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Balancing Sustainability with Economic Development in Developing Countries – The Case Study of Indonesia

Natural resources have historically been responsible for growing economies. Much of the developed world has long ago been through the cycle of utilizing natural resources to bring people out of poverty. By contrast, developing countries are relatively new to this process. Yet despite their newcomer status, some emerging economies have been quick to learn from both the successes and failures of developed nations in the quest to build their economies, while simultaneously conserving their natural heritage. Indonesia is one of these countries.

Indonesia: Nation on the Move

Revered as the world’s largest archipelago, Indonesia is spread over thousands of islands spanning from Asia to Australia and contains some of the most diverse flora and fauna populations on earth. Indonesia is home to the world’s third largest tropical forest, which is considered not only a national asset and global public good, but also an important contributor to the country’s GDP. World Bank figures show that forestry, agriculture, and mining together contribute approximately 25 percent of Indonesia’s GDP and nearly 30 percent to overall government budget revenue. Importantly, the forest also remains central to the livelihoods of nearly 35 percent of Indonesians who live in rural areas, below the poverty line.

In recent years, Indonesia has suffered an unprecedented number of setbacks that have impacted its economy, including the tsunami of December 2004, earthquakes in 2005 and 2006, a global spike in rice, and other food and energy commodity prices, along with random terrorist attacks. Against this backdrop, Indonesia has established priorities to ensure sustainable development occurs. These priorities are economic development to alleviate poverty, social welfare and environmental protection, which includes protection of high conservation value forests, biodiversity, endangered species and actions to tackle climate change. As in the developed world, it requires the government, NGOs, consumers and the private sector to work together to take action on these priorities and ensure success.

The Corporation’s Role in Sustainable Economy Building

Multinational corporations, NGOs and governments around the world each play a critical role in helping to solve the challenges of effecting societal improvements with natural resource preservation. This begins of course with job creation. In Indonesia, we know that the income multiplier effect for non-food agriculture, such as forestry is estimated at 2.30. For every $1 (USD) increase in non-food agriculture production, Indonesian incomes are estimated to rise by $2.30 (USD) . Indonesians employed by the forestry industry and those in ancillary industries enjoy a better quality of life, often preventing a slide into poverty when basic living costs outpace standard incomes.

Corporations can also provide direct private investment in country programs that support education, skills-training, some provision of medical care, entrepreneurial community enterprises and disaster relief, which often make a dramatic and immediate impact in the lives of the people who need it most. Clearly, it’s important that the corporation evaluates where these investments are earmarked, but the fact remains that many organizations in the developing world are the true drivers of change and positive growth for populations who are otherwise underserved.

Sustainability in Tandem with Economic Development

While corporations making these and other economic development investments are critical drivers of growth in developing countries, their focus must also be rooted in drivers that in turn enhance sustainability. Irrespective of geography, the focus of a company’s sustainability program most readily ties to the company’s core business.

Climate change is an increasingly pressing and critical global issue, which can only be addressed through a strong commitment to sustainability. Whether at the international, national or sub-national level, sustainability is everybody’s business. The global paper industry, like others, is in the process of making significant changes, which in turn opens the opportunity to reduce its environmental impact.

Some forest companies operating in the Asia-Pacific region are deploying more efficient paper making technology, which allows them to produce on average, lower carbon emissions than most Northern European or American paper makers. What’s more, regional pulpwood plantations sequester 30 times more carbon than those found in other major paper-making geographies. Unlike other industries such as fossil fuel and mining, pulp and paper making is a 100 percent renewable, recyclable resource. Taking reforestation efforts one step further, in addition to supporting government and NGO-backed conservation reserves, corporations can also develop their own land conservation programs to protect and manage areas of significant biodiversity and/or cultural significance.

Given the size of the challenge though, reforestation is a concern that can only be properly addressed when governments, NGOs, indigenous people and the private sector work together to ensure sustainable forest management. In so doing we also alleviate poverty. In Indonesia, like many developing nations, poverty is the root cause of illegal logging. Eliminate poverty and you eliminate the root cause of unsanctioned forest management.

The twin needs of economic development and sustainability make effective program development and implementation in developing countries a particular challenge. In the end, the same drive, dedication and collaboration evidenced in the private sector will also lead the effort to innovate lasting improvements for developing countries. Together, we have much to gain for the generations to come.

Ian Lifshitz is the Sustainability & Public Outreach Manager for Asia Pulp and Paper in North America. APP is one of the largest vertically integrated pulp and paper companies in the world, with production facilities among the most advanced and environmentally efficient in the global pulp and paper industry. The company recognizes that a combination of social and economic best practices is the foundation for long-term business success, and is a leader in economic development in all of the communities in which it operates. The APP Group operates within globally recognized and verified standards in all of its production facilities; ensuring pulpwood suppliers meet stringent guidelines, guaranteeing sustainable forest management.

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