the private sector, building alliances to foster transparency, consultation and participation in
land use decision making.
107. DFID has had a successful partnership with The Asia Foundation since 2011 working to promote
more effective and transparent land-use decisions through the SETAPAK programme23. Under this
output, this partnership would be expanded. The Asia Foundation has already submitted a proposal to
the UKCCU for a second phase of support.
108. Work is currently on-going in six of the 11 provinces designated as priorities for tackling
deforestation by the Government of Indonesia (GoI). Further funding under FLAG would allow
expansion to an additional two to four provinces.
109. The Asia Foundation (TAF) proposal builds on the foundations of the successful SETAPAK
programme which will end in September 2015. The TAF proposal addresses weak governance at the
district and provincial levels through civil society engagement in improving decentralised forest and landuse governance. The programme complements other UK investments in Indonesia which focus more on
support to government and the private sector, including the ongoing Multi-stakeholder Forestry
Programme (2015 to 2018) and the proposed private sector components of this business case. This
programme aligns well with two of the three UK G8 Presidency priorities: tax and transparency. It
delivers the UK Prime Minister’s Golden Thread concept: effective economic and political institutions;
transparency, accountability and opportunity for all; reduced corruption and strengthened rule of law.
Assisting local governments on technical matters where there is will but a lack of capacity.
110. Under this proposal, The Asia Foundation would support civil society engagement in improving
decentralised forest and land-use governance. Indonesia’s vibrant civil society and independent media
can play a stronger role in environmental governance through:




external oversight of government performance and law enforcement;
field monitoring of land-use infractions and forestry crimes, and reporting of illegalities;
raising public awareness, and assisting citizens to form constituencies and express their needs
and preferences with regard to environmental policies; and
assisting local governments on technical matters where there is will but a lack of capacity.
111. TAF will deploy a tool to measure the transparency of district governments by testing their
responses to information requests applied to project districts, and supported by research in policies
related to implementation of the Freedom of Information (FoI) Act. Where infractions or other problems
with information requests have been identified, partners will resolve these issues through law
enforcement, policy inputs, or by directly conveying the issues to policy makers. The tool is called the
Transparency Score Index (TSI). Originally called the LULUCF Governance Index (LGI), the Land and
23
SETAPAK is the Indonesian acronym for the DFID-funded programme Improving Governance of Land-use,
Land-use Change and Forestry (LULUCF) in Indonesia.
22
Forest Governance Index (LFGI) measures 157 indicators, with 69 questions related to transparency and
88 questions for participation, accountability and coordination. Data is taken from specific government
documents, such as workplans for regional work units, local regulations on spatial planning,
environmental assessments for spatial planning, and permits in the natural resources sector. Responses
are scored to produce an overall LGI score.24
112. TAF will work with national and regional Commuity Service Organisations (CSOs), local
government, national government, private sector, the media and the justice sector, including the
Corruption Eradication Commission (KPK). The programme activities will lead to three primary outputs:
improved transparency of forest and land-use information, strengthened government accountability and
rule of law, and strengthened civil society organisations. Together, these outputs will lead to the overall
programme outcome of improved pro-poor and gender-responsive governance of forest and land sectors
to reduce deforestation and forest and peatland degradation.
113. As a result of improved governance, the programme impact will be reduced deforestation and forest
degradation rates and more equitable sharing of benefits for women and the poor.
Output 2: Strengthened government and other stakeholder capacity on natural resource
governance
114. Effective governance of forestry and land-use requires that all key stakeholders are involved in
decision making and have the capacity to make effective inputs and then be involved as those decisions
are implemented. This means working with government, communities, civil society and the private
sector. UK support for spatial planning and its effective implementation is at the core of this output.
115. Spatial plans are a legal requirement and an important tool used by district and provincial
governments to allocate land for development. They can be a tool for reducing deforestation and
empowering local communities. For example, UK technical assistance in Papua Province supported the
provincial government to produce a revised spatial plan (now passed into law) that aims to protect 1.5m
hectares of forest previously allocated for conversion. Alternatively spatial planning processes can lead
to forest land that has sustained forest-dependent communities for generations being allocated to
logging, mining or oil palm concessions, depriving communities of the resources upon which they
depend. Meanwhile, vacant and degraded land suitable for development is left unused.
116. This output would be delivered through a combination of:


technical assistance to central ministries and provincial governments; and
partnerships with relevant NGOs following a process of submission of proposals and due
diligence checks.
Support to the Government of Indonesia on spatial planning
117. The Ministry of Home Affairs has had a critical role in providing overall supervision for spatial
planning implementation at sub national governments and importantly, permissions and approval for
development partners such as DFID working at the provincial level on spatial planning matters. With the
very recent creation of the new Ministry of Agrarian and Spatial Planning, there are prospects that overall
responsibility for working on spatial planning may shift at the central level. We will continue to monitor
the roles and responsibilities of the various Ministries as they are decided and plan this component
accordingly.
24
The transparency index in the districts where TAF has worked are very low (19 out of 100). Less than half have
scores in the higher ranges. The lower index score showed that decentralisation on land management areas, was
not followed by enough local government’s capacity in managing land use. Many documents are not accessible for
public scrutiny, there is no formal and standardized participation procedure, low accountability resulted from no
complain and redress mechanism for wider public. The horizontal and vertical coordination among government
institutions are also very weak, for example spatial and non-spatial data and mapping are not exchanged freely.
23
118. Working at the centre on spatial planning as well as at the provincial level is essential to achieve
integrated impacts and scaled results. For example the successful work under existing support with the
Ministry of Home Affairs and Papua Bappeda (Provincial Planning Agency) has provided valuable
lessons for how other provinces can tackle both the design of spatial plans and their implementation –
and these lessons have been used to good effect by a number of other provinces in the last two years.
119. Under this output – DFID would procure technical assistance through an international tender to
continue to provide central support to spatial planning. It would provide policy and implementation
support and work with the ministry to strengthen its outreach and partnership with broader stakeholders.
Support to the ICCTF
120. As identified under Option 3, Indonesia is making very good progress with the ICCTF. Although the
fund is not yet ready to be the main conduit for DFID climate change finance into Indonesia (it may well
be in the future), it is capable of using targeted DFID resources effectively to support the implementation
of the forestry and land-use parts of the greenhouse gas emissions reduction plans contained in the
RAN-GRK.25 DFID would make a contribution of programme funds to the ICCTF to be allocated
towards technical assistance in support of the delivery of forestry and land-use components of the RANGRK. DFID's funds would be co-mingled with those of other donors (see above), but it is proposed would
be subject to a separate MoU signed with the UK and Bappenas that would identify areas of specific
focus within the forestry and land-use sector. UK support would be limited to technical assistance and
would not include funding of travel, subsistence, hotels, venues, etc.
Accountable grants to NGOs to strengthen spatial planning and natural resource governance
121. Existing ICF support has demonstrated that the UK can be effective, even in difficult and
challenging remote provinces. The UK is currently providing support for the long-term task of building
capacity in Papua, a remote province which has fragile institutions as the legacy of a separatist conflict
and deep-rooted ethnic discrimination. The current UKCCU support to Papua province (which is due to
end in July 2015) has worked with the Ministry of Home Affairs and the Papua Provincial Planning
Agency (Papua BAPPEDA) to implement its revised spatial plan over the last two years. UK support has
combined technical assistance (TA) for spatial data compilation, analysis and monitoring at provincial
level; TA for spatial planning in districts to ensure district plans are in line with the Provincial spatial plan;
support for a system to monitor and enforce decisions on land licensing; and capacity building for
BAPPEDA including training programmes and reform of staff recruitment and management systems to
enable the development of a capable and professional workforce.
122. FLAG aims to expand this work, using the approach piloted in Papua to further work in Papua and
to between one or two additional forest provinces. FLAG funding would be expected to be delivered
through accountable grants to organisations that have a proven track record on providing support and
capacity building to provincial governments on spatial planning.
123. Other areas that may be considered for support include interventions to reduce land conflict,
improve the management of peatlands and promote transparent landscape management on palm oil.
Output 3: Mobilising the private sector in support of good governance and sustainable natural
resource management
124. Engaging the private sector is crucial to promoting sustainable approaches and tackling
deforestation. FLAG will do this in a comprehensive way by:


supporting efforts to remove deforestation in production and supply chains, particularly for palm
oil;
working with the Ministry of Finance to set regulations and incentives that encourage sustainable
approaches (through the budget, taxation system, trade and the market);
The RAN-GRK is Indonesia’s greenhouse gas emission reduction action plan and is delivered by Bappenas
through the planning process to relevant line ministries.
25
24


working with finance institutions to encourage them to adopt sustainability standards when they
provide finance for timber and agricultural investment
developing real-world models of private-sector led investment in plantations on degraded land,
particularly looking at ways in which smallholders can supply the industry;
Production and supply chains
125. The private sector exports about £6 billion worth of forest products and about £18 billion worth of
crude palm oil from Indonesia annually. Working with the private sector is a key part of any strategy that
is seeking to promote a more sustainable approach to forestry and important commodities such as palm
oil. The private sector is the main economic actors and their support for reform is vital. For instance
support from the two big pulp and paper players was instrumental in getting the government to agree to
sign the Voluntary Partnership Agreement (VPA) on trade in timber and timber products with the
European Union and that is now driving reform in the timber sector.
126. Many of the leading big companies in both forest and oil palm sectors have made high level
commitments to reducing their negative impact on forests, emissions, biodiversity and people, as have
their industry associations and the chamber of commerce. Whilst industry has significant economic
power it still depends on government and civil society to achieve these commitments through multistakeholder partnerships.
127. Most of the current international efforts to tackle deforestation are focused on public entities,
including strengthening public sector management of forests, improving forest governance and building
government capacity. The private sector has a vital role to play too, but is currently not sufficiently
engaged in programmes to stop deforestation.
128. The UK has a track record of working with the private sector to realise development objectives,
including helping to set up the Forest Stewardship Council (FSC) sustainability standard for timber;
working with UK and EU timber trade federations to halt illegal logging; and financing public-private
partnerships in other fields of development, such as infrastructure.
129. The UK also has experience with using demand-side policies to shape markets for timber and
agricultural commodities. Public procurement policy in the UK requires central government departments
to buy "legal and sustainable" timber, and that all palm oil-based products must come from credibly
certified sources by 2015. These initiatives have had a significant impact on markets for these
commodities. Many progressive companies from the UK and elsewhere are also taking steps to mitigate
the impact of their own operations on forests. B&Q, a home improvements company, reached a goal of
selling only certified sustainable timber in 2011. Unilever, the world’s largest buyer of palm oil, has a
commitment to the sustainable sourcing of all its raw materials by 2015.
130. DFID is set to address much of the global architecture through its global, centrally managed,
Investments in Forests and Sustainable Land-use Programme that was approved by DFID Ministers
in Autumn 2014.26 A crucial requirement of FLAG will be to complement this global programme and not
overlap or replicate it. FLAG will do this by ensuring it works on areas not covered by this central
programme, but instead on areas that will improve Indonesia’s readiness to more effectively deliver the
goals of the Investments in Forests and Sustainable Land-use Programme. The key approach to doing
this will be to work on enhancing the multi-stakeholder approach to a standards-based oil palm
component of the FLAG programme. DFID has excellent experience from similar work in Indonesia on
timber from which to base its approach.
131. Since 2002, DFID has been supporting a multi-stakeholder approach to verifying the legality of
timber in partnership with the Ministry of Forestry. The result of this work is a national legality assurance
system for timber that meets market demand for legal timber from the European, US and Australian
timber markets as specified in the illegal timber laws in those three markets. The EU recognises this
audit system through a timber trade agreement known as the Voluntary Partnership Agreement (VPA),
26
http://devtracker.dfid.gov.uk/projects/GB-1-202745/
25
and the audit requirements cover exports of Indonesia’s timber products to all destinations, worth an
estimated GBP6 billion per year.
132. The process of change that led to this achievement started with action by international NGO’s
focusing on the role of consumer markets such as the EU and USA in driving illegal logging and
deforestation. In response companies and governments in consumer countries developed responsible
timber purchasing policies and worked together with civil society to develop a more comprehensive
response to illegal logging that resulted in the EU Action Plan on Forest Law Enforcement Governance
and Trade (FLEGT) in 2003. The FLEGT Action Plan included negotiation of the VPA timber trade
agreements with partner countries.
133. The negotiations for a VPA with Indonesia started in 2007 and centred around the development of a
multi-stakeholder legality definition and an audit system to check timber legality. This was a long but
ultimately fruitful process involving many meetings, pilots, training, independent monitoring, revisions to
standards, auditing protocols, accreditation procedures, and independent evaluations. The end result is
a credible national timber assurance system that is gaining market acceptance and helping Indonesia
fight illegal logging and restore the reputation of its timber industry.
Oil palm - learning from timber
134. There are many similarities between the oil palm and timber industries in Indonesia. Both are major
drivers of deforestation and social conflict, and subject to weak enforcement and poor governance. Both
sectors are internationally competitive and contribute significantly to the economy in terms of foreign
exchange, jobs, taxes and rural income. Both have the potential to move up the value chain to more
finished consumer products.
135. Crucially both products are subject to increased market pressure requiring a higher level of
transparency and due diligence, and some assurance that the products have not come from illegal
sources or land once covered in natural forest.
136. Both industries have developed new standards to satisfy changing demand; the forest sector
developed a multi-stakeholder system called SVLK whilst the oil palm sector developed the Indonesian
Sustainable Palm Oil (ISPO) standard, base around the laws regulating oil palm. In addition there are
many voluntary business-to-business standards such as timbers’ Forest Stewardship Council (FSC) and
Palm Oil’s Roundtable for Sustainable Palm Oil (RSPO) that have varying degrees of take up and
market penetration.
137. The Indonesian Ministry of Forestry led the development of the timber standard SVLK, and its
negotiation with the European Union through the VPA. The Ministries of Trade, Industry and Foreign
Affairs have also played their part, amending regulations as needed and joining the market dialogues in
many consumer markets. These dialogue events involved civil society, private sector and government
from both producer and consumer countries, and reinforced how important it was to the market that civil
society and the private sector are fully involved in the development of standards, the so-called multistakeholder process modelled in the SVLK.
ISPO - like SVLK but not yet multi-stakeholder
138. Palm oil’s ISPO standard was developed in a more technical manner by the Ministry of Agriculture
without significant engagement from industry or civil society. It has yet to achieve much acceptance in
consumer markets, in particular amongst members of the Consumer Goods Forum and the umbrella
Tropical Forest Alliance who are looking for more rigour and credibility. In addition ISPO was developed
as a national response to the voluntary RSPO, as a sustainability standard, but in fact is based, like
SVLK, on laws that may or may not deliver sustainability. ISPO was also designed specifically to meet
the needs of small holders who were finding it difficult to reach RSPO standards. Also, like SVLK, ISPO
is intended to be a compulsory requirement of palm oil producers.
139. The UK is in a unique position as the main donor supporting development of the SVLK for timber
and one of the key architects of the FLEGT approach to weak forest governance. We are able to draw
on a range of resources, tools and approaches to help Indonesia’s oil palm industry respond to the new
26
opportunities of zero deforestation palm oil. We have a track record as a credible, responsive partner
that can facilitate national leadership and ownership and increase the chances of a sustainable, lasting
solution to illegal palm oil.
140. In three years success of the proposed approach will be measured by the strength of the multistakeholder processes in revising and improving the national ISPO standard and auditing system so that
it is credible as a national palm oil legality standard.
141. At the same time this component should draw on resources from central programmes, particularly
the Forest Governance Markets and Climate Programme (FGMC)27 grantees and the Investments in
Forests and Sustainable Land-use Programme, but recognise that this is a very focused programme,
limited to the ISPO standard and how to open it up to multiple stakeholders. On this basis the focus of
FLAG will be to work at the country level to help Indonesia feed into and benefit from the global work that
DFID is supporting.
Working with the Ministry of Finance to set regulations and incentives to encourage sustainable
approaches
142. DFID has been providing technical assistance to the Ministry of Finance since 2010. The Ministry of
Finance has a crucial role in setting the rules of the game in terms of incentives/disincentives for
sustainable management of natural resources. Building on the strong partnership and relationship, FLAG
would focus very targeted technical assistance into the ministry to help it deliver the forestry and landuse aspects of the RAN-GRK, promote sustainable management in natural resources and improve the
tax take from natural resources (particularly palm-oil).
Working with finance institutions to encourage them to adopt sustainability standards
143. In 2014 the IFC launched a programme of collaboration with Indonesia’s financial services regulator
Otoritas Jasa Keuangan (OJK) to promote green financing in Indonesia. This programme, funded with
US$1m by the Swiss State Secretariat for Economic Affairs (SECO) has opened up an important
dialogue with this key body that basically sets the rules and regulations for amongst other things,
investment in Indonesia. Following discussions with OJK and with IFC, it was clear that there is a strong
interest and commitment to developing specific green financing regulations related to investments in
timber and in palm oil. In a partnership with DFID, the IFC would develop a comprehensive programme
of capacity building with OJK, banks and investors to design and then implement a “green” standard for
investment in agriculture. It would:
 work with regulators (OJK) to develop such standards based on international best practice;
 build capacity in the market with service providers to be able to offer appraisal expertise; and
 support the main individual financial institutions in Indonesia through training and consultancy
support to be able to implement the new standards and regulations that would emerge.
144. The IFC is a highly respected body in Indonesia – with a strong track record of delivery. It has
excellent relationships with government and credibility to work with Indonesia’s professional bankers and
investment institutions. The programme would operate from 2015 to 2018.
Agence Francaise de Developpement (AFD)- private-investment led Forest Management Units on
degraded land
145. AFD has been working with GoI on climate change since 2009 to protect forest areas and to roll
out policies to promote the sustainable management of forest lands. Currently AFD is contributing to the
reform of the management and governance of the forestry sector, by assisting in the setting up of new
Forest Management Units (FMUs) by the local governments in cooperation with Ministry of Forestry.
146. In parallel, as a financial institution using credit as its main tool, AFD seeks to finance and support
economically viable pilot projects with a strong conservation, rehabilitation or carbon capture
components which would stand as models for private-sector led sustainable plantation development on
27
http://devtracker.dfid.gov.uk/search?query=Forest+Governance+Markets+and+Climate+Programme+
27
degraded land in Indonesia. To this end AFD has proposed to work with DFID to facilitate investment by
private players in the Indonesian forestry sector. Several projects are already at appraisal level by AFD
and more are currently being explored. The key output of this partnership would be model FMUs that can
demonstrate viability for investing on degraded land.
147.The AFD contribution would be expert staff and management time in kind and then provision of
concessional loan finance of up to £30m. The programme would operate from 2015 to 2018.
Bringing it all together on the ground
148. It is anticipated that one priority province will be selected to bring the various elements of this
programme together in a meaningful practical way, demonstrating the golden thread of transparent,
accountable government creating the conditions for sustainable management of forests and peatlands to
generate economic, environmental and social benefits for the people and society. This is likely to be one
of the provinces selected for the spatial planning support work.
COMPARISON OF OPTIONS
149. A multi-criteria analysis was undertaken to assess Options 2, 3 and 4. The analysis assessed the
ability of each option to deliver the outputs of FLAG. The summary of the assessment is presented in the
table below.
Table 1: Comparison of delivery options
Option 2
Make a payment to the GoI
for verified emissions
reductions
Output 1
More effective &
transparent land-use
At this stage - weak links
with transparency-related
civils society, limited
provincial on-the-ground
networks
Score
Output 2
Strengthened
government and
other stakeholder
capacity on natural
resource governance
1
The REDD+ Model, when
fully operational – would be
suitable for consideration
for support. It is not ready
yet and so risk that DFID
funds could not be
deployed. New fund for
REDD+ (FREDDI) is being
tested but risks too great at
this stage.
Score
Output 3
Improved
environment for
sustainable &
responsible business
1
The REDD+ approach will
rely heavily on partnerships
with the private sector and
is building its experience to
develop effective
partnerships.
Option 3
Financial support to the
Government of
Indonesia’s climate
change fund
ICCTF has commitment
to work with civil society,
but primarily see’s
government as the
delivery vehicle, so would
struggle to deliver this
output
2
ICCTF has good
networks across
government and could
support capacity building,
but would face
challenges working with
civil society – because of
limited experience in this
area. Ability of ICCTF to
influence government
behaviour change
untested.
2
ICCTF has at this stage
limited direct experience
of working with the
private sector – but it will
seek to develop these in
the future.
Option 4
Building-on and deepening existing
partnerships on forestry and land-use
Excellent existing relationship with
NGOs that specialise in promoting
transparency and accountability. Proven
track record of delivery. NGOs have
strong relationships with provincial and
district level Government agencies.
NGO’s now have experience of testing
FoI legislation.
5
UK’s existing relationships with
Government Ministries and with NGOs
provides knowledge and experience of
driving delivery and understanding
strengths and weaknesses of partners
4
The UKCCU has strong relationships
with AFD and a proven methodology for
promoting sustainable development.
There is limited experience of working
with the IFC and Ministry of Agriculture
in Indonesia.
.
Score
Totals
2
4/15
2
6/15
28
The UK has a strong track record of
working with the private sector in forestry
through our work on illegal logging. The
UK is a founding government member of
the Tropical Forests Alliance.
3
12/15
Note: criteria scored on the basis of 1-5, with 5 being most favourable against criteria
150. On the basis of the above analysis – Option 4 was selected as the preferred option. An appraisal of
the option is presented below.
APPRAISAL OF THE PREFERRED OPTION (OPTION 4)
Economic appraisal of the preferred option
151. Appraisal modelled three principal benefit streams arising from the investments under Option 4:



reduced rates of deforestation;
carbon savings; and
increased incomes to forest-based communities and individuals.
Data and assumptions
152. The standard method for valuing the benefit from reduced deforestation is to assign a value to the
carbon emissions that are saved as a result of the reduced deforestation. Values can also be assigned
to the “environmental services” (e.g. watershed impacts) and “biodiversity”, but for the purposes of this
analysis no values were attached to these benefits.
153. The value of carbon assigned to a hectare (ha) of tropical forest requires a scientific calculation of
the stock of carbon per hectare. There are various estimates of this ranging from highs of 250 tonnes per
hectare28 to lower figures of 100 tonnes per hectare. In this appraisal, the figure for primary forest /
peatland mix that would result in the release of 120t of CO2e per hectare. 29 This is at the conservative
end of figures for Indonesia, an authoritative study in 2011 found figures of between 100 and 200 t CO 2e
per hectare in Papua Province.30
154. The rate of reduced deforestation is determined by:



using data from avoided deforestation delivered under spatial planning support to Papua
Province under existing UK support from 2011-2015;
an estimate of avoided deforestation from the partnership with AFD on model plantations; and
an estimate of avoided deforestation from the proposed partnership on transparency and land
licencing under the proposed partnership with TAF.
155. The carbon savings are estimated from the avoided deforestation associated with spatial planning
support and the partnerships with AFD and TAF. The increased incomes are estimated from the
proposed partnership with AFD, that will generate income and employment in model private-sector led
FMUs.
156. The following valuation of key variables was as follows:




costs and benefits were discounted by 8% (standard for Indonesia);
carbon benefits were discounted at 3.5% (standard for ICF global carbon-related projects and
programmes;
carbon was priced using standard DECC carbon “values” used to reflect the full economic cost of
carbon; and
average rural household income in 2014 was estimated at: £1,394 per year.
“Estimation of Tropical Forest Biomass for assessment of Carbon Sequestration using regression models in
remote sensing in Berau, East Kalimantan, Indonesia” by Irvin K. Samalca, Alfred de Gier and Yousif Ali Hussain,
of the Department of Natural Resources at The International Institute for Geoinformation Science and Earth
Observation
29Cost Benefit Analysis prepared for DFID BAR Bid 2010, using data from McKinsey “Abatement Costs Curve for
Indonesia” 2009.
30 Saatchi et al (2011). Benchmark map of forest Carbon stocks in tropical regions across three continents –
Proceedings of National Academy of Sciences, June 3 2011.
28
29
157. When discounted over a ten-year period, the above assumptions produce a benefit:cost ratio of
7.57. This would represent very good value for the proposed investment. It should be stressed that this
result does not include the modelling of the benefits from:



biodiversity that is saved and environmental services associated with areas which are not
deforested;
alternative low carbon economic activities which would likely generate returns beyond the price of
carbon; and
any of the benefits stemming from the proposed partnership with government and the activities of
the ICCTF, the partnership with the IFC or from the monitoring and evaluation contract.
Sensitivity analysis
158. The section examines the robustness of the assumptions used to generate data for the economic
appraisal. A number of the variables are within the control of the programme, others are not. The factors
considered in the sensitivity analysis were:


within the control of the programme: programme costs, amount of deforestation avoided as a
result of the programme, when benefits start to accrue, reduction in assumed increase in
incomes; and
outside the control of the programme: price of carbon, amount of carbon emissions released from
deforestation.
159. Table 2 examines the impact on the benefit cost ratio of negative movements in each of the
sensitivity factors.
Table 2: Sensitivity analysis
Sensitivity variable
Resulting
benefit Percentage impact on
cost ratio
benefit cost ratio
Base case
7.57
Within the control of the programme
10% increase in cost of investment
6.88
9.1%
10% reduction in assumed rate of
6.84
9.6%
deforestation avoided
10% reduction in assumed increase in
7.54
0.4%
income
Delay of all benefits by 1 year
7.52
0.7%
Outside the control of the programme
Price of carbon 10% lower
6.84
9.6%
10% reduction in estimated carbon released
6.84
9.6%
from 1 ha of deforestation
160. Table 2 shows that the programme is most sensitive to reduction in the assumed quantity of
deforestation avoided, a reduction in the price of carbon and the assumed amount of emissions
associated with deforestation. The least sensitive factor is the assumed increase in income. The above
shows that even with significant reductions in benefits or increases in costs, the benefit:cost ratio
remains robust and positive.
161. The sensitivity analysis also shows that the project is not dependent upon a single assumption
holding true. For example:


if the carbon price was reduced by 50% the B:C ratio would be 3.92; and
if the amount of carbon in a tropical forest was reduced to 30 tonnes of Co2e per ha (25% of the
typical value), the B:C ratio was still positive at 2.09
30
162. All of the above suggests that there would have to be substantial reductions in assumed benefits for
the project to no longer break even. This shows that, provided the assumptions hold, the economic
return to this programme are robust. When the benefits that have not been quantified are added
(especially environmental services and biodiversity and those from low carbon investments), the returns
to DFID’s investment look sound.
Gender appraisal of preferred option
163. An appraisal to deliver Gender Mainstreaming (GM) within the proposed programme was
undertaken as part of the preparation of this business case. The appraisal incorporates recent findings
from fieldwork in in West Kalimantan, East Kalimantan, and South Sumatra, undertaken by The Asia
Foundation (TAF) that sought to identify ways to improve GM into interventions in forestry and land-use
programmes in Indonesia.31 It also used recent analysis undertaken by USAID in the design of its spatial
planning work in Papua that was reviewed as part of preparing the gender analysis. The TAF and USAID
analysis is important since it incorporates analysis that includes the voice of communities as well as
women’s institutions currently working on gender-sensitive environmental issues.
164. Gender is important in Indonesia and any interventions in Indonesia need to work to address this
issue. Although Indonesian law forbids discrimination against women and the principle of equality
between the sexes can be found in the State Philosophy (Pancasila), Indonesia lags behind other
ASEAN countries in gender equality. Laws and policies addressing gender justice in natural resources
management are often not effectively implemented.
165. Gender relations can influence natural resource management in four main areas: roles and
responsibilities, access and control of resources, knowledge base, and decision-making. In Indonesia,
men and women have different access to and make different use of forest products and other natural
resources. Based on their social position and traditional land ownership rights, women often have
limited access to information about rules and regulations affecting forests and less access to and control
over forests than men, contributing to their marginalization and vulnerability. The degradation of forests
has a different impact on women and men. The reduction in availability of forests products used as fuel,
food or medicine has a negative impact on women’s quality of life. As women must venture further afield
to seek these forest products, they have less time to meet their domestic responsibilities, earn money,
and engage in political issues or other public activities.
166. The appraisal for this programme started with an assumption that success in forest and land
management will inevitably lead to a halt in uncontrolled deforestation and mining. As well as relying on
regulations, an end to deforestation can occur when the participation of the community, including
women, is properly and fairly accommodated in voicing their interests in forest and land management. A
failure to incorporate women’s interest may lead to FLAG largely being successful in reducing emissions
and deforestation, but with little benefit to women. This programme has the potential to significantly
impact in a positive way on women and adolescent girls.
167. Based on gender fieldwork, the gender appraisal identified the risks that project partners may not
be aware, committed or interested in gender issues, for example they could be:
31

Gender Blind: Partners care about women’s issues, but in their work (especially research or
policy advocacy for openness of information), they feel that there is no connection with gender
issues.

Gender Neutral: The partners generally view that environmental damage through poor forest
management has the same impact on men and women, boys and girls.

Gender Biased: an assumption that if the policy advocacy succeeds, then automatically women
will enjoy the benefits. Or that certain types of work are too dangerous for women, so they should
not be involved.
Assessment Report: Forest and Land Management with a Gender Perspective, The Asia Foundation , 2014.
31

Have Limited Gender Sensitivity: Some partners may perpetuate stereotypes of women’s
femininity or give too little consideration to the traditional roles of women, which impedes their
participation.
168. The way to overcome these risks is at the inception of any of the components of FLAG. And to use
the negotiating and discussion phases of MoUs, accountable grants, contracts and government
partnerships to put gender issues up front and centre into any agreements and contracts that are signed.
This way – expertise, analysis and targets can be incorporated into approaches. This means that all
targets related to: income, jobs, SME development, transparency and corruption and rights under FLAG
will have gender action and gender reporting. With partners responsible for delivery against these
targets.
169. In implementation, the components of the programme will:





ensure that as key users and beneficiaries of healthy forests, women must be empowered to
participate in and benefit from decisions related to their access to natural resources;
that a gender analysis that identifies how gender relations influence natural resource
management within the unique cultural, ethnic, and religious diversity present amongst
stakeholders will be undertaken;
action to address gender inequalities are planned and mainstreamed into work programmes;
woman participate in a meaningful way in the governance or management institutions of the
components of the programme; and
gender disaggregated data will be collected from day one for all programmes.
170. The prospects for success in this approach are good. AFD and the IFC have strong commitments
on gender. As part of its proposal to the UK, The Asia Foundation has designed a gender mainstreaming
strategy that will include:

Capacity Building for Partners’ Staff - strengthen gender and environmental analysis internally
within the institutions and in their work, including in advocacy or organising work, through short
courses that discuss the use of gender analysis and social analysis in the framework of
organising and advocacy;

Gender Mainstreaming in Partner Institutions - partners will be encouraged to change the
stereotype that gender issues are “soft” and apolitical. Partners will be supported to see the
connection between gender and the suffering of women, through the use of gender analysis and
use this to convince policy makers that gender analysis is essential for improving forest and land
management;

Working with communities to build knowledge and experience on the importance of gender
analysis and its centrality to action to improve livelihoods; and

Data collection – all data will be disaggregated by gender.
171. As a result gender will be effectively mainstreamed and will be a key indicator in the base-lining,
monitoring and evaluation of the project.
Social assessment of the preferred option
172. The programme has the potential to provide significant social benefits. Proposed programme
activities that seek to increase transparency, improve the accountability of government, increase
standards for responsible business behaviour and improve land licencing processes can make
community forest management a source of new sustainable income for its members, enabling them to
capture more of the value-added from forest products. This can reduce vulnerability, generate
sustainable jobs and strengthen the position of small-holders. In addition conflict can be reduced and
greater stability can help promote investment and certainty. But there can also be risks. Formalising land
rights can exclude poorer groups, including women. Benefits from interventions could be unevenly
distributed, and there is a risk of capture by elite groups. There is also a risk of limited livelihood and
32
poverty reduction associated with large-scale commercial forestry, risks that land acquisition could
impact upon indigenous rights and cultural resources, and risks that small-scale producers are unable to
engage in supply chains and comply with new standards.
Social risk mitigation
173. Given the identified risks and opportunities, and the varied activities and delivery mechanisms
under FLAG, the social appraisal concluded that the key output-level components in FLAG will require
strong appraisal procedures, which apply the best possible social safeguards as those activities are
developed and implemented, particularly as a number of the components under the programme will be
designed by third-parties. Safeguards will need to be both effective in terms of mitigating risk and
enhancing opportunity; and accessible and practical. It will be important the UKCCU adopt a
standardised approach to safeguards policy in the early stages of implementation of FLAG, seeking
external support as required. This policy will be applied to programme activities and closely monitored.
Contractors will be obliged to report regularly on safeguards implementation to UKCCU.
Environmental assessment of preferred option
174. The environmental appraisal noted that this project is entirely related to mitigating greenhouse gas
emissions and promoting sustainable development. It represents a significant bilateral investment by the
UK towards supporting the ICF’s overall forestry targets to deliver a substantial reduction in levels of
global deforestation. Appraisal noted that over 41,000 ha of avoided deforestation will be delivered.
These are significant positive environmental outcomes. The programme is categorised as:
FLAG
Option 4:
Climate change and environment risks
and impacts, Category (A, B, C, D)
C (low risk)
As this option will clearly support the GoI
in reducing GHG emissions, the climate
change risk and impact is low
Climate
change
and
environment
opportunities, Category (A, B, C, D)
A (Opportunity)
The intervention by partnering with a broad
base of stakeholders and working from the
centre to the local level gives an opportunity
to leverage substantial results for the
proposed ICF investment
175. This means that there is a modest risk that programme interventions could have adverse
environmental impacts, but a strong possibility that programme interventions will provide positive
environmental impacts.
176. The private sector is acknowledged to have a major influence on forest and land-use, and
involvement of this sector in financing and implementation of reduced deforestation and better
management of land has the potential to result in significant reductions in emissions. There is good
potential to realise significant environmental benefits, particularly in terms of biodiversity and ecosystems
services. There is also potential to develop and demonstrate sustainable business opportunities.
177. The aim of the programme is to use Forest Management Unit pilots (with AFD), the introduction of
environmental and social safeguards in finance for palm and timber investments (with IFC) and to
expand sustainable small holder palm oil (under support to promote a multi-stakeholder approach to
palm development) to demonstrate benefits of reducing deforestation in order to leverage further
investment and involvement. Specific barriers to investment will also be addressed. This could result in
increased awareness of, interest in and ability to implement ‘green’ and sustainable investment
opportunities.
33
Financial Case
Affordability and the sources of funding
178. The programme will be funded from resources that are earmarked under the International Climate
Fund (ICF) for forestry. Year 1 (2015/6) will be funded under the current resource allocation round.
Subsequent years will be funded from the 2016/17 resource allocation round.
179. The programme will run three years, subject to satisfactory performance.
180. There are a variety of funding disbursement mechanisms depending upon the partner:



all commercial contracts, and accountable grants will be disbursed in arears, upon receipt of
invoices. This will eliminate any issues relating to advance funding;
DFID’s contribution to the ICCTF will be made in year 1 and co-mingled with funding from other
donor partners. The contribution will be conditional upon an agreed set of results related to
forestry and land-use to be delivered by the ICCTF; and
contributions to partnerships with AFD and the IFC will be made through annual payments. After
the first payment, each payment will be subject to evidence that the previous payment has been
fully committed and or disbursed.
Due Diligence
181. Unless resources are being channelled through OJEU procurement/ competitive bidding, a due
diligence assessment on recipients – using the standard DFID methodology and template - will be
undertaken for all accountable grants, financial contributions to other donors. However, for contracts
issued on nomination (generally valuing between £25K and above) a proportional due diligence will be
conducted.
Forecasting, reporting and accounting for expenditure
182. All implementing partners will be required to submit annual budgeted work plans for DFID approval
containing detailed estimates for fees and reimbursable expenses, including disbursements to 3rd party
organisations. These will be followed by financial reports at least quarterly containing details of historical
spend, forecast spend and estimated total spend for the current financial year including an explanation
for any marked deviations from expected spend. These will help DFID to assess partners’ budget
utilisation rates and to further inform accurate forecasting.
Assessment of corruption, financial risk and fraud and DFID response
183. Corruption is a serious impediment to Indonesia's development and combating corruption has been
a major priority of the reform era. Indonesia ranked 118 with score of 32 in the Transparency
International corruption perception index 2012. Corruption in the country is likely to be facilitated by a
number of factors, such as the large amount of public resources derived from natural resources, vested
interests and politically connected networks, and weak judicial independence. In addition, local elites are
given wide discretionary power and resources without strong accountability and enforcement
mechanisms. The persistence of corruption is reflected in the views of Indonesian citizens on corruption.
According to the global corruption barometer (transparency international, 2011), 43% of surveyed
households believe that corruption has increased in the three years preceding the survey.
184. At an operational level, DFID’s assessment of corruption and fraud concluded that:

the size of Indonesia, the geographically remote nature of some of Indonesia’s most important
forests and a lack of transport infrastructure will make it more difficult to access a number of the
programmes activities. This geographical isolation and in some parts of Indonesia, insecurity,
makes tracking and monitoring of programmes and seeking views from beneficiaries more
34
challenging. This is a particular problem in Papua – so working with others that have better
capacity on the ground makes sense;

Indonesia has a devolved structure with significant power and decision making authority held at
the district level. It is important that UKCCU programmes act at national, provincial and district
levels to ensure that changes are embedded throughout the Indonesian Government. In order to
reach through the various layers of government, programme delivery chains can sometimes be
long and complicated and involve a number of different partners, sub-contractors or subgrantees. Programmes with complex delivery chains have increased risk due to the additional
management challenge this can pose;

programmes operating at the district level are made more vulnerable due to the limited human
resources (staff and expertise) both in Government and NGO/CSOs at the local level. Low wages
in the public sector and weak systems further increase the risk of corruption and fraud; and

UKCCU Indonesia’s overall budget is small for a DFID country programme and is spread across
a number of relatively low value contracts and grants thus balancing the financial risk across the
portfolio (compared to all resources being through a smaller number of interventions).
185. In recognition of the Indonesian corruption context and the particular risks faced in the climate
change sector, UKCCU Indonesia has built a number of safeguards into the way it will manage FLAG,
these measures give us confidence that corruption and fraud risks will be mitigated by our proposed
implementing partners. They include:

delivering through capable international and local partners with good programme and
financial management. A key mitigation is identifying delivery partners with recognised strong
management practises to manage DFID funds as a lead partner. A number of FLAG activities
will work closely with the Government of Indonesia however in each case DFID funds are
disbursed through a delivery partner, separate from government, who takes responsibility for
assuring the good management of DFID money. For activities where we are working through
small, local NGOs and CSOs we will disburse aid through an intermediary partner such as a
large international NGO. For example the accountable grant with The Asia Foundation, which
has a good track record of delivery in Indonesia and clear internal fund management processes.
Not only will TAF provide management oversight for DFID funds but they will also coach these
smaller organisations to improve their own internal management practises thus further
safeguarding DFID funds;

regular monitoring by DFID staff and fund managers: In addition to DFID’s regular monitoring
through the annual review and project completion process, DFID staff will visit partners who are
delivering FLAG at their headquarters in Jakarta on a regular basis, attend programme
workshops and when possible visit the field. UKCCU managers and advisers use these
opportunities to assess progress and develop a better understanding of how funds will flow and
results will be delivered. Regular communication will be encouraged between UKCCU staff and
the delivery partner team (in particular the delivery partner finance officer);

use of financial assessments and audits of delivery partners: All UKCCU accountable
grants, contracts and MOUs will include relevant text on audit and asset reporting in line with
DFID guidelines;

supplementary audits and spot checks (including at sub-grantee level): where UKCCU has
concerns that programmes may have higher risk (see above), it will be policy to request
additional independent audits or deeper audits such as management audits on an ad hoc basis.
The need for this can be assessed by the UKCCU programme team during the programme’s
implementation; and
35

spot checks: These will be carried out at regular unannounced intervals. For higher risk
activities, spot checks will go deeper and request documentation at the sub-grantee level or
where possible spot check sub-grantees.
36
Management Case
Governance and management arrangements
186. This will be implemented by the UK Climate Change Unit (UKCCU) in the British Embassy.
187. Each of the categories of partnership under the programme will require differing approaches to
governance and management.
Government partnerships
188. The contribution to the Indonesia Climate Change Trust Fund (ICCTF) will be made under an MoU
or Letter of Arrangement with Bappenas. The ICCTF is a multi-donor fund whose creation was largely
the result of previous UK support. It is legally established in Indonesia with the purpose of channelling
financial support from donors to mitigation and adaptation initiatives in support of Indonesia’s RAD-GRK
and other climate change initiatives. DFID support would be channelled to mitigation activities related to
forestry and land-use. DFID would sit on the ICCTF Management Board along with GoI ministries and
other donors (currently GIZ and USAID). The Board receives, analyses and approves all expenditures.
DFID will insert clauses into the Letter of Intent to ensure that the finance is used for technical
assistance and not for overseas flights, study tours, entertaining or per diems. The contribution will be
made in June 2015 and co-mingled with other donor support. The ICCTF is subject to annual
independent audits.
189. The procurement of technical assistance to Line Ministries will commence following the signing of
Letters of Arrangement with each ministry. The technical assistance will then be delivered through one or
more commercial contracts through the OJEU process. One option to be explored, following approval of
this business case would be to jointly contract this assistance (or combinations of each ministry) or for
them to be done separately. Selection of preferred bidders would be done jointly with the GoI. Once
preferred bidders are selected, a short inception phase would commence to allow the preparation of a
detailed work plan. Each programme of technical assistance would then be managed through technical
committees every quarter and annual steering committees.
Accountable Grants
190. In advance of this business case, DFID has received a proposal from The Asia Foundation to
deliver a comprehensive programme related to transparency and anti-corruption in forestry and land-use.
Proposals are also expected from a number of other NGOs on spatial planning and natural resource
governance.
191. For each proposal, the following governance and management arrangement will be established:







a finalised full-proposal will be requested;
a due diligence assessment will be undertaken before any partnerships are started;
a Partnership Management Committee (PMC) will be established that will include at least one
adviser from the UKCCU and two senior-level officers from the NGO concerned;
the PMC will meet at the beginning of the partnership and then semi-annually to review progress,
discuss proposed strategies, partners’ activities, ensure gender is mainstreamed into
implementation, and finalise activities;
the PMC will also be a forum to discuss issues that may necessitate programme modification,
risk mitigation, or any other developments that impact progress;
the PMC meetings will take place in Jakarta. To ensure governance within the project
implementation, the PMC will also assess the management’s strategy and performance to handle
fiduciary risk and to prevent fraud; and
for multi-year partnerships - an inception review will be held within the first six months of the
programme, in order to finalise a logframe, agree the monitoring and evaluation framework and
review detailed implementation plans.
37
192. Each partnership will be monitored and evaluated under the overall FLAG M&E component of this
business case.
Donor partnerships
193. There are two partnerships expected under the programme, with IFC and AFD. The lead adviser for
each partnership will be determined by the Head of UKCCU following the approval of this business case.
Each partnership will commence with the completion of a due diligence assessment and then followed
by the signing of an MoU between the donor partner and DFID in Indonesia. Each MoU will clarify the
baselines, milestones and results expected under the partnership, Funds will be transferred according to
an agreed payment schedule, following normal DFID procedures. Each partnership will be managed by
two tiers of steering committee:


Technical Committee, meeting quarterly, comprising the lead adviser from UKCCU and the lead
technical adviser from the donor partner; and
Annual Steering Committee meeting attended by the Head of UKCCU and the respective donor
partner. Partners in government and potential project partners will be invited to attend committee
meetings when relevant. If necessary the Steering Committee will meet more regularly.
194. Donor partners will be responsible for implementation and will report annually on results contained
in the MoU. All procurement using DFID funding will be untied.
Monitoring and Evaluation
195. All outputs delivered under all activities under FLAG will be monitored and evaluated under the
overall FLAG M&E component of this business case.
196. DFID will contract through the OJEU for an overall monitoring and evaluation contract for the
programme. The selected consultants will work to establish agreed baselines, milestones and data
collection methodologies for all activities under FLAG and then integrate these into work programmes.
Following the completion of the OJEU process and the selection of a preferred bidder, the contract would
be managed by the lead results adviser in UKCCU. During a six-month inception phase this project
would be managed intensively through monthly meetings. Following this – it would move to quarterly
management meetings.
197. The tendering of this contract would be undertaken very early in the programme to ensure that it is
in place as other partnerships commence. This will be vital to ensure that results reporting follows
agreed methodologies and can be consistent with ICF reporting requirements.
Ability to deliver
198. A due diligence assessment on all partners will be performed in advance on any agreements or
contracts signed by DFID.
Government partnerships
199. The ICCTF has struggled in the past, but now has legal status, a government budget, an effective
management mechanism and financial support from other donors. Its ability to deliver outputs related to
forestry and land-use are considered to be good. DFID will need to actively manage through its role on
the board of ICCTF to ensure that results are high-quality and delivered on time.
200. The UKCCU has very good experience of working with central ministries and of how to navigate the
bureaucratic steps to ensure legal compliance with Indonesian government regulations.
Donor partnerships
201. The donor partners selected in FLAG were chosen based on their track record of effective
operations and potential to deliver results at scale for DFID. In particular they are selected for their ability
38
to operate on the ground in remote forested provinces, something that is a major challenge for a small
DFID section in the British Embassy. Partnerships will have to be carefully managed to ensure that
results remain on track.
NGO partnerships
202. The Asia Foundation will be the major NGO partner to deliver the transparency and accountability
output of this programme. DFID has a 4-year track record of working with The Asia Foundation in
Indonesia delivering civil society support on anti-corruption. Consistently scored A or above in Annual
Reviews, this track-record of performance was recognised in the recent ICAI ICF report32.
203. A number of other smaller partnerships will be built with other NGOs. Well established NGOs have
a strong ability to work with stakeholders outside government, particularly with the private sector and
communities. Their ability to deliver depends on DFID correctly specifying realistic goals and ambitions
for the partnerships that are developed with them.
How it will respond to changes in context and the key elements of the Delivery Plan
204. This programme has been developed as the central plank of a new DFID Operational Plan for
Indonesia that will see the UKCCU focus solely on forestry and land-use issues. It will also be launched
at the time of new government in Indonesia that is committed to supporting sustainable rural
development with strong international commitments on emission reductions and climate change and a
national plan for implementation of emission reduction actions. If these commitments are not followed
through, the Head of UKCCU can scale-back planned programmes or redirect funds to the elements that
have the best prospects for delivering results for the ICF. In the event of a significant change in the
context (eg Indonesia abandons its ambitions on deforestation and its global climate change ambitions),
then DFID ministers will be given the opportunity to reconsider the efficacy of the programme in
Indonesia.
205. The programme will be reviewed annually. This will provide the opportunity to review strategy and
make decisions on future allocations of finance to any of the components under the programme.
32
Independent Commission for Aid Impact’s review of the International Climate Fund, December 2014.
39
Risks and mitigating actions
B. What are the key risks and how these will be managed?
206. There are a number of risks associated with the programme, these are categorised as follows, with
associated mitigation measures identified.
Risks
Mitigation measures
POLITICAL
MEDIUM
Institutional changes associated with the new
government, mean commitments to emission
reductions become weaker.
Intensive consultation and dialogue with GoI and with
other partners working in the sector and through the
UNFCCC to encourage a progressive position on
Indonesia’s emission reduction targets.
MEDIUM
Resistance to elements of UK support
channelled through other donors and NGOs.
Emphasise the benefits of partnerships and how they
reduce GoI administrative and management burden.
being
MARKET
MEDIUM
Little interest in the communities that are targeted for
support.
MEDIUM
Weak alternatives to business as usual deforestation
and palm development.
MEDIUM
Emphasis on demand side activities leads to
resistance from powerful interests, including local
governments or law enforcement officials.
MEDIUM
Difficult to attract reputable private investors to the
sector who would cooperate efficiently with the
Indonesian authorities as well as with the local
communities.
MEDIUM
Private sector investments supported by the
programme are not additional and would have taken
place without public support.
SOCIAL
MEDIUM
Conflict and or disagreement in areas targeted for
support.
OPERATIONAL
LOW
Disagreement between programme entities, for
example between donor representatives or between
consultants and UKCCU staff.
MEDIUM
Corruption of DFID funds.
Comprehensive consultation with communities,
clarification of expected benefits, obtain commitments
for partnerships.
Core of the project will be promote alternative
livelihood approaches and to reduce conflict and
promote transparency. Support will be practical and
deliver real change.
Strengthen CSOs and promote their connection to
communities. Use publicity, media and the courts to
secure change.
Due diligence will be undertaken on private sector
partners to ensure that they share the values of the
programme.
Private sector investment in the programme’s area of
intervention is at present limited. The additional
aspect of investments will be considered carefully as
part of the selection process.
Comprehensive stakeholder analysis prior to
programme activities so that all parties and their
interests are understood.
MoUs will be carefully drafted, will have resolution
guidelines in the event of disagreements. Regular
meetings and team building between partners.
UKCCU’s robust anti-corruption and counter-fraud
strategy is operational and all partnerships will be
under this umbrella. Regular audits, spot-checks,
management meetings will ensure that policies
procedures and (if necessary) sanctions will be
implemented.
207. As each activity is developed, a comprehensive assessment of risks for each one will be developed
as well as mitigation strategies. These risks will be regularly monitored as part of programme
implementation.
40
Exit
208. Progress will be reviewed through an independent review to coincide with the end of Year 2 of the
programme (this will be financed under the M&E component). This review will recommend options to
DFID in terms of improving performance – but also on future engagement beyond 2018.
41