This study by Traction Energy Asia provides a technocratic analysis of Foreign Direct Investment (FDI) in Indonesia’s electricity (coal power) and agroforestry (oil palm) sub-sectors. It compares the economic, social, and environmental impacts of FDI from different countries of origin to inform a low-carbon policy strategy.
The Study at a Glance
| Sub-Sector | Location (Regency) | FDI Project (Origin) | Key Metrics Compared |
|---|---|---|---|
| Electricity | Cilacap, Central Java | PLTU Karangkandri (China) | Economic Growth, Poverty, Health, GHG Intensity |
| Electricity | Jepara, Central Java | PLTU Tanjung Jati B (Japan) | Economic Growth, Poverty, Health, GHG Intensity |
| Agroforestry | Kubu Raya, West Kalimantan | PT Rezeki Kencana (China) | Income, Conflict, Water Quality, GHG from Land Use |
| Agroforestry | Sanggau, West Kalimantan | PT Agro Palindo Sakti (Singapore/US) | Income, Social Capital, Water Quality, GHG from Land Use |
Key Findings: Electricity Sub-Sector (Coal Power Plants)
- Economic Impact: Both plants contributed to reducing income inequality and acted as regional growth poles. However, only the Japanese-funded plant (Tanjung Jati B) showed a positive contribution to long-term economic growth (GRDP). Neither plant contributed to reducing regional poverty.
- Social & Health Impact: CSR programs provided social benefits. However, pollution (especially NO2) from both plants exceeded WHO guidelines, leading to increased cases of Acute Respiratory Infections (ARIs) and skin diseases in nearby villages.
- Environmental Impact (GHG Intensity): This is the most striking difference.
- Chinese FDI (Karangkandri): Produces 122.15 kg of CO2e per dollar invested.
- Japanese FDI (Tanjung Jati B): Produces 119.17 kg of CO2e per dollar invested.
Key Findings: Agroforestry Sub-Sector (Oil Palm Plantations)
- Economic Impact: The sector has strong economic linkages and multiplier effects on output, income, and employment. However, quantitative analysis confirms that FDI in this sector has not contributed to reducing poverty levels at the provincial or district level.
- Social Impact: Positive impacts include job creation, increased digital literacy, and improved energy access. Negative impacts include agrarian conflicts (land disputes with communities) and reduced fish populations due to water pollution from mills.
- Environmental Impact (GHG Intensity): The disparity is stark, primarily driven by land clearing practices.
- Chinese FDI (PT Rezeki Kencana): Caused 7,689 hectares of deforestation, resulting in 3.06 million tonnes of CO2e from land preparation alone.
- Other FDI (PT Agro Palindo Sakti): Caused 5 hectares of deforestation, resulting in 2,757 tonnes of CO2e from land preparation.
Policy Recommendations: The Path to Low-Carbon FDI
The report concludes with clear, actionable strategies for the Indonesian government (BKPM, Coordinating Ministry for Maritime Affairs):
For the Electricity Sub-Sector:
- End offers for new coal plants and aggressively promote incentives for solar, wind, geothermal, and tidal energy.
- Revise the New and Renewable Energy Bill (RUU EBT) to remove false solutions like palm-biodiesel and biomass without safeguards.
- Mandate advanced pollution control and circular economy waste treatment for all new projects.
- Ensure the incoming 2025 carbon tax applies to all foreign investment projects.
For the Agroforestry Sub-Sector:
- End investment offers for new land clearing by adopting a mandatory NDPE (No Deforestation, No Peat, No Exploitation) policy.
- Only permit investments that commit to sustainable intensification, good agricultural practices, and NDPE principles.
- Promote alternative feedstocks (like used cooking oil) for the biodiesel program to limit palm oil expansion.
- Mandate waste treatment systems that capture methane (e.g., from palm oil mill effluent) for renewable energy.
