The Republic of Indonesia, herein Indonesia, is the world’s largest archipelagic state. Indonesia consists of more than 17,500 islands , including the five main Islands of Sumatra, Java, Kalimantan, Sulawesi, and Papua. Administratively, since 2013, Indonesia is divided into 34 provinces . Situated in a unique position, Indonesia lies between two large oceans, the Indian and Pacific Oceans and bridges two continents, Asia and Australia . The country has over 81,000 kilometres (km) of coastline and its islands are home to an extremely varied geography and topography, ranging from sea and coastal systems to peat swamps and montane forests. Indonesia’s climate is tropical, with the highest rainfall occurring in its low-lying areas. The mountainous regions experience cooler temperatures .
Indonesia, with a population estimated at over 275 million in 2022 , is the world's fourth-most populous country . In the period 2000 - 2010, the country’s population grew at an average annual rate of 1.49%. Population growth slowed between 2010 and 2020, to an average annual rate of 1.25%. Nevertheless, within 30 years (1990-2020), Indonesia’s population increased by 50.63%. The most populous province by 2020 was West Java (49.317 million), while the least populous province was West Papua (959,600), which is located in the far eastern region of Indonesia .
According to Indonesia’s Third Biennial Update Report (BUR: 2021) under the United Nations Framework Convention on Climate Change (UNFCCC), approximately 67.1% of the country’s population live in urban areas . By 2035, nearly 70% of Indonesia’s population is expected to live in cities, and three-quarters of the population in Java will live in urban areas. Urbanization in Indonesia is driven by the rural to urban migration of people for jobs and better lives, and the transformation of the region from rural areas into urban areas. With rapid urbanization, Indonesia has experienced increasing inequality. According to Indonesia’s Voluntary National Review, data shows that inequality in urban areas is much higher than in rural areas. Poverty in urban areas has also decreased much more slowly than poverty in rural areas. Unanticipated urbanization has resulted in challenges including lower quality of life (urban slum areas), urban poverty, increased pollution, reduced environmental quality, and congestion .
Indonesia is the largest economy in Southeast Asia . The country has made remarkable development strides in the 21st century, including sustained economic growth and significant reductions in poverty . The Indonesian poverty rate based on the national poverty line decreased from 11.13% in 2015 to 9.22% in 2019, at an annual rate reduction of 0.48%. The year 2018 was an important milestone in Indonesia, as it was the first time the country’s poverty rate had been a single-figure digit .
Between 2015 and 2020, there was a population structural shift from the agriculture sector to other economic sectors, which has become apparent and reflected in the contribution of each sector to GDP. In 2020, the main contributors to the country's GDP were manufacturing (19.88% of GDP) and agriculture (13.70%). During the period 2015-2019, Indonesia's economy enjoyed an average annual GDP growth rate of 5.03%. In 2020, the COVID-19 pandemic negatively impacted the country’s economy  and Indonesia experienced negative economic growth for the first time since the Asian Financial Crisis in 1997-1998 . As a result, Indonesia moved from upper-middle income to lower-middle income status, as of July 2021 .
Indonesia’s economy is now recovering. The economy accelerated 3.7% at the end of 2021, as the country stepped off from the COVID Delta wave. Momentum continued in early 2022 at 5% (Year on Year) , supported by growing commodity exports and accommodative fiscal policy to weather the pandemic . However, due to the challenging global environment, the country is starting to feel the pressures of rising prices and tightening external finance . According to the Asian Development Bank, the Indonesian economy is projected to grow by 5.4% in 2022 and 5% in 2023. But inflation in developing Asia, while remaining lower than elsewhere in the world, is increasing amid higher energy and food prices . Inflation, which averaged 1.6% in 2021, is forecast to rise to 4.6% in 2022, because of higher commodity prices and the recent increases in fuel price. It is projected to be almost 6.0% through June 2023 and to ease to below 4.0% by the end of 2023 . A sharp deceleration in global growth, global financial volatility, tighter macroeconomic policy in Indonesia, and continuing shocks from the Russian invasion of Ukraine all risk denting Indonesia’s economic growth in 2023 , .
As economic recovery has resumed in Indonesia, the country's headcount poverty rate has declined in 2022. In March 2022, the Indonesian poverty rate based on the national poverty line decreased to 9.5%, down by 0.6 percentage points (pp) from March 2021. Progress in poverty reduction was observed in both urban and rural areas. Increases in employment in agriculture, manufacturing, and transportation, as well as the logistics services sector contributed to poverty reduction in Indonesia. Despite a decline in unemployment by 0.4 pp to 5.8% from February 2021 to February 2022, unemployment has still not returned to its pre-pandemic level of 4.9% in February 2020. Under-employment is also still higher than before the pandemic .
Indonesia’s digital economy will remain a key driver of inclusive growth in the coming years . However, Indonesia is still facing challenges to expand access to electricity in remote and hard-to-reach areas, including the provinces of East Nusa Tenggara, Central Kalimantan, Nusa Tenggara, Maluku, and Papua. As of 2020, there are still 409 villages without electrification and 3090 Energy Saving Solar Lamps (Lampu Tenaga Surya Hemat Energi/LTSHE) villages that need access to electricity and increased reliability .
Over the last decade, internet access in the country has improved substantially: as of 2020, almost three-quarters of the population are internet users, far above the global average of 60% . However, those living in rural areas and underdeveloped regions, as well as vulnerable groups, such as women, the elderly, and people with disabilities, continue to experience disadvantages in internet access. Development of internet infrastructure should continue to be prioritized in hard-to-reach areas to improve the country’s internet coverage, which can be utilized for business development, innovation creation, social network expansion, and intensive political participation, among many other things . Through the Palapa Ring Project, the government is already investing in fiber optic-based backbone communication infrastructure for 36,000 km to reach around 500 districts in the country , which aims to provide access to 4G services across Indonesia's vast archipelago .
Though internet connectivity in remote areas remains difficult, there is optimism that increasing smartphone penetration can help leapfrog this challenge . In Indonesia, the proportion of individuals who own mobile telephones increased from 56.92% in 2015 to 63.53% in 2019, but then decreased to 57.48% in 2020. The highest access to mobile telephones was among young people (15-24 years old) and the level of access to mobile telephones in urban areas was better than in rural areas. Additionally, mobile phone access remains higher in men than women, though the gap became narrower during the 2015-2020 period .
Indonesia's 2021 Government Work Plan outlines the challenges that still need to be addressed in the Technology, Information and Communication (ICT) sector, which are: (i) inadequate access and unreliability of ICT infrastructure to boost digital economic growth; (ii) the use of ICT infrastructure that has been implemented needs to be optimized for public sector services, industry, tourism and services to restore economic productivity; and (iii) the use of ICT infrastructure services is hampered by limited Human Resources (HR) who have mastered expertise in the digital field .
Two types of natural disasters occur in Indonesia, namely hydrometeorological disasters due to climate change and disasters due to geological activities. The number of hydrometeorological disasters is far greater and appears to be showing an increasing trend, when compared with geological disasters. However, the geological characteristics that place Indonesia at a point of several tectonic plates have made it prone to disasters such as earthquakes, volcanic eruptions, and potential tsunamis. Though these disasters are rare in terms of frequency, they have the potential to cause loss of life and economic losses on a large scale as many human settlements and important infrastructure are built around active faults. For example, Indonesia is classified as a tsunami-prone country because it is located at a point where 3 major tectonic plates meet, namely the Eurasian Plate, the Indo-Australian Plate, and the Pacific Plate, and almost all coastal cities and regencies are at high and very high risk of tidal waves of three meters or higher .
Violence against children and women are severe problems in Indonesia. One in three women aged 15-64 have experienced physical or sexual violence throughout their lifetime, according to the 2016 National Women’s Life Experience Survey (SPHPN). Furthermore, the National Children and Adolescents Life Experience Survey (SNPHAR) 2018 found that 62% of girls and 61.7% of boys aged 13-17 have experienced violence. One form of violence against children in Indonesia is child marriage. Though it is still challenging to regularly obtain the complete picture of violence against children and women in the country, the Government of Indonesia has recognized that a lot of improvement is needed in the protection of children, women, and other vulnerable groups .
Indonesia’s National Medium-Term Development Plan (RPJMN) 2020–2024 signals a shift towards a new green, low-carbon development path that would enable the country to meet its goal of achieving high-income status by 2045. The RPJMN includes seven current development agendas, one of which is ‘strengthening the environment and improving resilience against natural disasters and climate change’. The national priorities for this development agenda are divided into three policy groups, with strategies to realize each policy direction, namely: (1) improving the quality of the environment; (2) increasing resilience against natural disasters and climate change; and (3) applying a low-carbon development approach .
Since 2017, the Indonesian Government has been working progressively on implementing Low Carbon Development Indonesia (LDCI), which aims to explicitly incorporate environmental considerations (GHG emission reduction and carrying capacity) into the national and regional development planning toward 2045 . In support of Indonesia’s Low Carbon Development, the country launched its Long-Term Strategy for Low Carbon and Climate Resilience 2050 (Indonesia LTS-LCCR 2050) in 2021, which aims to contribute to global goals and to achieve national development objectives, taking into consideration the balance between emission reduction, economic growth, justice, and climate resilience development. Indonesia’s commitment to tackle climate change impacts is also reflected in the ratification of the Paris Agreement through Law No. 16/2016 .
The key piece of environmental legislation that deals with environmental issues in Indonesia is Law No. 32/2009 on Protection and Management of Environment, with the objectives to protect environmental function sustainability, enforce the wise use of natural resources, achieve sustainable development, and anticipate global environmental issues . The law also increases the power of the environment ministry to oversee compliance monitoring and enforcement activities by provincial and local governments. In recent years, the Ministry of Environment and Forestry (MoEF) has increasingly used such “second-line” enforcement, particularly in the environment sector .
Concerning the management of coastal and marine areas, the Coastal and Small Islands Management Law and the Indonesia Ocean Policy aim for coherent and harmonious marine spatial planning across all levels of government, but thus far implementation has fallen short. The idea was that marine spatial planning, through tools called the Zoning Plan for Coastal and Marine areas (RZWP3K) and the Strategic Plan for Coastal and Small Islands Zonation (RSP3K), could guarantee allocated spaces for different functions in the sea. As of September 2021, 27 of Indonesia’s 34 provinces had RZWP3K plans approved by the Ministry of Marine Affairs and Fisheries, and of these, 21 had allocated significant amounts of coastal land for large-scale infrastructure projects that require reclamation .
Over the span of 30 years, cooperation between the EU and Indonesia has been rooted in and strengthened by shared values of democracy, human rights and pluralism, and common interests such as sustainable development, climate resilience, and global health. In May 2014, the EU-Indonesia Partnership and Cooperation Agreement (PCA) came into force, covering a wide range of policy areas including climate change mitigation and the environment . For the period 2021-2027, EU-Indonesia cooperation will prioritize trade and connectivity, governance and security, and the Green Deal. The EU will support policy-driven cooperation, particularly in the areas of trade, investment and connectivity, green inclusive development, good governance (including anti-corruption and rule of law), human rights, including labour rights and gender equality, and human security (including Disaster Risk Management and Disaster Preparedness as well as preventing and countering violent extremism) .
Recent highlights of EU-Indonesia cooperation include the launch of the ARISE+ Indonesia, which aims to strengthen Indonesia’s trade competitiveness by improving the country’s business environment, strengthening trade and investment policy, and providing technical assistance to Indonesian SMEs; the Marine Biodiversity and Support of Coastal Fisheries in the Coral Triangle project, which aims to improve the management of commercially and ecologically important fisheries and create marine protected areas (MPAs) with long-term financial arrangements; and the EU-Indonesia FLEGT Voluntary Partnership Agreement (FLEGT-VPA). In 2016, Indonesia made history by becoming the world’s first Voluntary Partnership Agreement (VPA) partner country to issue FLEGT (Forest Law Enforcement, Governance and Trade) licenses for timber and timber products exported to the EU market .
The European Investment Bank (EIB) is also supporting Indonesia to address climate change effectively, and at the same time, helping to unlock major investment opportunities that will accelerate the green economic recovery of Indonesia from COVID-19. The EIB, the climate bank of the EU, has announced plans to finance two bus rapid transit systems (BRT) in the cities of Batam and Makassar. The EIB financing is part of a wider Team Europe support to reduce Indonesia’s greenhouse gas emissions by up to 41% by 2030 , .
Additionally, the EIB and PT Mass Rapid Transit Jakarta (MRT Jakarta) signed a Memorandum of Understanding (MoU) in May 2022, as a first step towards more concrete financial and technical support for the sustainable and green urban development of Jakarta. EIB and MRT Jakarta will work together in developing the city’s public transport network and financing urban regeneration of residential and business areas along the transport routes. The expanded transport network will provide safer, more affordable, green and sustainable commuting to more than 10 million citizens of Jakarta, reduce commuting times, cut air and noise pollution, and support the Republic of Indonesia in achieving its ambitious climate action targets. Urban regeneration of areas along the line is also expected to contribute towards improved living and business conditions in the national capital .
Recently, in September 2022, the EIB also opened a regional representation office for Southeast Asia and the Pacific in Indonesia, building on three decades of EIB involvement in financing projects in the region. The EIB office in Jakarta will work to ensure that the development loans granted in cooperation with its financial partners accelerate growth, make rural areas more prosperous, transform cities into innovation hubs and strengthen economies. The EU bank is ready to finance regional climate action, climate change mitigation projects, green energy and the just transition in carbon-neutral economies, sustainable and disaster-resilient infrastructure development, urban development, digitalisation, transport and the blue economy. In Indonesia alone, EIB is ready to invest up to €1 billion in projects each year. With the EIB’s permanent presence in Jakarta, EU-Indonesia partnership can be further strengthened on climate action, the energy transition and sustainable urban development. The EIB’s permanent presence on the ground aims to bring EU-Indonesia cooperation to the next level, by ensuring proximity, increasing operational delivery capability, and ensuring closer institutional ties with national authorities .
Indonesia is highly vulnerable to the impacts of climate change, including extreme weather events such as floods and droughts, as well as long-term changes such as sea level rise, shifts in rainfall patterns, and increasing temperatures . Already, Indonesia has seen a rising trend in hydrometeorological disasters influenced by extreme short-term climate variability and by the effects of climate change . During 2016, there were 2,342 disasters, of which 92% were hydrometeorological disasters dominated by floods, landslides and puting beliung (light tornado) .
Climate change in Indonesia is likely to have impacts on water availability, disaster risk management, biodiversity, urban development, particularly in the coastal zones, and health and nutrition, with implications for poverty and inequality . According to an analysis by insurer Swiss Re, if the world is 2.0–2.6°C warmer by mid-century, as it may be even if current pledges under the Paris Agreement are met, Indonesia’s GDP could shrink by 16.7–30.2% due to climate change impacts. Therefore, ambitious climate action is crucial for Indonesia's future .
Indonesia represents the third largest tropical rainforest in the world and is home to the world’s largest tropical peatlands and mangrove forests . These forest ecosystems provide society with a wide range of important ecosystem services  and are central to the lives of about 48.8 million Indonesian people, who are dependent on forest resources for their survival . However, deforestation and forest degradation are of major concern to Indonesia . Indonesia had the highest rate of annual primary natural forest loss in the tropics, reaching the greatest level of 3.51 million hectares annually between 1996 and 2000, during which time major forest fires occurred , .
As tropical deforestation contributes significantly to global warming and atmospheric change , Indonesia’s tropical forests have an important role to play in tackling global climate change. During the period 2000- 2020, the average GHG emissions level in Indonesia from forests and peatlands stood at 499 MTon CO2e/year, with around 40% of the emissions coming from peat fires .
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