Going Circular: The Development of Indonesia’s Circular Economy

Recently, the adoption of CE has been stated in the 2020-2024 National Medium-Term Development Plan (2020-2024 Rencana Pembangunan Jangka Menengah – RPJMN) with special attention towards a green economy. It is expected that the adoption of CE will unlock many benefits such as creating new jobs, lowering household costs, and preserving the environment.

 

Raw materials play an important role in the global economy. Through production processes, materials are transformed, used, consumed, and discarded into the environment [1]. This linear consumption model which has been predominantly used is intensifying the crisis planet Earth has been facing [2]. In Indonesia, this fact is becoming increasingly apparent as the number of hydrometeorological disasters is escalating. A study from the Ministry of National Development Planning (Kementerian Perencanaan Pembangunan Nasional Republik Indonesia / Badan Perencanaan Pembangunan Nasional - BAPPENAS) showed that the rising number is going to reduce the GDP during the 2020-2024 economic period [3]. The transition to a CE provides a fundamental step towards addressing the climate crisis by transforming the way people make and consume products. Transitioning towards circular economy also offers economic advantages as creating new employment, decreasing expenses for households, and protecting the natural environment.

 

To achieve these outcomes, the Indonesian government has integrated CE strategies into its 2020-2024 RPJMN and is formulating a N Roadmap for CE. The planned outcome of the integration is the achievement of a green economy by 2060 [4]. Some of the most important factors in that regard of standards as well as conformity assessment and accreditation processes. The Head of National Standardisation Body (Badan Standardisasi Nasional - BSN) Mr Kukuh S. Achmad stated this during the Conformity Assessment Agency Technical Meeting in 2022 [5].

 

Circular Economy Policy in Indonesia

According to the Minister of BAPPENAS, Mr Suharso Manoarfa, CE is an economic approach that focuses on maximising the value and utility of raw resources, components, and products and reducing the waste production. As stated in the RPJMN, the government aims to strengthen economic resilience and growth. One of the ways to achieve this is by improving the competitiveness of small-medium enterprises (SMEs) by accelerating the usage of new and renewable energy. This priority is further supported by the development of the green industry by the government.

 

To accomplish these goals, the government is currently focusing on waste management as the first step towards circularity. With support from BAPPENAS, the government has structured ten principles for companies to follow. The principles determine the level of circularity a company is currently on. Additionally, the government has published circular business strategies for companies to follow. The strategies include the use of renewable energy and recyclable materials, the provision of a long-term maintenance plan for products, the long service life of products, and to recycle waste and by-products as secondary raw resources. The government also put more focus to turn the five main sectors, which are Indonesia’s biggest contributors towards its GDP, into adopting the models. These main sectors include food and beverage, textile, construction, wholesale and retail, and electronic equipment.

 

The Current Implementation of Circular Economy in Indonesia

Often, huge transformations pose challenges, and this is no different in Indonesia. Mr Medrilzam, the Director for Environment for BAPPENAS, stated during the Virtual Workshop: Circular Economy Standards to Support Sustainable Development Goals/SDG that Indonesia is currently facing specific challenges in transforming into a green economy. These challenges include the investment gap for circular business models and initiatives as the business sector is still largely pervaded by high-carbon investment. Other challenges include the limited technology and infrastructure for the integration of the circular model into business and the limited knowledge and skill of industrial and business actors for the implementation of CE.

 

Mr Medrilzam also underlined that it is important to build capacity for stakeholders regarding the practice of circular economy as stated in the RPJMN. He also emphasized that incentives should be awarded for stakeholders to further encourage them. The Director for Environment also stated that the government is already implementing policies that support the implementation of a circular economy. Examples of these policies are the usage of Green Industrial Standards (Standar Industri Hijau – SIH) and the Indonesia Ecolabel (Ekolabel Indonesia).

 

The SIH is a set of standards regulated by the Ministry of Industry of Indonesia (Kementerian Perindustrian Indonesia – MoI). The main goal of SIH is to support the green economy transformation by building a green industry. SIH standardise the products’ consumption of resources and energy, the production process, waste management and other aspects of a green industry. These standards are a consensus of all stakeholders involved to build a green industry. During the period of 2010-2019, the MoI certified 895 companies as green industry. In 2019, records for energy saving reached 3.5 trillion Rupiahs and 228.9 billion Rupiahs for water saving [6].

 

Accompanying the SIH, Ecolabel Indonesia is a declaration label awarded by the Ministry of Environment and Forestry of Indonesia (Kementerian Lingkungan dan Kehutanan – KLHK). The label is planned to further bolster companies’ competitive edge in the national and international market along with SIH. Furthermore, Indonesia is also actively involved as a participating member (P-member) in the ongoing formulation of the ISO standards for CE. The BSN Circular Economy Technical Committee 13-13 (Komite Teknis 13-13 Ekonomi Sirkular) acts as the National Mirror Committee for ISO TC 323 on CE.

 

Ultimately, building a greener economy is essential as the risks of hydrometeorological disasters are rising in Indonesia. Extreme weather led to landslides, flooding, and forest and wildfire incidents across Indonesia. The government has prioritised this issue to lead the country by integrating circularity into all areas of economic and industrial activity. Standards have become one of the main strategies of the government. Through standards, the government continuously push stakeholders to conform and change to implement circularity into their activities. To fully integrate circularity, the government is expected to publish a roadmap for CE in 2023 as a guideline for all stakeholders.

 

Within the framework of the GPQI, the German Federal Ministry for Economic Affairs and Climate Action (Bundesministerium für Wirtschaft und Klimaschutz – BMWK) is collaborating with MoI to harmonise domestic standards and technical regulations with international standards and technical regulations. To achieve its mission to reduce technical trade barriers, protect consumers, and improve product safety, the GPQI facilitates bilateral technical and political Dialogues for Innovation and Trade.

 

Bibliography:

[1] United Nations Economic Commission for Europe, Accelerating the Circular Economy Transition: Policy Options for Harnessing the Power of Trade and Economic Cooperation, Policy Brief, Geneva, 2022. Available at https://unece.org/info/publications/pub/374805
[2] Circular Economy Initiative Deutschland, Circular Economy Roadmap for Germany, Germany 2021. Available at https://www.circular-economy-initiative.de/circular-economy-in-germany
[3] Kementerian Perencanaan Pembangunan Nasional/BAPPENAS and Cleanomic, The Future is Circular: Langkah Nyata Inisiatif Ekonomi Sirkular di Indonesia, Jakarta 2022. Available at https://www.undp.org/indonesia/publications/future-circular-undp-bappenas
[4] Dr. Medrilzam MPE, Kebijakan dan Program Nasional Ekonomi Sirkular dalam Mendukung Pembangunan Rendah Karbon dan Ekonomi Hijau [PowerPoint Slides], November 2022
[5] Badan Standardisasi Nasional, Memahami Konsep Ekonomi Sirkular dalam Mendorong Pemulihan Ekonomi yang Berkelanjutan, June 2022. Available at https://www.bsn.go.id/main/berita/detail/12996/memahami-konsep-ekonomi-sirkular-dalam-mendorong-pemulihan-ekonomi-yang-berkelanjutan#:~:text=Indonesia%20telah%20mengadopsi%20konsep%20ekonomi,rehabilitasi%20ekosistem%20pesisir%20dan%20kelautan
[6] Kementerian Perindustrian Republik Indonesia, Wujudkan Daya Saing Global, Kemenperin Akselerasi Penerapan Industri Hijau, Jakarta 2021 Available at https://kemenperin.go.id/artikel/22572/Wujudkan-Daya-Saing-Global,-Kemenperin-Akselerasi-Penerapan-Industri-Hijau