Executive Summary

The gold sector is of increasing importance to CAR’s economy, with a significant expansion of both official export volumes and production estimates since 2015. While CAR has a detailed mining code, the legal and regulatory frameworks need updating to respond to and support the fast-growing gold sector. For example, the government’s 2019 report on legal exports represents only 6.3% of the annual gold production volume estimated by IPIS. Reforms are also critical to meet international market expectations of responsible gold trade which have solidified over the past decade, based on the principles and practices of due diligence.

Due diligence is a framework which calls upon companies to make informed, responsible choices about their sources and suppliers. The goal of due diligence is to help companies create supply chains which respect human rights, do not contribute to conflict, and comply with international and national laws. Due diligence is not only responsible business practice, but has become a passport to international markets; it has been codified in laws such as the EU Conflict Minerals Regulation and private systems governing the supply chains of refiners, jewelers, electronics manufacturers, automotive companies, and other sectors. These industry systems and international, regional, and national laws require due diligence and risk mitigation as a condition of imports, contracts, or gold buying.

Unfortunately, armed group involvement and informality in the gold sector currently makes CAR a challenging operating environment for scrupulous international buyers who must screen out human rights and conflict-related risks from their supply chains. Thus, although gold is currently being exported from CAR, failure to update laws and governance systems will severely limit trade and investment opportunities with formal markets and industry partners.

Proactive due diligence measures can help the Central African gold sector manage and mitigate the material and reputational risks linked to “conflict gold.” Due diligence enables legitimate businesses to differentiate themselves as lower risk, even in challenging country contexts. In contrast to the Kimberley Process, which creates a pass-fail designation at the country or regional level, individual CAR cooperatives, collectors, buying houses, refiners, and their supply chains have the chance to meet due diligence benchmarks and connect to responsible markets despite an overall challenging context.

CAR’s public and private sector should collaborate to build a responsible gold sector and maximize international trade opportunities. The mining code, related laws, and business practices should be updated to integrate due diligence as described in the OECD Guidance and ICGLR Regional Certification Mechanism, including the following elements:

• Mine site mapping to gather important data on gold production and risks of human rights abuses and armed group involvement;
• Mine site inspection and validation, and prohibition of human rights abuses and armed group involvement in the mining sector and minerals supply chain in CAR;
•  Establishment of chain of custody systems from mine to export to differentiate conflict-free minerals and trading chains (acceptable to the market) from those of illegal, conflict-affected, or unknown provenance (not acceptable to the market). Existing practices and tools such as bordereaux d’achat can be integrated into these systems.
• Comprehensive registration and licensing of legitimate mining operations, cooperatives, mining companies, collectors, buying houses, refiners, and other exporters; and exclusion of illegal actors and those perpetrating human rights abuses from the supply chain; and
• Validation of legal exports based on evidence documented during all of the above steps.

Executive Summary

This land tenure and property rights assessment informs the development of United States Agency for International Development (USAID)/Indonesia’s 2020 – 2024 Country Development Cooperation Strategy (CDCS) in support of Indonesia’s national mid-term development plan (RPJMN) and also provides context for USAID/Indonesia project appraisal documents (PADs). The assessment provides a summary of key land tenure and property rights issues, constraints and opportunities, including an overview of recent related reforms by the Government of Indonesia (GOI) under President Joko Widodo. It then identifies potential opportunities for USAID/Indonesia to incorporate land tenure programming across technical offices.

Why a Tenure Assessment: A country’s land and resource governance framework are the rules for acquiring/using land and resources for development in urban and rural areas, often transferring public resources into the hands of private companies and/or local communities or private individuals. Land and resource governance also defines the procedural rules and social and environmental safeguards when stakeholders have overlapping rights or interests (for example, where a community is impacted by a timber or agricultural concession or government plans infrastructure for public services). A country’s framework governing land tenure and property rights (LTPR) and resource governance thus balances the interests of the state, private sector, and local communities, creating opportunities for domestic revenue generation through licenses and tax, creating jobs and economic growth through partnerships with the private sector, and raising living standards of communities. A well-balanced LTPR framework can increase a society’s resiliency, reduce poverty, and enable sustainable development. Land and resource administration is also prone to ambiguity and corruption and can lead to social upheaval. Because land and resource governance is so deeply tied to national autonomy and steeped in complex social, economic, and political relationships, it is often perceived as too complex or costly to address through development assistance. Yet LTPR issues can be broken down into manageable sub-units within a development portfolio. Furthermore, a failure to consider and act on the tenure context can undermine program success. As land tenure considerations establish the playing field for who benefits from development, a land tenure analysis provides a framework for understanding democracy and governance, economic growth, and environmental issues within landscapes.

Major Findings

Current Status. Within Indonesia, weak land and resource governance and poorly performing land markets have led to the current situation of: 1) inequitable access to land; 2) resource conflict and displacement; 3) unsustainable natural resource management and biodiversity loss; and 4) insufficient planning for public service delivery, each of which constrains Indonesia’s Journey to Self-Reliance. At the heart of this challenge is tension between government’s role to generate economic growth through private sector-led investments and government’s role to support community development through community participation and benefits. Multiple ministries have responsibilities over land and work toward their own internal objectives, resulting in a lack of coordination and in some cases outright competition over land use. This challenge has been further exacerbated by the demands made by re-centralization through Regional Autonomy Law 23 of 2014. Most civil servants are reluctant to pilot new legislation that recognizes and registers local rights or engages communities in participatory planning (Government Regulation 45/2017) despite decentralization legislation and encouragement from the Ministry of Home Affairs for innovation by local government. Furthermore, there is selective implementation of the legal framework, particularly around monitoring and enforcement of development conditions within the private sector land use licenses.

This status quo results in rural and urban poor who are largely unaware of their land and resource rights. Furthermore, rights documentation processes are largely inaccessible to these populations either due to cost and bureaucracy, or in the case of informal settlements in urban areas, due to illegality and zoning restrictions. This lack of rights multiplies the vulnerability of these populations, as they may be invisible to many service providers, such as those that provide water, sanitation, electricity, and in some cases health services. These undocumented populations are at risk due to natural disasters, as informal settlements are often built in flood or erosion-prone marginal land, or from forced displacement, as lack of documentation can restrict rights to negotiation or fair compensation.

Barriers to Engagement. While these outcomes and opportunities are widely recognized in both urban and rural areas of Indonesia, neither the GOI nor international donors have successfully pushed structural reforms to date because:

• Powerful interests in Indonesian society within both government and the private sector can navigate these constraints to their advantage, based on connections and wealth, and thus continue to stall movement on policy reform and local implementation; and,
• The international community sees land and resource tenure as too complex, a matter of national autonomy, and too political to engage in. Furthermore, donors generally lack understanding on how to address these complex issues strategically and in phases.

From Challenges to Opportunities. Even within this challenging context there are opportunities:

• Support internal pushes by the GOI, civil society organizations, and communities for transparency around land use, particularly through the public information legislation and high-profile platforms like One Map. Such efforts would demonstrate the benefits of making land use information publicly available;
• Scale participatory planning approaches that lead to rights recognition and enhance local decision-making, by addressing capacity gaps. Participatory planning approaches may upset the status quo in ministerial authority and interrupt unofficial benefit flows. As such, participatory planning approaches need to be addressed by engaging those with power and influence to demonstrate the importance of reduced land use conflict and negotiated solutions in long-term sustainable development;
• Increase women’s rights awareness, address barriers to inclusion and decision-making, strengthen women’s rights to land and resources, and strengthen implementation of women’s rights in law. These activities would help promote the social and economic well-being of women and family members, strengthening household resilience; and
• Continue to support implementation of progressive legislation and continued learning/advocacy, which should help to overcome donor dependency, over-reliance on project-funded initiatives in localized areas, lack of GOI prioritization (e.g. weak impact assessments and safeguards), and active resistance (e.g. to decentralization). Encourage civil society-led learning to build momentum for rights-based solutions that deliver results.

A Roadmap for Intervening in the Land Sector. Current political commitment, civil society pressure, technology to increase accountability, and interest of the domestic and international private sector provide a unique and timely opportunity for constructive USAID engagement:

• Political Will: The President is currently using political capital to challenge the status quo on land and resource rights. He has prioritized reallocation of degraded state forest areas, abandoned private land, and expired concession licenses to the poor (PP86/2018); converted a temporary moratorium to a ban on exploitation of 66.2 million hectares of primary forest and peatlands (Inpres 5/2019); and exerted pressure to pass the new land law. He is also said to be planning a restructuring of land ministries in support of these goals for the 2019 – 2024 cabinet.
• Civil Society and Information Technology for Transparency: At the regional and global level, Indonesia recognizes its suboptimal reputation in natural resource management and waste management sectors, as well as a history of land use conflicts (BAPPENAS, 2019c); as of 2019, fewer than half (4,031) of a recorded 10,802 land conflicts had been formally resolved (BAPPENAS, 2019b). The GOI has signed on to pledges which are being monitored globally, and domestic and global pressure is being applied, particularly with the use of information technology.
• Private Sector Interests: There is increasing recognition by elements of the international private sector of the monetary and reputational risks of land and resource tenure conflict, and companies are signing on to binding commitments to verify their social and environmental impacts. And while foreign investment in natural forest management is prohibited in Indonesia, concessionaires in private and state forest areas are actively asking government for enabling regulations for co-management with local communities. Continued support to these processes will create a level playing field for the good actors.

Recommendations for USAID 

Based on the findings of this assessment, there are opportunities for USAID within the land and resource tenure sector to recognize and support existing GOI priorities and investments; engage donors and private sector community in broad sector reforms; support opportunities that demonstrate commitment and capacity on the Journey to Self-Reliance; invest in activities that promote sustainability and/or scalability beyond the life of USAID; and promote LTPR and improved land and resource governance in the environment and natural resource sector and beyond.

Strategic Directions. USAID should consider the following broad strategies:

1. Focus on implementation of existing major policies that strengthen land and resource rights, including working within private land areas (APL) and state forest areas (Kawasan Hutan Negara), in particular land use zonation and licensing. USAID’s strategic advantage is not in development of new laws or policy, but rather seeing that the impacts of progressive elements of existing policies are demonstrated on the ground.
2. Assess land tenure and property rights constraints and opportunities during the program design phase through a simple diagnostic and encourage subsequent review at program inception and periodically. A framework can be used to identify whether program activities have no tenure link, a potential tenure link, or a strong tenure link. This would not force tenure and property rights onto programs but encourage more integrated and systems thinking. For example, clarifying the challenges that informal settlements and patients without formal title face could provide broader understanding of pathways to tackle health and sanitation challenges.
3. Partner with the private sector to clarify and demonstrate the benefits of addressing land tenure and property rights proactively to avoid costly delays and conflicts associated with joint objectives.
4. Integrate land tenure considerations into USAID’s required gender analyses to determine how the rights of women, indigenous peoples, and vulnerable populations to land and property are respected within program contexts. As USAID/Indonesia invests in women’s empowerment, ensure equitable access to participate, benefit, and decide on the direction of engagement. Women’s engagement in rights documentation or planning processes is a stepping stone to reach these goals.
5. Use participatory technologies including Mobile Approaches to Secure Tenure (MAST) to increase access to information, improve enforcement, and build a broad-based understanding of land and resource rights, potentially through collaboration with One Map.

Specific Opportunities:

1. Promote private sector and infrastructure development and support development actors at the local level to carry out stakeholder consultation and planning in line with the principles of free, prior, and informed consent (FPIC) to build local commitment and capacity and resolve conflicts before they arise and persist. USAID support would focus on rigorous and replicable process.
2. Mobilize Village Funds, which are increasing as forestry budgets shrink, to support responsible and equitable rights documentation (e.g. through Village Law 6/2014). This domestic resource mobilization demonstrates capacity and commitment of communities and provides an enabling environment for inclusive growth, while leveraging USAID technical assistance.
3. Use USAID’s collaborating, learning, and adapting (CLA) methodology where programs are engaging on planning, documenting rights, interacting with private sector or government actors or indigenous peoples and local communities, to promote evidence-based learning and multi-stakeholder dialogue.
4. Ensure that a diversity of landscapes representative of Indonesia’s widely varying geography and socio-cultural contexts are chosen to inform national decisions.

Conclusions

There is a need for more explicit incorporation of land tenure and property rights considerations in future assistance strategies and specific interventions, reflected in the following conclusions:

1. Mainstream tenure and resource rights considerations in future programming. Results from past activities suggest that stand-alone land programming focused exclusively on land titling is limited in its broader development impact. However, USAID/Indonesia should integrate LTPR and resource governance considerations into its programming. Strengthening land tenure and property rights is a necessary, but insufficient step on its own to achieve the Journey to Self-Reliance. To fully realize the potential of Indonesia’s land and resources in an equitable and efficient way, a wide array of other constraints stand in the way, notably policy-driven undervaluation of resources. There are priority targeted strategic interventions that could be pursued as major components within stand-alone projects, as described below, for example related to private sector investment and environmental governance.
2. Build understanding of the major development value of land tenure and property rights. In order to achieve successful integration, there is a need for coordination and learning across offices. This could be done with a cross-mission advisor (or at least focal point), in a similar fashion to gender integration. This role would help clarify the utility of a tenure framework to disentangle seemingly intractable issues. The land tenure and property rights framework is a useful tool to coordinate and harmonize activities across multiple sectors with competing interests to create a level playing field for inclusive development.
3. Plan to be opportunistic. The shifting political priorities related to land tenure and property rights in Indonesia requires opportunistic support as movement can only occur at the pace of government willingness. The timing and direction of policy decisions fall outside of the likely influence of USAID portfolio development. In particular, pay careful attention to the uncertainty surrounding the outcome of reform processes for the Basic Agrarian Law, roll-out of Indonesia’s present online system for registering land title (ATR [2017]), and the “Cities Without Slum” (Kotaku) program. New interventions should provide an opportunity to plan for activities that have the most traction and promote stakeholder coordination at national and local levels.
4. Focus on tenure interventions that deliver immediate benefits to government, communities, and private sector through local level private sector partnerships, multi-stakeholder planning, information transparency, and gender-sensitive approaches. Discrete activities should focus on bottom-up, but scalable solutions that could include partnerships with a private sector actor who is interested in using a tenure framework to guide negotiations and proactively avoid conflict or employing participatory planning approaches with water/energy utilities, municipality, and upstream communities. These site-level actions are based in existing law, will reduce conflict over land and resource governance and have the potential to scale by being locally relevant and in some cases driven by private sector interests.
5. Promote shared learning to influence policy and practice. Adopting CLA will deliver scale and replicability. Establishing shared opportunities through existing government non-sectoral institutions, for example, Agencies for Regional Planning and Development and local universities will promote adoption of a common vision. This may include communication between USAID programs, links to other development actors, engagement with civil society, and coordination with official government recognized forums for addressing tenure and resource rights. USAID does not need to lead these forums, but should be an active participant, and subsequently promote dissemination within the mission and integration into program design and implementation.