15/07/2011 (Jakarta Globe) - Many industry leaders in Indonesia hold misconceptions about the recent moratorium on logging. Questions abound on whether the halt on issuing new licenses to convert forests and peatland means a shutdown of business in the sector. And many ask about the purpose of Norway’s $1 billion contribution to Indonesia’s efforts to reduce greenhouse gas emissions caused by deforestation.

A prevailing perception in industry is that the price of accepting Norway’s money is halting the $16-billion-a-year palm oil industry. But in the government’s eyes, business continues and palm oil production continues. It is not a matter of taking the Norwegian money and stopping work. “The Norwegian money is not intended to make Indonesian industry sit under a tree and twiddle its thumbs,” says Matthias Rhein, an adviser to the Ministry of Finance in Jakarta.

Susilo Bambang Yudhoyono’s recent presidential instruction suspends for two years all new concessions for conversion of primary forest and peatland and aims to improve governance in the forestry sector. Indonesia has experienced how unsustainable business practices can harm communities. Much conflict has resulted from competing land claims, exacerbated by weak land use planning.

“In a rapidly developing country with a growing population, the frequency of such conflicts is likely to increase,” said Moray McLeish of the World Resources Institute. “This Norwegian money can help pay for improved land use planning, thereby reducing conflicts, providing a more secure operating environment for businesses.”

Rural communities throughout Indonesia have learned the hard way that the unregulated pursuit of short-term gains often comes at a large long-term cost. Economic development that ignores sustainability usually entails a brief boom followed by a prolonged bust.

Strict criteria governing the counting of reduced carbon emissions mean a monitoring, reporting and verification (MRV) system has to be put in place before Indonesia can sell carbon credits.

Improved land use planning and precise MRV are both elements of good governance, as are clear rules about what activities can be undertaken, where and by whom.

Reputable businesses seek clear laws and predictable regulations to guide their operations. Less reputable operators, however, thrive in the gray areas created by unclear laws and uneven enforcement.

How a businesses conducts its businesses will define what changes to governance it will welcome — or fear.

This moratorium can bring some much-needed transparency to land use planning and licensing. For those businesses that pay bribes, and for the officials who solicit them, transparency is threatening. However, for clean businesses, transparency will help — in the medium to long term.

There is likely to be a difficult initial period where disreputable actors are subject to, and try to resist, this transparency. The clean businesses are not likely to enjoy immediate benefits. It will take some time to create a level playing field, on which clean businesses no longer have to compete with illegal operators.

And as market trends change, and the buyers of timber and palm oil become increasingly concerned about deforestation or social conflict in their supply chain, businesses that practice sustainability can expect to command a premium price for their goods.

The government has stated that the moratorium is about “improving governance,” so it has a responsibility to be clear about what this really means and what it will do.

In a bid to encourage palm oil planters to move onto low carbon “degraded” lands, the president last month announced that Indonesia had more than 30 million hectares of degraded land.

For business, however, this magic figure is not of much use. The government has yet to create a list of the characteristics of land classified as degraded, a map identifying such areas and a system to make it available to palm oil planters.

The private sector requires clearer rules — not only what cannot happen and where, but what can happen and where.

Consistency in applying the rules of the moratorium is a big test for the government — will the rules be applied and enforced in the same way at different locations, and at different points in time? Reputable businesses deserve, require and demand, this.

There has not been enough information to increase predictability and reduce risks for business. To achieve this, the government should provide further details on policies and regulations to facilitate low-carbon growth.

First, it should freely provide accurate data on the use of forests, land titles, spatial plans and indications of which degraded land is available for cultivation.

Second, it should create mechanisms for provision of fair and transparent access to degraded land for businesses and local communities.

And third, it should provide incentives for industries willing to invest in the low carbon economy.

It is clear that one presidential instruction will not solve the whole problem. But a two-year suspension is a big step toward “7/26” — Yudhoyono’s target of maintaining an economic growth rate of 7 percent while reducing emissions by 26 percent by 2020.

In a world with a growing population, improving living conditions and burgeoning demand for food, we need to “do more with less for more,” as the late University of Michigan professor C. K. Prahalad once put it.

Through this moratorium, the government seeks to create the conditions to allow Indonesia’s businesses to do just that.