Saurlin P Siagian, Consultant of the Asia Society Policy Institute. The views expressed personal
In April 2019, through its official website, Bank of China announced it would evaluate its financial support for the Batang Toru hydropower project, North Sumatra. The evaluation of the project, which is planned to receive funding under the Belt and Road Initiative (BRI), was carried out as a result of protests by environmental organizations in Indonesia. In the said letter, the Bank of China emphasized “The Bank is committed to supporting environmental protection globally and upholding the principles of green finance” in the letter (Bank of China,2019).
This is both good and bad news. The good news, from the perspective of environmental organizations, is that investors from China have started to care about environmental issues when making investments. In addition, the concerns of various environmental organizations regarding forest degradation and the extinction of the Tapanuli orangutan – something they are concerned about, have been temporarily avoided. The bad news is, for Indonesia, this project has the potential to lose its funding commitment of up to USD1.6 billion – equivalent to 23 trillion rupiah – from the Bank of China. The price is quite expensive for a long-term project that actually has the spirit of encouraging renewable energy; hydroelectric power plant.
Green agenda and the BRI in Indonesia
The world is changing. Agendas, agreements, including the international community require all countries, corporations, banks and investors to prioritize the environment issues and protecting the rights of local communities in all development activities. This direction is known among scholars as the third generation human rights movement, which connects the protection of human rights and the environment (Siagian, 2008).
Look at the debates on international tables from year to year. Last November, the G-20 high-level meeting in Italy underlined that any development and anywhere in the G20 member countries must achieve zero greenhouse gas emissions, each for the seven developed countries until 2050, and for all its members until 2060.
COP 26 in Glasgow at the end of last year also underlined the agreement on the creation of new targets in order to suppress climate change through “net zero emission” efforts globally. One of the important achievements of COP 26 is the cessation of dirty energy, in particular the commitment of the parties to end the use of coal.
In addition, the 2015-2030 Sustainable Development Goals (SDGs) agenda also firmly addresses climate action, promoting the environment and protecting the rights of local communities as the main requirements for sustainable development.
China has actually started trying to encourage a green economy. In 2012, the Chinese government introduced China’s Green Credit Guidelines (GCG). This document is considered as an example of a progressive green finance policy in the world, even though the country has difficulty implementing and integrating it into its investment practices in various countries (FoE, 2017).
In a relatively similar period, the BRI agenda emerged. BRI is a global development strategy covering trade, infrastructure, technology, finance and security initiated by the China government. This ambitious agenda with funding estimated at one trillion US Dollars is designed to support various projects in around 60 countries especially infrastructures of ports, roads, trains, airports, dams, to power plants (Russel & Blake, 2020).
BRI funding is designed not only from the government and companies from China. The roadmap is expected to get funding from global financial institutions, including the companies and governments where the project is being carried out. For example, the governments of Italy and Luxembourg have officially signed funding support for the BRI.
Through BRI, Chinese investment has increased significantly in Indonesia. In 2017, projects that have been running under this umbrella reached US$63 billion, making Indonesia one of the top three destinations for Chinese investment in Southeast Asia (ANU, 2021).
Practices in Indonesia
Various studies report that social and environmental conditions are still far from good in almost all projects under BRI. The beginning of the problem usually starts with an initial assessment which is carried out in a hurry, so that later it causes social and environmental problems, including the unpreparedness of the affected community for the presence of the project. (Foe, 2017). The evaluation of the China Bank for their support for the Batang Toru project, which is considered environmentally problematic, should be appreciated, but this is proof of something worng in the beginning.
Another example, prolonged land acquisition as experienced by the Jakarta-Bandung Railway (JBR) project, resulted in increased financing and multiple delays in project completion (Tenggara Strategic, 2019), including the neglecting of vulnerable communities to their right to work and land rights in the said projects (Walhi West Java, 2019).
From the author’s research finding, it was found that several spots were not included in the initial environmental impact analysis of the JBR project, even though housing residents were only less than 100 meters from the tunnel blast point. One of them is in the village of Laksanamekar, Padalarang, West Bandung. As a crucial consequence of the project, apart from massive damage to residential housing, the company also failed to deal with the existing problems because from the beginning they were not included in the mitigation scenario and had to be compensated (Aspi, 2022).
Various coal projects funded by banks and investors from China also received negative views in various places in Indonesia. While funding the coal project is problematic in itself – contrary to the spirit of COP 26 Glasgow, there are still conflicts over land rights, poor labor conditions, such as wages below the required regulation and poor access to health insurance, as happened in the three power plants, respectively PLTU Sumsel 1, Sumsel 8, and Simpang Belimbing (AEER, 2020).
Official reports also find poor communication space, public involvement, and participation of local communities, so that people are confused about where to protest, as well as creating unavoidable conflicts in the project field (FoE, 2017).
To promote a green and human rights-friendly agenda for local peoples within BRI, these three strategies deserve to be considered.
First, encourage the BRI project and its supporters, especially the Chinese government, banks, developers, and contractors to comply with international agreements and conventions, especially those related to the environment and the rights of local communities, including respecting the national regulations.
Second, the BRI need to present a complaint mechanism and its institutions. This is useful as an enabling environment to provide public participation and complaint channels to various parties, especially affected parties. The mechanism must be easily to be accessed, and use a language that is understood by each country in which the project operates.
Third, for civil society in various regions in Indonesia and other BRI destination countries, networks and cooperation are needed so that they have the power to voice together both the good and bad practices that occur in their respective regions. Cross-community and cross-civil society networks can be an arena to build knowledge and strengthen each other in order to voice their rights. When the required mechanisms are not yet available by state institutions and corporations, it is an opportunity for the civil societies to create space initiatives and participatory mechanisms to ensure that project-affected people can be protected.
For China entities, the practice of green economy is still a big challenge, even though they have started to look at making green economy credit guidelines. However, China has the potential and capacity to be more environmentally friendly than its competitors, such as Europe and America in Indonesia and its surroundings. Existing guidelines must be complemented by comprehensive regulations plus institutions, including strategies to translate them into practice in the field, and to familiarize themselves with public participation.
For Indonesia, being included in the target and route of BRI development is both a privilege and a threat. As a taken from granted cake, given its geographical position and natural resources, Indonesia is unavoidably included in this agenda. However, the presence of investment must be followed by the readiness of institutions, regulations, and all stakeholders so that it is reversible to the environment sustainability.
The author deliberately raises a good practice case at the beginning of this paper, on how a bank responds positively to the environmental issues. It is a must that environmental and social consideration should be a priority for all parties, to save BRI reputation it self, and for a sustainable future.