Indonesia

An image of the country's flag.

Indonesian development policies have for the past several decades focused on rapid economic growth, without a targeted strategy to benefit the least powerful groups, such as landless and land-poor agricultural laborers in the densely populated agricultural districts and the equally poor forest-dwelling communities in the less populated islands. Indonesia’s legal and regulatory framework governing land is flawed and in need of a comprehensive overhaul. Throughout the country, the land rights of unregistered owners are insecure, women’s rights to marital property are generally not registered, and registration of all rights is unnecessarily expensive. A deforestation rate of 2% per annum is a significant ongoing threat which imposes especially high costs on traditional adat communities that depend upon forest resources for their livelihood. Indonesia’s legal framework fails to provide an environment conducive to investment and economic growth that would open doors of opportunity for the poor, women and traditional communities.

At least five land and natural resource property-rights issues should be addressed for the benefits of growth to be more widely shared and to increase environmental sustainability. First, ambiguities between formal and customary law are interpreted by governments, officials and citizens in ways that undermine land rights, leading to a growth in land disputes and conflicts which must be addressed. Second, a registration system that is overly complex, inefficient and ambiguous has weakened security of tenure and the development of a functioning land market. Third, land conversions driven by economic development are threatening Indonesia’s vital forest resources and hold implications at the global, national and local levels, particularly related to climate change. Fourth, urban growth has not been accompanied by sufficient investments in housing and urban services despite continuing decentralization. Fifth, the problem of rural landlessness has limited the economic options, basic livelihood strategies and food security of millions of families.

The current era of decentralization of central government functions could be an opportune time to work with district (kabupaten) governments on various land tenure and natural resource property issues. The National Land Agency (BPN) has long resisted reforms and does not appear likely to embrace them, while some district governments may be more amenable to reforms that they see as responsive to the needs of their communities. This could also be an opportune time to engage with civil-society organizations that have an interest in agrarian, natural resource and legal aid matters, but which may not have sufficient technical capacity to design and promote specific legislative reforms.

KEY ISSUES AND INTERVENTION CONSTRAINTS

Donors in general and USAID in particular could help establish the foundations for broad-based local economic development by working with district level (kabupaten) governments and civil society groups in a number of areas. Each of the following potential activities should expressly extend land tenure and natural resource rights equally to women and men:

  • Support legislation that resolves ambiguities between customary and formal land laws. While adat or customary law is declared a primary source of land law, it is simultaneously subjected to all restrictions of formal land law. This ambiguity remains problematic. Donors could support the development of legislation that clarifies and reduces conflict between customary and formal laws. This could include support for kabupaten legislation that recognizes the validity of currently unregistered land right derived from original rights.
  • Improve land administration at the kabupaten level. Insecurity of tenure in both urban and rural areas has been exacerbated by a cumbersome and complex land registration process, lack of clear rights and procedures for registering communal rights, and nontransparent expropriation procedures. Donors could support positive reforms in Indonesia’s land administration system including: 1) work with kabupatens to eliminate or greatly reduce fees for first-time registration of land rights in registration systems administered by kabupaten governments and ensure that women’s names are included in titles; 2) work with kabupatens to conduct community-level spatial planning and develop processes for identifying, describing and registering the communal land rights (hak ulayat rights) of adat customary communities; and 3) work with kabupatens to adopt local guidelines for implementing expropriation procedures in a more transparent and less arbitrary way.
  • Strengthen forest conservation measures. Conversion of land use, particularly in forest areas, for palm oil, pulp and mining poses a significant threat to forest resources that are vital both domestically and globally. Donors could build upon Indonesia’s recent commitments to reduce carbon dioxide emissions and to conserve forest habitats and wildlife by supporting coordinated reforms to the political and legal frameworks at both national and local levels, enhancing knowledge of both the status and importance of forest resources, and strengthening government institutions in the forestry sector.
  • Encourage development of effective urban governance and planning. Indonesian cities are changing rapidly. Environmental conditions have deteriorated, particularly in areas where rapid population and economic growth have increased the demand for urban infrastructure and services. The rising demand for urban land reflects the rapidly growing economy of some cities. Good urban governance is a prerequisite to sustainable development and urban poverty reduction. Donors could build upon the continued trend of decentralization to promote greater stakeholder participation, including from the private sector and the poor, in urban planning. Donors could support governance systems and planning measures that emphasize environmental sustainability, provision of adequate housing with security of tenure, support for capacity-building in urban management and governance and greater financial responsibility at the local government level.
  • Explore measures to expand land access. Landlessness continues to deepen rural poverty and food insecurity in the wake of expanding plantations and indiscriminate awarding of forest and timber concessions and mining. Providing landless households with even fractional hectare micro-plots for producing food and raising livestock can significantly supplement their diets and incomes. Donors could build upon the ongoing work in civil society to ensure that access to land, agrarian reform and sustainable development for the rural poor are addressed in national and regional development agendas. In addition, donors could support pilot programs to acquire, at market rates, land sufficient to provide families of landless agricultural workers with small plots, as well as provide access to inputs such as public services and education.

SUMMARY

The legal and regulatory framework governing land in Indonesia is flawed and in need of a comprehensive overhaul. The legal framework fails to provide an environment conducive to investment and economic growth that would open doors of opportunity for the poor, women and traditional communities. Development of sound policies and laws acceptable to citizens and civil society groups, and also acceptable to the bureaucracies that must implement them, is an imposing task. In the current era of decentralization of central government functions, the design and implementation of sound land policies poses unique challenges which Indonesian planners are just beginning to address.

The Government of Indonesia’s focus on rapid economic development during the 1960s through the 1990s did not produce the same level of benefits for all segments of the population. In particular, landless and land-poor agricultural laborers in the densely populated agricultural islands and forest-dwelling communities in the less populated islands were often neglected. This situation has persisted into the 21st century. Rural landlessness remains a significant problem, especially on Java. Throughout the country, the land rights of unregistered owners are insecure, women’s rights to marital property are generally not registered, and registration of all rights is unnecessarily expensive. Rules on government expropriation are ambiguous and do not fully protect private rights.

According to joint World Health Organization and UNICEF 2010 statistics, 28.4% of urban households have access to tap water and 37.8% have access to protected groundwater. In rural areas, only 6.7% have water piped into their dwellings and 41.3% have access to protected groundwater. The Government of Indonesia (GOI) is working to address water resource problems, including unsustainability of water quality and quantity and challenges related to development and management of government agencies responsible for water management at the central and regional levels.

Deforestation is a significant ongoing threat in Indonesia. The removal of forests imposes especially high costs on the traditional communities (organized along principles of customary law known as adat) that live in the forests and depend upon forest resources for their livelihood. The land rights and natural resource rights of such traditional communities cannot be registered and are generally unrecognized by the state.

Indonesia is a leader in the global mining sector. Policy and regulatory uncertainties and overlapping land-use and property rights in general have created conflicts between mining and forestry concerns, between central and local governments, and between mining interests and local communities.

Published / Updated: December 2010

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