The Analysis of Agriculture Implication on Indonesia’s Green Economy

The Analysis of Agriculture Implication on Indonesia’s Green Economy

Published: 2021.03.30
Accepted: 2021.03.29
College of Agriculture and Natural Resources, National Chung Hsing University, Taiwan
Indonesian Center for Agriculture Socio Economic and Policy Studies
Distinguished Professor
Department of Forestry, National Chung Hsing University, Taiwan


Nowadays, climate change presents as the fundamental global challenge for humanity. In the last two decades, environmental damage and global warming have become increasingly severe and frightening and have had tremendous negative impacts on humankind's lives globally. Natural disasters such as floods, soil, water, and air pollution, extreme climate, and weather changes occur everywhere in various countries. These challenges include climate change on food security and community survival, with rapidly increasing populations, high poverty rates, and environmental degradation. As a solution, a green economy development pattern and concept was formed to improve human welfare and social justice while significantly reducing risks to the environment. Indonesia has adopted the green economy principle, and agriculture is an important sector that will drive this growth. Agriculture can support sustainable development, despite challenges related to resource availability, the environmental impact of agriculture, and climate change. For agriculture to support Indonesia's green economy, it must contribute to economic growth and not destroy the environmental, social, political, and cultural systems. This article carries out an analysis and synthesis that highlights the critical determinants of an agricultural green economy and strategic policy in its development.


Keywords:            agriculture, green economy, policy, Indonesia



The implementation of a national Green Economy strategy in each country can vary according to their needs. The information and policy bases needed to support a green economy in general, and agriculture is not yet well developed because a green economy is a developing concept both globally and in Southeast Asia. An analysis of the regulations and the Indonesian government's focus on implementing a green economy can be shown from the supportive policies of Four Development Goals, namely pro-growth, pro-jobs, pro-poor, and pro-environment (Bappenas, 2019). Through the National Development Planning Agency of the Republic of Indonesia, the green economy is implemented into a program that supports SDGs. Agriculture is the most vital factor supporting the green economy concept because it helps solve the environmental, food, unemployment, and poverty problems.

World attention to environmental problems has been poured over the past 40 years, which leads to the convening of the 1972 United Nations Conference on the Environment in Stockholm. However, in reality, the world still faces two major problems, namely the issue of fulfilling people's welfare on the one hand and the question of preservation of environmental functions and management of natural resources as a support of human life on the other hand. Both of these two problems are the backbone of human life on the other side, and are, in fact, always contested. Economic development activities to meet the people's welfare so far in developing countries are based more on natural resources. Indonesia has a great quantity and quality of natural resources. This causes neglected aspects of environmental protection and preservation and causes various ecological problems, such as water and air pollution, soil quality, fire and forest damage, conversion of agricultural land functions, climate change, etc. Such conditions ultimately lead to the emergence of poverty pockets in people whose lives depend on these natural resources and the environment.

Despite their different assumptions and operational strategies, the green economy and circular economy, and bio-economics concepts are combined by common ideals to reconcile economic, environmental, and social improvement goals. Three ideas are currently mainstreamed in policymaking as the primary sustainability path. According to the study of D'Amato et al. (2017), at the policy level, there is a need to improve, clarify, and systematize contemporary concepts in detail and not mix them up. This can be done by promoting a more integrated interpretation and application of green economy, circular economy, and bio-economics. It is a way to increase effectiveness towards the common goal of sustainability; identifying areas of opportunity and community-related actors to pursue the incorporation of several concepts in their light synergy and conflict. Tables 1 and 2 below explain the differences in the three ideas that can enrich and enhance the overall landscape of policy instruments that apply these concepts, with particular attention to efficacy, efficiency, and consistency.

The preceding discussion underlines the following challenges to existing activities to promote a green economy in Indonesia. It comprises: (1) scholars in Indonesia have not discussed the concept of the green economy in detail; (2) green economy activities already exist in Indonesia, but their effectiveness in achieving measurable relative targets for the people's economy and never discussing solutions to the consequences of economic damage; (3) failures in scaling up various suitable activities have been linked to inconsistent and ineffective market regulations; risk of losing competitiveness; financial difficulties; and suboptimal coordination; and (4) the enormous push and pressure for macro-level reforms such as the removal of energy subsidies have been hindered by internal social and political problems. Important issues must be among excellent ideas if we have a goal to devise a practical and workable strategy.



This article aims at overviewing the agricultural green economy status and government strategies of Indonesia. It discusses the green economy status, environmental issues, policy strategy, and green economy practices in the country's agricultural sector.




Overview of Indonesia’s green economy status and its policy strategy

The development approach of the Indonesian government during 2004-2019 has shown high economic growth, which is above 5% per year, except in 2009. However, along with such high change, environmental damages and socio-environmental crisis are also part of the current consequences. Economic and business actors' irregularity causes poverty, unemployment, economic inequality, ecological damage, and natural disasters. The income gap between community groups, reflected in the Gini Ratio, has increased in the last ten years to reach above 0.41 (Central Bureau of Statistics, 2020). The phenomenon shows something wrong with a national development strategy based on four pillars (pro-growth, pro-poor, pro-job, and pro-green). It could be that development strategies and policies so far have unwittingly led to the emergence of the greedy behavior of economic and business actors who sacrifice society and the environment in the interests of financial and business growth (Bappenas, 2010).

Indonesia's economic growth to date has been built with the rapid expansion of natural resource-based industries, particularly mining, energy, agriculture, and forestry. Economic growth occurred with structural changes in the economy, including shifting away from primary industries and expanding the service sector. This economic growth has brought prosperity to many people. According to OECD (2011) in Kasztelan (2017), green growth means taking measures conducive to growth and economic development, while ensuring that natural assets continue to provide the resources and environmental services which contribute to the country’s prosperity. However, Indonesia's financial growth path also contributes to increasing social and environmental problems. The future challenge is to maintain a rapid economic growth rate by increasing resource efficiency in an inclusive and community-based manner (Bappenas, 2015). This is very important for achieving various economic and social goals, including food and energy security and reducing pressure on the environment and natural resources.

The importance of achieving economic growth can be seen by comparing the two scenarios. The "business as usual" scenario based on the latest trends in resource and energy intensity in the Indonesian economy and carbon intensity in Indonesia's energy supply – directions from the last two decades is assumed to continue. In contrast, the 'green growth' scenario assumes gradual changes in energy intensity in the economy and carbon intensity in the energy system - both of these scenarios have been proven to occur in other countries. This alternative scenario's benefits include high-quality economic growth, accelerated structural changes, accelerated increases in resource and energy productivity, and increased environmental protection. However, green economy assigns more funding than the business-as-usual (Georgeson et al, 2017)

The green growth scenario shows that reducing the Indonesian economy's intensity is in line with continuing rapid economic growth. By approaching best practices, Indonesia can gradually minimize environmental damage while maintaining a rapid economic growth rate. The result is a more robust economy with greater welfare for more people. This result is driven by increased income and increased health, food, energy security, and sustainability – all substantially caused by reduced environmental and ecosystem damage, and at the same time, contributing to sustainable development.

Green growth will require investment. The reason for the investment is to avoid the more significant costs associated with maintaining the status quo. These costs can be significantly reduced by a green growth approach, including health costs that are deteriorating due to insufficient water and air quality; food insecurity due to soil erosion, soil subsidence, and uncertain water availability; damaging impacts from mining, deforestation and illegal fishing; high levels of greenhouse gas emissions; and widespread flooding due to deforestation and river sedimentation. Green growth offers an alternative path to prosperity – without harmful side effects.


Environmental issues due to irregularities in economic and industrial activities in Indonesia

Indonesia's economic growth to date has been built with rapid industrial expansion to improve and enhance the economy (Yusuf et al., 2010). Unfortunately, Indonesian regulations are still not ready to face the challenges of overcoming the consequences. Makmun (2016) studied the following are the factors that have become the consequences of disrupting green growth in Indonesia to date.

Air quality: Emissions from toxic gases and particles, including smoke from forest fires and peatlands, have reduced air quality in many cities in Indonesia. Recent estimates state the impact of death from air pollution in Indonesia is around 3% of Gross Domestic Product 2010 (Bappenas, 2018).

Groundwater abstraction and subsidence: In Jakarta, almost all industrial water needs are met with water abstraction, not groundwater. As a result, the land surface dropped significantly - even some densely populated areas in Jakarta continue to decline in a few locations of about 20-28 centimeters per year (Abidin et al, 2011).

Water quality and availability: Water quality is a growing problem in Indonesia. The latest report states that 14% of drainage basins are in critical condition, while the Ministry of Environment survey said that most rivers in Indonesia had been severely polluted.

The impact of coal mining and burning: Mining and coal mining have environmental effects that endanger the community, including the health impacts of the community in the mining area, ecological damage in the mining area and from mining transportation, as well as the health effects of air pollutant emissions from combustion. Rough estimates suggest that Indonesia's costs from these practices are US$ 100 million dollars per year, not including the damages caused by climate change.

Social impact of carbon: At present, Indonesia's CO2 emissions from fossil fuel consumption are around 500 million tons per year. Meanwhile, CO2 emissions from land-use change and forestry can reach more than 1 billion tons per year (Climate Transparency, 2019). These emissions have an economic impact on future generations in Indonesia and throughout the world (Box 1)


Box 1

The Impact of Gas Emission in Indonesia

The Green Economic concept’s primary implementation in Indonesia is the Government of Indonesia's commitment to reduce greenhouse gas emissions by 26% by 2020 through Presidential Decree Number 61/2011, which focuses on the Action Plan to Reduce Greenhouse Gas Emissions. The ambition to reduce greenhouse gas emissions is contained in Indonesia’s Long-Term National Development Plan (RPJPN 2005-2025), with a commitment to reduce 29 to 41% by 2030.

According to the National Medium-Term Development Plan, the Indonesian government's most important goal is to make middle-high income people prosperous, fair, and sustainable. The macroeconomic development target for the period 2020-2024 is that economic growth is expected to increase by an average of 5.40 to 6.03% per year and GDP per capita growth of 4.0 +/- 1.0%, which is driven by increased productivity, sustainable investment, increasing the labor market, and improving the quality of human resources. With this economic growth target, the GNI per capita (Atlas Method) is expected to increase to US$ 5,600 to 5,930 per capita by 2024. Besides maintaining economic growth, inflation stability remains a priority. The inflation rate is targeted at 3.0 ± 1.0% throughout 2020-2024 (Bappenas, 2019).


According to the United Nations Development Program data (UNDP, 2020), in 2015, Indonesia was the fourth largest carbon emitter country, with more than 80% of national emissions from land-use changes, mainly deforestation. Indonesia's biodiversity is an essential commodity in the world, however domestically the protection of biodiversity is still weak (Bappenas, 2004). The current national legal framework for biodiversity conservation is centered on Law no. 5 of 1990, the adoption of the IUCN World Conservation Strategy in 1980. Threats of damage to biodiversity due to involvement in irregularities, such as large-scale forest fires, coral mining, dredging, industrial effluent, agricultural effluent and oil spills (Cleary & Devantier, 2011). Therefore, Indonesia's biodiversity must be treated as a country's wealth that must be managed, safeguarded, and preserved with a wise use for the greatest possible prosperity of the world.


Indonesia’s government strategy on green economy

Green economy emphasizes the environmental dimension of Sustainable Development. The green economy then needs to be included in the context of sustainable development. In general, the environmental side of sustainable development has been relatively neglected, the reason being that the environment has a more distant view element. Green economy strategies must be aligned with other development goals. A green economy must be seen as an integral part of the broader concept of sustainable development and emphasize that a green economy must always be related to other development agendas. Its development planning is to bridge the gap between different development agendas such as the Millennium Development Goals (MDGs) and the environment or natural capital.

The National Development Plan is an umbrella for all government policies and economic development programs in Indonesia (Bappenas, 2005). The activities carried out towards the green economy are implicit in the development plan. Law Number 17/2007 related to the National Development Plan, which states that national development has four objectives: making Indonesia green and sustainable is included in its goals. These objectives are displayed in three areas: adaptation to climate change in agriculture to ensure food security, development of alternative energy, and disaster management. Another breakthrough in legislation that has created a right environment towards a green economy is the current law, Law Number 32/2009 on Environmental Protection and Management, which strongly supports "Green Indonesia" through various directions and mechanisms and the use of economic instruments to achieve safe environmental management without compromising economic growth (Bappenas, 2015 and Bappenas, 2019).

This macro condition has an impact on improving the quality of growth. The poverty rate and open unemployment rate are expected to decrease to 6.5 to 7.0% and 4.0 to 4.6% respectively in 2024. The level of the Gini ratio increases from 0.370 to 0.374 in 2024. Meanwhile, HDI is expected to increase to 75.54 in 2024, which indicates an improvement in the quality of human resources.

The Ministry of Finance sees that a green economy cannot be implemented without changing the structure of economic incentives. Low yields in a green economy (such as green investment) are the biggest obstacle to its success. An essential element for changing the structure of incentives is fiscal policies. The Ministry of Finance also sees that energy price reform is vital for the green economy and underscores policy refining options. However, it seems that the choice is not a direct matter and is not counted as an urgent element related to waste resources from about US$ 20 trillion per year for energy subsidies. The following can be summarized into nine strategies to minimize general methods' differences to implement Indonesia's green economy (Table 3).

Agriculture Practices in Indonesia’s Green Economy

Fundamentally, the constitutionalizing of environment in the Indonesian constitution has been carried out in the amendments to the 1945 Constitution (GoI, 1999). This can be referred to as a guideline of the green economy includes:

  1. Article 28H paragraph (1): Everyone has the right to live in physical and spiritual prosperity, to have a place to live, and to have a good and healthy living environment, and the right to obtain health services.
  2. Article 33 paragraph (4): The national economy is carried out based on economic democracy with the principles of togetherness, efficiency-justice, sustainability, environmental awareness, independence, and by maintaining a balance between progress and national economic unity.

The practices of the green economy in the agricultural sector in Indonesia are quite diverse. However, those are predominantly implemented on small-scale lands since it has an obstacle in adopting large-scale areas due to inadequate incentive. Table 4 shows some relatively environmentally friendly agricultural practices related to the green economy and its challenges in the country. 

The green economy can generate economic activities in agriculture to be more environmentally friendly (Sayaka et al., 2015). The marketing method can be conventional, but the product's appearance must be more attractive, and consumers can feel the benefits.  In other words, the conventional marketing method is related to “green” while the attractive term is associated with “economy” substance. The price of green economy products is generally higher because the social costs (efforts to preserve the environment) are considered. In this case, the government needs to promote a green economy so that public awareness, both producers and consumers, would be improved. Strict enforcement of regulations must be carried out in order to provide a deterrent effect on environmental offenders. Organic certification is needed so that consumers have more confidence in green economy products. In addition, further efforts are needed so that product certification does not only assess the production process but also tests the content of the products. Green economy implementation requires group cooperation because it is very difficult for individual farmers to implement, which are generally categorized small-scale in Indonesia.

Overall, the implementation of Indonesia's agricultural green economy tends to be exclusive and sporadic. This consequently causes a gap between aspiration and applying green economy concepts in the field (Leimona et al., 2015). Hence, it is required to strengthen the government's environmental management role within an integrated framework system. It also needs to adopt, develop, and manage the green agricultural economy in voluntary approaches supported by incentive provisions and participation of relevant stakeholders, particularly the private sector. Finally, national and local governments should work more intensively and sustainably to develop the green agricultural economy in the country systematically. 


The synthesis of sustainable and green agriculture principles should produce a different set of principles for Indonesia's agricultural sector in the context of a green economy. The amalgamation of these principles should be aligned with Indonesian realities and outside of international policies, theories and principles. On the other hand, this merging of the circular economy, green economy and bio-economics concepts requires adjusting the way in which agriculture is structured and implemented, from policy to practice, and involving all stakeholders, including farmers, government, the private sector and civil society together to create the right conditions to facilitate change. In reality, it is also important to put in place mechanisms to manage the risks and opportunities associated with climate change and other global conditions, to minimize negative impacts on, and generate benefits for the green economy.

In conclusion, the primary keys are appropriate policies and institutions, relevant information and skills, innovations to support sustainable agricultural production, and social and economic systems. The right incentives to encourage changes of farm businesses and supply chains that support a green economy, the ideals of environmental protection and social inclusion will realize the implementation of the agriculture sector's strength in Indonesia's green growth.


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