Annual World Bank Conference on Land and Poverty 2015

A Review of Indonesian Land-based Sectors with Particular Reference to

Land Governance and Political Economy

Shivakumar Srinivas

Keith Clifford Bell

Kurnia Toha

Arifin Zaenal

William Collier

The World Bank

kbell@worldbank.org

Paper prepared for presentation at the

“ANNUAL WORLD BANK CONFERENCE ON LAND AND POVERTY”

The World Bank - Washington DC, March 23-27, 2015.

Copyright 2015 by author(s). All rights reserved. Readers may make verbatim copies of this

document for non-commercial purposes by any means, provided that this copyright notice appears

on all such copies.

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Abstract

Land along with the development of land-based sectors is central to any discussion of

Indonesia’s chronic social, political, and economic problems. Land and factors that affect

land-based sectors are central to understanding different issues. These include poverty,

deforestation, environmental degradation, rapid urbanization, growing demand for land

in urban and peri-urban areas, underdeveloped infrastructure, weak housing and land

markets, human rights violations, and denial of access and use rights for Indigenous

People (IP) and customary (adat) communities. Urban development and recent

environmental programs have compelled a fresh analysis of the land sector in Indonesia,

highlighting its many flaws and the need for sustainable solutions. This paper analyzes

land governance in Indonesia with a special focus on tenure security and the political

economy of land-based sectors by considering key factors such as dual administrative

traditions in the land sector, growing demand for land, and the need for recognizing and

protecting the rights of customary rights holders, smallholders, and marginal farmers.

Land reforms are high on the agenda of the new government and the enactment of the

proposed comprehensive land law is central to those proposed reforms. It should eliminate

overlaps, contradictions, and ambiguities in existing laws, regulations, and procedures. A

focus on land policy and regulatory framework in spatial planning, agriculture, and

forestry, and cross-cutting policies linked to water, irrigation, energy, and mining

activities are moves in the right direction. The paper offers concrete recommendations in

this regard.

Key words: Land tenure, Reform, Governance, and Rights

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Background

Indonesia is the world’s fourth most populous nation and an emerging economic power.

The planet’s largest archipelago, consisting of five major islands, is also socio-culturally

diverse. Historically, its economy has been largely agriculture-dependent, reflecting its

economic development and its policies from 1940 to 1960, aimed at promoting agricultural

self-sufficiency and social welfare. Industrialization and urbanization began in the late

1960s and accelerated in the 1980s. During this time, especially since the mid-1960s, the

State depended on natural resource extraction for revenue. Indonesia’s economy is based

on resource extraction and agriculture, with manufacturing and tourism making major

contributions (Barr et al., 2010). It has expanded strongly over recent decades, in spite of

the sharp economic contraction caused by the 1997-1998 Asian financial crisis and the

global economic meltdown of late 2009-11. As a result, Indonesia has become an

increasingly important part of the global economy too (World Bank, 2007). Despite four

decades of industrialization, agriculture remains an important part of the national economy,

accounting for 16 percent of output and 38 percent of total employment in 2013 out of a

total population of about 240 million persons (Agricultural Census, 2013; and World

Population Review, 2014). Over 50 percent of Indonesia’s population depends

predominantly or exclusively on agriculture for its livelihood and many others are

employed in downstream agro-industrial or food-distribution activities. Indonesia’s

tropical rainforests are the third largest in the world and provide important environmental

services, while supporting an economically important forestry sector and providing

livelihood benefits to millions of Indonesians, including customary communities (Central

Statistics Bureau of Indonesia, Badan Pusat Statistik, 2013).

Given its role in agricultural production and rural livelihoods, land is critical for

revitalizing agriculture for greater food security and poverty reduction in the country. It

can easily be used as an asset for social and regional integration or disintegration, as is

evident from the challenges posed in areas dominated by ethnic groups. Consequently,

access to and security of land rights are prime concerns for policies and strategies aimed at

reducing food insecurity and poverty. Land tenure security can be described as the certainty

that a person’s rights to land are recognized and protected in the face of specific challenges.

Whether guaranteed by customary or statutory law or some accommodation between them,

land-tenure security is critical to food security. However, evidence suggests that land-

tenure security for Indonesia’s smallholder farmers is eroding (Srinivas et al., 2014;

Colchester and Chao, 2013; and Collier, 2012).

In Indonesia, land and natural resources are central to any discussion of chronic social,

political, and economic problems. While generally considered a “land abundant” country,

recent studies indicate that more than one-third of Indonesia’s rural population is probably

landless and faces multiple associated vulnerabilities. The growing proportion of landless

households also includes a large number of indigenous people (IP) who live in areas

formally classified as forests. Land administration and management are fundamental

challenges to the country’s socio-economic progress in the long run. Although the

Government of Indonesia (GoI) has attempted to restructure land-related legal and

regulatory framework in recent times, millions of people still have insecure land tenure and

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property rights. Most of Indonesia’s land-tenure challenges are legacies of the Dutch

colonial period and the regimes that followed it. In particular, government-led economic

development policies since 1980s led to massive land alienation and promoted plantation

economies along with subsistence farming among a large majority of households.

Indonesia’s rapidly evolving socio-economic situation with regard to land, spatial, and

forest sectors, together with increasing government collaboration with civil society and

ministerial reforms post the 2014 presidential election present unprecedented opportunities

to confront and resolve decades of land-based issues.

Indonesia’s land problem originated from a political and economic structure established

through decades, especially by ruling governments since 1991 seeking to build up their

power base. The government restricted access to land resources through laws that

contributed to socio-economic distress. Land administration and decision-making conflicts

between the government and local communities and various interest groups (military,

private investors, farming communities, poor households) are problematic.

Against this background, analysts and commentators have argued that reforms to land

policies and laws will have to address issues arising from uncertain tenure and land-related

conflicts and strengthen accountability and governance at all levels. Despite overall lack

of significant progress in Indonesia’s attempts to modernize land and property rights and

strengthen tenure security, optimism and desire for change is evident in anecdotal evidence

and recent government and civil society actions (Bell, et al., 2013).

This paper draws conclusions from available evidence, synthesizing critical issues and

wider pressures on the Indonesian land sector. It has drawn from field observations; direct

interviews and discussions; various research studies, especially Towards Indonesian Land

Reforms: Challenges and Opportunities, A Review of the Land Sector (Forest and Non-

Forest) in Indonesia (2014); and the work of other developmental agencies, government

institutions, and civil society between 2012 and 2014. Conclusions and recommendations

have been confirmed through stakeholder workshops and consultations with academics,

civil society organizations (CSOs), development partners and the Indonesian National

Land Agency (Badan Pertanahan Nasional, BPN, which was on October 27, 2014,

restructured as the Ministry of Agraria and Spatial Planning Affairs/National Land Agency,

MASP/BPN) and the National Planning Development Ministry (Bappenas). This bold

move surprised political observers as the President also integrated the ministries of

environment and forestry to form the Ministry of Environment and Forestry (MoEF,

Kementarian Lingkungan Hidup dan Kehutanan). The decision sent ripples throughout the

Indonesian environmental and policy community. It could weaken and simplify a broad

and cross-sectoral environmental agenda. It could also strengthen jurisdiction over forest

lands, which will be consolidated under one ministry. In January 2015, the President also

mandated the Coordinating Ministry of Economic Affairs (MENKO) to oversee work on

OneMap and facilitate the efforts of the National Geospatial Information Agency (Badan

Geospasial Informasi, BIG) to build a single, nationally consistent, map-base that utilizes

a common geo-referencing system. Will such moves see an end to dualism in land

administration? The following paragraphs discuss relevant issues and provide suggestions.

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1. Growing Demand for Land

Short in supply but greatly in demand, land continues to take center stage in Indonesia’s

political, social, environmental, and economic discussions, whether it involves catering to

the demand arising from rapid urbanization or considering the distribution of benefits

arising from environmental programs. This section examines existing land usage and

administration and changes in demand.

Forest land disappearing: Indonesia’s total land area is reportedly a little more than 181

million hectares. Around 60 percent of the population lives on the island of Java, which

constitutes only 6 percent of Indonesia’s landmass. By 2013, around 52 percent of

Indonesia’s land was reportedly still under forest cover and it had the third largest tropical

forestland after Brazil and the Democratic Republic of Congo. This is in spite of the

reduction from 162 million hectares of forest cover in 1950 to 90 million hectares in 2010.

The high rate of deforestation and forest degradation in Indonesia is because of logging,

forest fires, conversion to other uses such as industrial timber, oil palm plantations and

mining, and to a lesser extent, subsistence agriculture expansion, and infrastructure. In

addition, by 2011, about 78 million hectares of land in the archipelago was classified as

“degraded” (of which 26.7 million hectares was non-forest land and 51 million hectares

forest land). Between 2001 and 2008, degraded land increased from 35 million to 77

million hectares. The government estimates the rate of land degradation at 1.2 million

hectares per annum and rehabilitation at 0.5 million hectares per annum. This pace of

deforestation erodes a national asset that is a key foundation for the national economy and

the main livelihood of rural and forest-dependent communities (Srinivas et al., 2014).

Concerns on protecting forests and forest-dependent communities: Indonesia is a signatory

to the Declaration on Climate and Reducing Emissions from Deforestation and Forest

Degradation (REDD+), the Convention for Biological Diversity (CBD), and other

resource-related declarations and commitments. One critical commitment is ensuring fair

and equitable distribution of REDD+ benefits. Given Indonesia’s inequitable land-tenure

system, the government has announced focus on two areas: (a) suspension of forestry

license issuance and (b) better governance for forests, peat lands, and non-forest land. This

would require protecting and recognizing the rights of about seven million people who

derive a significant share of their cash income from forests (Ministry of Forest, 2010).

Besides providing jobs and cash incomes, forests provide fuel, medicines, food,

construction materials, and other goods for the poorest households in these areas. Forest-

based livelihoods are supplemented by wage labor in timber companies. The REDD+

program will have to protect livelihood sources and support further progress. It could either

worsen customary land rights issues or help resolve them. Unless current laws and

regulations on forest and non-forest lands are replaced with unambiguous and concise ones,

equitable land tenure security cannot be realized in Indonesia and IP and traditional forest-

dwelling communities will continue to be denied REDD+ implementation benefits.

In 2011, the government issued a moratorium on licenses for converting forests or

developing peat lands; this was later extended till 2015. The government has recognized

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that tenure is critical to shaping the distribution of risks, costs, and benefits of a REDD+

program. Secure tenure gives local communities more leverage with the government and

the private sector. Insecure tenure makes them vulnerable to dispossession if REDD+

increases land values and outside interests intrude. REDD+ programs could then result in

possible tensions. Of greater importance may be the risk of uncertainty in delivering

REDD+ commitments with unresolved tenure issues or local hostility and lack of legal

protection against such non-delivery. Such risks might limit private sector involvement in

REDD+ and increase opposition from IP and local communities. Therefore, appropriate

systems and tools for implementation must be developed.

Agriculture and smallholders form backbone of the rural economy: Although Indonesia is

considered a rapidly industrializing nation, it remains predominantly agrarian. Total land

under cultivation in Indonesia increased about 2 percent annually from 6.4 million (1960)

to 13.8 million hectares (2013). Population growth for the same period was an annual 3

percent. Smallholders, each holding an average of less than 0.8 hectares, account for around

90 percent of Indonesia’s rice production (total production estimated at 72 million tonnes

in 2013). Smallholder farms employed about 37 million persons (total estimated labor force

in agriculture was 41 million in 2013) against a total rural labor force of nearly 49 million.

As of 2013, close to 55 percent of the population depended on land for subsistence, and

agriculture continued to play an important role in the national economy, accounting for 16

percent of revenue in 2013-14. However, anecdotal evidence and field studies show that

around 600,000 hectares of land are cleared per year for oil palm plantations or non-farm

purposes. Therefore, while some aggregate numbers may suggest increased agricultural

potential and economic contribution, they also show increases in land concentration among

large-scale holders (Agricultural Census, 2013).

Many consider average farm sizes in Indonesia too small to allow sustainable

intensification of smallholder agriculture. The probability of adopting fertilizer and better

quality seeds decreases as farm sizes shrink. Households with smaller farms have less i)

cash income, ii) access to agricultural input and credit, iii) ability to deal with drought, and

iv) profitable technologies, given higher transaction costs of acquisition and application of

fertilizer per unit of operated land. The resulting economic inefficiencies and frequent

fluctuations in household income lead to seasonal migration, rapid urbanization, and

increases in the number of people employed in the informal sector. Experiences in

neighboring Southeast Asian nations (e.g., Thailand) suggest a landholding of about 3

hectares (three crops) and an incremental price structure for smallholder households in

Indonesia to move out of poverty (Japan International Cooperation Agency, JICA, 2012). Fragile tenure security and its attendant troubles give rise to land-related disputes and

conflicts (Hendriatiningsih, 2009; Collier, 2012; and Jones, 2013). This is raising serious

concerns within the government, among policy makers, and the development community

in general, who are engaged in a discussion on alleviating rural poverty.

Growing demand for land for urban development: Close to 50 percent of Indonesia’s

almost 230 million people could live in cities by 2016 (World Population Review, 2014).

Most of its mega-cities and key urban centers (Jakarta, Surabaya, Bogor, Bandung, and

others) experience formidable challenges in urban development: weak zoning, unplanned

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squatter settlements, inadequate infrastructure, unaffordable land prices for housing, land

fragmentation, and poor basic amenities. Even smaller urban areas need better

infrastructure, basic facilities, improved urban environment, and housing for the poor, all

of which requires land. Indonesia’s urban development efforts are constrained by non-

availability of suitable land or exorbitant land costs and weak local capacities. This has

stifled economic and social development. Large-scale investments in land and property

lead to smaller and inefficient land holdings in rural areas and accelerate urbanization,

which renders development controls ineffective. Poor and migrant communities rarely

benefit from investments that continue to push inequalities in access to affordable and

adequate land for housing.

Urbanization is also pushing rapid land conversion, threatening Indonesia’s vital forest

resources and farmland. A significant amount of agricultural land is being used for non-

agricultural purposes. Land-use change is aggravated by urban growth unaccompanied by

adequate investments in urban services and management of urban areas. Problems include

proliferation of slums on the outskirts of cities and development of mega-cities, loss of

fertile arable land around urban settlements, strong pressures on peri-urban farmlands, and

a struggle over existing land between original inhabitants, State actors, and new

immigrants. In recent times, the growth of tourism has also increased interest and demand

for developing coastal lands and areas of recreational interest in the country.

Tenure security is fragile with only a minority holding land parcels that have secure tenure

or access to infrastructure and services. Available data suggests that as of early 2013, close

to 65 percent of the civil cases pending with local courts related to land disputes, several

of which involved the rich and influential, both locally and nationally (International Land

Coalition Asia, 2013 and Jones, 2013).

Increasing demand for large-scale investments in land: Available data and anecdotal

evidence suggests that close to 130 million hectares have been granted to investors since

the early 1970s for “development purposes” (Ministry of Forests, 2010). Such concessions

allowed the investor to conduct specific commercial or development activity in an area and

generally covered agribusiness ventures, mining concessions, oil and gas exploratory

permits, and logging in forest areas. In 2014, the new Indonesian government mandated

further investments in land to promote economic development.

All these involve extensive land-use changes and invariably result in displacement, loss of

access to and control of natural resources by dependent communities, especially IP, and

the destruction and loss of the rich biodiversity of primary and naturally regenerating

forests. The principal modalities of land concessions have attracted greater public scrutiny

and attention since 1999. A growing body of evidence indicates that many concessions

awarded since 1991 may not be contributing to national economic development. Recent

studies established that large-scale land concessions in Indonesia reduced the farmland

available to smallholders and cultivators and left a trail of social and ecological destruction.

Despite such evidence, the government continues to pursue a policy of large-scale land

investments without adequate oversight mechanisms.

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Land Banking – an opportunity or misguided optimism? The government has also proposed

land banking as a model for addressing some challenges in urban poor and low-income

housing. In principle, land banking is the practice of aggregating parcels of land for future

sale or development. It requires strong institutions and good land governance for land

banking projects to be successful. Given the poor governance track record in Indonesia,

several government officials and CSOs have expressed concern that land banking demands

land-use conversion and is largely driven by the private-sector, which is still dominated by

the few who benefited during Soeharto’s presidency (1967-1998). Land banking is seen as

a means of buying back land obtained by the elites and speculators who have obtained land

in what locals call “the black market”. Commentators argue that Indonesia has an

abundance of vacant land and degraded lands, and that government should invest in

clarifying the availability and location of such lands, rather than further reward the small

group of elites by buying back lands which has not been obtained legitimately. Further,

many areas currently mobilized or targeted for mobilization for land banking are located

in peri-urban zones where local institutions have weak capacities and governance is poor.

Available data indicate that since the mid-1990s, urban land values, and by association

property prices, have increased relentlessly (Wallace, 2010 and World Bank, 2012).

Private ownership of vast land concessions in agricultural, forest, and urban areas excludes

large sections of the population, especially IP and local communities, from its benefits,

widening the gap between the wealthy and the poor. Indonesia is also witnessing land

speculation in the form of land banking by investors and powerful conglomerates, and

firms securing large-scale land concessions in peri-urban areas. This has fueled demand,

with land being perceived as a means of capital appreciation among domestic investors. As

small and large investors seek capital gains in the property market, land demand drives real

estate price inflation. Land banking has continued to impact land availability for urban

poor. In Indonesia, this has been such a common and longstanding practice that, during

periods of strong growth, CSOs refer to it as the “national hobby.” CSOs have expressed

concern that donors may be dragged into supporting land banking.

Landholding and agrarian and land relations, including land control and management, play

a significant role in socio-economic development. Increased investment in rural land has

not benefited Indonesia’s smallholders and poorer households. Current land-development

policies seem to override existing uses and systems of land-management rooted in the

traditions of local communities. As a result, power relations in rural areas are changing

rapidly, with smallholders and poorer households losing their access to land and resources

and moving to wage labor. This implies further social and political instability, which

Indonesia can ill afford.

Developing smart cities - In late 2014, the government announced its intention to build

inclusive, safe, resilient, and sustainable cities and human settlements under the “green-

smart cities” paradigm. Over the next couple of years, through a guided approach, at least

50 such cities will be built by converting rural land for urban uses. The management of

land conversion demands significant good governance, whilst keeping in mind the claims

and rights of marginal and small landholders, IP, and customary communities. Apart from

land tenure and related governance issues, the government and communities will have to

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incur significant costs to realize the smart cities concept. That said, there is a risk of smart

cities being established through land banking rather than on abandoned or degraded land

areas creating significant challenges and reputational risk for good governance.

2. Persisting Dualism in the Land Sector

Dual administration in the land sector dates back to the 1600s, when the Dutch first

colonized Indonesia. The country’s policy and legal framework is characterized by

multiple and overlapping land-related regulations and guidelines, creating ambiguous,

often contradictory, provisions for administering and managing land and land-based

resources. These, in turn, created separate land-administration systems with overlapping

authority and jurisdictions. This resulted in multiple and poorly coordinated agencies

governing, for example, forestry, agriculture, and urban affairs. Weak institutions, lack of

inter-sectoral coordination, and arbitrary and unclear rules and regulations worsen this

situation.

Indonesia’s problematic regulatory frameworks, institutional arrangements, and

administrative traditions distinguish forest from non-forest lands. It is highly inefficient, a

legacy inherited from the colonial Dutch period and enshrined by the New Order era (1967-

98). Administrative separation, with the MoEF administering forests and the MASP/BPN

administering non-forest land, evolved from practices rather than law. It emerged from

slow progress in zoning forest estates, lack of formal gazettal, and incorrect assumption

about State forest areas (kawasan hutan negara). This error was partly highlighted by the

Constitutional Court decision of May 2013, which overturned the classical understanding

about forest (hutan), forest area (kawasan hutan), and indigenous forest (hutan adat).

However, this legal ruling is yet to be fully followed up with effective and clear policy and

legal action by the government. Indigenous forests are now largely controlled by investors

or the government, which uses it for business and conservation, excluding the IP and forest-

dependent local communities from their traditional settlements. The ruling primarily

confirmed the rights of IP and local communities over forest lands. It has encouraged IP

and local communities and CSOs to enter the legal arena to further use the law as a tool to

fight for their rights to land and other natural resources. The challenge now lies in

formulating the legal framework, at national and regional levels, to integrate the legal

recognition of their existence and rights over land and other natural resources. In moving

forward, a better technical and legal understanding is necessary for creating complete,

integrated, and implementable policies and programs at the grassroots level. In this context,

it is important for IP and local communities to understand the benefits, drawbacks, and

challenges likely to be posed by complex legal and political issues in the quest to securing

their rights. In sum, reforms undertaken since 1998 have failed in eliminating land-sector

dualism.

Policy and legal complexities: Both prior to and after securing independence in 1945,

various land policy reforms enacted in Indonesia have done little to resolve the

inconsistencies and weaknesses of dual land administration. Indonesia’s land

administration, with multiple and overlapping laws and regulations and weak land

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classification, means that vast areas categorized as forest estate are actually made up of

forests, agricultural land, roads, and human settlements. Such arbitrary classification

results in a mismatch between laws and ground realities. Land issues are further

complicated by indeterminate entitlements to land; lack of a comprehensive land registry

and related geospatial information; lack of formal methods to protect and recognize

customary rights to land; lack of processes allowing free, prior, and informed consent;

excessive application of the State’s power of eminent domain; and a policy for the

allocation of land concessions that ignores or overrides the customary rights and interests

of other rights holders. Numerous peasant and rural poor protests since the 1970s exposed

the weaknesses in the government’s agrarian policies.

The complex legal environment is evident in the number of existing laws and regulations.

By end-2012, the land sector (non-forest) was governed by an estimated 580 laws and

regulations; essential subordinate laws have not yet been drafted. An estimated 2,000 legal

instruments govern forest land (Collier, 2012). Ambiguities over responsibilities and

control of land areas abound. Since 1998, new laws and regulations encouraging

decentralization and de-concentration have led to even more variable arrangements in

administration of land affairs, spatial planning, management of resources, and collection

of fees for permits. Unfortunately, those with money and influence thrive on the vagaries

and ambiguities of land-sector dualism.

3. Weak Policy and Legal Framework Fail to Recognize and Protect Tenure

Indonesia has never had a clear, nationwide land-tenure system. During Dutch rule, two

tenure systems existed side by side. Indonesians applied their customary practices, while

the Dutch introduced a Western tenure system. The first Forestry law was issued in 1863

and an Agrarian Law (known as Dutch Agrarian Law) was enacted in 1883. These laws

respected customary tenure systems only in areas not under Dutch control. When the

Agrarian Law was enacted, the Dutch did not revise the Forestry Law of 1863 to reconcile

the two laws. Thus, significant forest land matters remained obscure. The Basic Agrarian

Law (BAL) was introduced post-independence, in 1960. It differed significantly from the

Dutch version, creating a framework of land rights that reflected the sedentary, agricultural,

and modest housing needs of an agrarian economy as it emerged from Japanese occupation

and sought to throw off all remnants of Dutch colonization. It was unique in its expression

of Indonesian nationalism and emphasis on “social features.” The BAL discarded domain

theory (the basis for State land ownership) and introduced new tenures supposed to reflect

adat theory. Although the BAL was drafted to cover “all land” in the country, no agreement

or established approach exists for MASP/BPN to undertake registration of forest land. As

a result, the tenure security of forest dwellers and other traditional groups who relied on

communal and traditional practices was uncertain because customary land rights could not

be registered.

The Basic Forestry Law (BFL) of 1967 increased marginalization of certain communities

by asserting that land held under customary arrangements should not conflict with

protection and conservation plans and measures. Families on forest land found themselves

being treated as illegal settlers and faced eviction. As a result, IP and forest-dwelling

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communities, numbering about 60 million, were further impoverished and experienced

socio-economic discrimination, rising inequality, and loss of access to livelihood

opportunities (Mangkusubroto, 2011 and Safitri, 2012). This situation must be corrected

immediately by the government. Resolving issues of land rights and land access has thus

far been highly difficult for IP, government stakeholders, and investors, as proposed

solutions have met with skepticism and little positive action.

Dual systems in land administration and poor enforcement of existing laws have created

uncertainty over tenure, inconsistencies in laws and regulations, and uneven enforcement

and governance across land and land-based sectors. Moreover, Indonesian law gives the

State control over land and natural resources, allowing government entities to claim all

land that is not residential or subject to constant forms of use (“free State land”) or subject

to customary rights but not recorded in the land register (“not free State land”). This claim

potentially encompasses all Indonesian land other than parcels in the national land titles

register, creating confusion over the rights of forest dwellers (particularly those living on

non-forest land in forest estates) and fails to provide an environment conducive to

sustainable development. National economic development policies still reliant on

extractive use of land and land-based resources; a deforestation rate of more than 2 percent

per annum; lack of comprehensive geospatial data and information; insecure land rights of

IP and local communities, who largely remain unregistered landholders; weak institutional

capacities to demarcate forest and non-forest land, and expensive land-registration

procedures are challenges that plague the country (Geospatial World, 2011 and Palmer,

2012). To deal with these, land-administration systems must be strengthened.

When the BAL was enacted in 1960, its scope was national — land rights could exist

anywhere in Indonesia and could be registered. However, its implementation never

achieved national coverage. Subsequent forest and other resource laws had stronger and

more effective administrative support and budgetary allocation. This relegated land-

administration agencies to a lower level among government institutions. High-level policy

change and administrative reform are needed to return national scale to the BAL and allow

BPN to register all Indonesian land. The BAL does not strictly oppose the recognition of

rights on land administered as forest estate or forestland. However, ground realities differ

since forest and non-forest land are administered separately. Reversing this trend will

require an array of systemic reforms and new technologies to deliver capacity for mass

certification and spatial identification of land rights throughout the country.

Dual administration has significantly affected good land governance. Different

interpretations and competing policies have resulted in conflicts and competing tenure

claims between and within communities across the country (World Bank, 2007;

Mangkusubroto, 2011; Palmer, 2012; and ILC-Asia, 2013). Overlooking existing rights of

IP and local communities triggers such disputes. In some instances, previous owners

reclaimed land on the grounds of insufficient or non-existent compensation, fuelling further

disputes. Rural landlessness has limited economic options, basic livelihood strategies, and

food security for millions of families. Resulting conflicts and competing claims have

caused tenure insecurity. This situation is not unlike the experiences of many other

colonized countries around the world.

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Current legal and policy complexities can be attributed to the lack of an appropriate model

of land custodianship (stewardship) in Indonesia that would help differentiate between the

government’s administration of public and private lands from its “utilization” of such

lands. MoEF’s continued authority and administrative control over non-forest land must

also be addressed and clarified.

4. Need for Comprehensive Land Reforms

The literature documenting mismanagement and faulty administration of forest and non-

forest land is voluminous. It demonstrates that dual land and forest administration and

confusion in land-related laws have had negative consequences. A law to specifically and

clearly define and secure customary land is essential for the visibility of associated rights

and those dependent on such traditions and tenure arrangements for subsistence.

Emancipation of ethnic minorities and their economic, political, and cultural development

is based on recognizing and realizing traditional and customary land rights. Their

relationship with their land and resources is deeply intertwined with their customs, culture,

and political practices; it is the expression of their social wholeness. In their opinion, living,

working and nurturing the land with full control and tenurial security is the key to living

fully and surviving as people. Taking land from them implies depriving them of their

unique identity. Legislation to recognize their struggle for land and self-determination of

their destinies is a prerequisite for the fulfillment of their rights and cultural development.

The strongest and most effective calls for reforming the land sector have come from

networks and coalitions representing IP, rural poor, and their CSO supporters. The first-

hand experience of IPs with unsustainable land management and deforestation and their

improved capacity for political organization have coalesced into proposals for changes to

laws that have reached the public and parliamentary arenas. Given the complexity of the

land-reform agenda, these proposals seek reform of land and forest laws because the

problems, arguments, and proposed solutions cut across forest and non-forest sectors.

The Indonesian government’s numerous attempts to modernize land and property rights

and strengthen tenure security, through legal reform and land registration, have borne little

fruit. Such reforms should be anchored in customary arrangements and customary law by

drafting an umbrella land legislation that would protect and recognize existing customary

and tenurial rights. However, the recent government decision against preparing and

enacting a comprehensive land law will only allow dual land-administrative traditions to

continue.

Pursuing land governance reforms — challenges and opportunities: Designing land

reforms is complicated by the vast array of actors and processes involved. Reforms will

inevitably impinge on established socio-cultural norms and entrenched power structures

that cannot be legislated out of existence by regulations or policy statements. Experiences

show that decentralization and de-concentration have been sub-optimal in land

administration, spatial planning, and resource management. Available data indicates local

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authorities lack capacities or ignore, reinterpret, or circumvent land regulations (United

States Agency for International Development, 2006 and Mangkusubroto, 2011).

Indonesia does not pursue “custodianship” over land, but government agencies are seen as

“owners.” This understanding limits the ability of MASP/BPN to administer all non-forest

land. Mechanisms for MASP/BPN’s institutional coordination on land matters have not

been well established. Little information on State-held land is publicly available and

regional governments and departments lack data on the amount of State land under their

control. CSOs note that the government’s inability to award and oversee land leases

transparently allows concession holders to exploit land with little consideration for long-

term sustainability and leaves local communities with few opportunities to participate in

revenue streams from resources. Ideally, land expropriated by the government for public

interest must accord with existing spatial (land-use) plans. In recent years, landholders have

received some compensation for land acquired, but less is offered to those holding land on

the basis of tax receipts or under customary law and none at all to squatters and informal

occupants. Delays in compensation payments are frequent; the fairness of compulsory

acquisition has also been contested.

Despite advances in modern geospatial technology, Indonesia lacks a complete inventory

of geo-referenced land parcels for forest and non-forest lands and available land

information is scattered. While cadastral databases maintained by MASP/BPN serve as

basic reference points, these are not updated with regular ground-truthing. In addition, the

large backlog in formally delineating land and recording relevant data presents numerous

challenges to good land governance. The adoption of the Geospatial Information Law in

2011 provides a better platform for developing guidelines to build a nationally consistent

land-information system and fill-in gaps in data through a national inventory of land

parcels, that is, the cadastral layer of the National Spatial Data Infrastructure (NSDI). The

adoption and implementation of these guidelines and an NSDI consistent with Indonesia’s

geospatial needs are critical for land-information management. The NSDI will also guide

the development of physical and human resources along with capacities for land

administration and management in the country.

Indonesia’s political stability in recent years along with policy commitments announced

since 2011 have created a window of opportunity to improve land governance. Indonesia’s

enactment of the Geospatial Information Law in April 2011 has paved the way for key

improvements to land governance and land reform. The law is designed to ensure the

availability and widespread use of geospatial information for all Indonesian citizens, to set

standards and governance norms, and encourage the use of geospatial information in

transparent governance. It provides the legal framework for acquiring and distributing

accurate geospatial data and creates a regulatory framework for the administration of

national geospatial information.

In 2011, the GoI also announced its OneMap policy — a single, nationally consistent, map-

base for the country that utilizes one common geo-referencing system — and commenced

its implementation under the President’s Office. The issue of multiple mapping systems

and overlapping data sets was raised in various forums since 2000 in the lead-up to the

14

passage of the Geospatial Information Act. The government believes OneMap encourages

private sector participation in providing geospatial value-added services and products.

In January 2015, the government designated MENKO to strategically coordinate OneMap

across whole-of-government and BIG to continue to lead the technical implementation of

OneMap as well as overall technical coordination of geospatial information and

establishment and operation of the national Geoportal and the NSDI framework. BIG is

responsible for strengthening intra-government and other stakeholder access to nationally

consistent and complete geospatial data, through OneMap. This is critical to improving

land governance and making government more accountable and transparent. BIG has

indicated its intention to adequately consider broader NSDI needs, especially for the land

sector; fundamental data sets must be defined and funding identified for this purpose.

Funding requirements should address initial data capture and ongoing sustainability

through maintenance.

Pragmatic solutions to various land-tenure problems are a pre-condition for good land

governance. The government has indicated its interest and willingness to build adequate

human, financial, and technical capacities to support land policy development and

implementation. It is also committed to delegating land-governance responsibilities to local

governments to increase accessibility of services and promote accountability and

transparency. Regional experiences and good practices show that timely dissemination of

information to stakeholders is critical and must be addressed as a priority.

For good land governance, public administration of land must be separated from land use

and from any responsibility to dispose State land or buy land for the State. Public

administration of land includes initial registration, transfers, surveys, and property

valuation. In these stages, the government institution is a custodian of the land.

Easily accessible data must be unified and responsibility clearly delineated among

government agencies. Land-administration must also consider effective customary

practices and decentralization to render itself more useful and accessible. Modernization

of customary practices will ensure that gender-based discrimination is rooted out.

Positive developments and emerging opportunities: The past 16 years have seen progress

in political democracy and significant changes in the way some government agencies (e.g.,

Anti-Corruption Commission and the Constitutional Court) and the larger civil society

espouse the cause of poor communities in securing their rights. Recent judicial rulings and

the work of progressive members within the government and bureaucracy support change-

seeking groups. These groups should be encouraged to advocate comprehensive land-

related policies and regulations and inclusive and accountable multi-level land governance.

Despite Indonesia’s access to modern geospatial technologies including satellite imagery

and geographic information systems, and its new investment in NSDI, to-date it has had

little success in reliable monitoring of deforestation and land degradation and the

governance of land-development investment. New technologies should be revisited to

assist the government in improving land governance.

15

Political openness and democracy are creating progressive dynamics that some local

governments are exploiting to create innovative and inclusive models of land

administration and management (e.g., focusing on smallholder farms; opposing large-scale

concessions; a moratorium on new land concessions; programs to conserve biological

diversity; constructive judicial rulings; and CSOs advocating the rights of the poor and

marginalized). These initiatives must be supported, nurtured, and strengthened.

What’s Next?

In moving forward, land and land-based sector reforms should be anchored on a number

of critical principles. First, a comprehensive land law is central to land-sector reforms. It

should eliminate overlaps, contradictions, and ambiguities in existing laws, regulations,

and procedures, and do away with dual administration. It is to be noted that the demands

for land law reform have crystallized into two main legislative efforts since 2012: (a)

Drafting of a Bill on the Protection and Recognition of Indigenous Rights (2013); upon

adoption, this law will apply to land under the administration of the MoEF and other

government agencies and (b) drafting and adoption of the land bill (2014) i.e., a

comprehensive land law that would be prepared by revising and reforming the BAL. These

two draft Bills were basically dropped at the commencement of the new government in

October 2014. More recently in February 2015, the government has revived these two bills

and are expected to be present to the Parliament in the coming months. The new laws

should restrict bias towards the elites and market tendencies, and help to harmonize

national and local laws on land administration and management, spatial planning and

zoning, and urban development. This is essential for successful land reform, development

of pro-poor policies, and sustainable use and development of land and natural resources.

The adoption of these two land-related bills are as a prerequisite for building a sustainable

land administration system in the country.

Second, relevant laws and regulations in other sectors should be aligned with the proposed

umbrella land law. Further, transparent and fair procedures and guidelines are also needed

for land acquisition for “public purposes.” The government must adopt a “no eviction”

policy to assure landholders that land acquisition will be fair and transparent and that the

claims of informal settlers, particularly in urban areas, will be considered. The government

must also issue a thoroughly revised set of regulations and guidelines, replacing existing

ones, on forest land management. These should include support for developing local

dispute-resolution mechanisms to address land conflict. The government should

reformulate its urban (and peri-urban) policy and harmonize it with land and land-based

sector reforms. It should also include procedures for strengthening urban land-management

practices (acquisition and transfers, land-use planning, zoning, permits, taxation, and de

jure and de facto systems) to support infrastructure development. Clear policies, programs,

and instruments are required to support adequate and affordable urban land supply for

squatter and slum settlements and low-income groups.

Third, dialogue and partnership with communities and civil society is essential because it

helps build consensus, ensuring inclusive approaches. For good land governance,

16

Indonesia needs transparency, greater public participation, consultation and cooperation

with CSOs, and an educated officialdom sensitive to the problems and needs of people.

Fourth, land administration and management must be monitored to strengthen governance.

The government should consider establishing a multi-stakeholder Working Group on Land

Governance to help set up a national framework and mechanism for monitoring and

reporting on the implementation of proposed land-related bills and in tracking progress

made in priority land-governance indicators. This would entail engagement with

appropriate government agencies, civil society, and other stakeholders. A series of

advocacy and awareness-raising sessions should be organized to demand better land

governance. This should result in an agenda to address bottlenecks, including land-

information management. Reports from such events should serve as a tool for monitoring

implementation of the proposed agenda.

These principles will strengthen people’s relationship with land and resources. As

Indonesia considers strategies to mitigate challenges confronted by rural and poor

communities and ensure land-sector reforms, efforts must be made to tackle prevailing

complexities from a political, economic, and social perspective as well. Stereotyping of

land-related issues and challenges must be prevented. Periodic measures are required to

learn from experiences and enhance policy, laws, and regulations to protect and recognize

land rights. Also needed are field-level measures; policies to support development of land-

information systems; and steps to develop capacity, facilitate changes at national and local

levels, and identify areas for follow-up and further research.

The government that took over after the general elections in October 2014 has moved in

the right direction, streamlining some ministries and mandates. The establishment of

MASP/BPN and the creation of the MoEF are positive signs. In merging ministry

responsibilities, redundant positions would be streamlined. A compact institution geared

towards land administration and management might help bring in line all the disparate

methods for the country’s land and resource management. The new government has also

reiterated its commitment to push land-sector reforms by reviewing and adopting existing

land-related bills and regulations. It has also reconfirmed its commitment to consider the

two draft bills for adoption at the earliest.

Without extensive capacity-building programs, local offices of MASP/BPN, MoEF, or

Ministry of Home Affairs (MoHA) cannot deliver. The government will have to support

such local offices and governments (regional and local), providing training and capacity

building for efficient and transparent functioning. Land conflicts and the weaknesses of the

judicial system will also have to be addressed through capacity building. Clarifying tenure

and access rules and minimizing land fragmentation would incentivize increased land

investment and minimize conflicts. Transparent mechanisms should be created to link the

poor to State institutions, particularly those that mediate disputes and conflicts. Strategies

and mechanisms must be developed for preventing and reducing land disputes through

education and information dissemination.

17

In all this, political will at the national level must be galvanized to ensure that requisite

legislation within and across sectors is coherent on land-sector reforms. Increasing

community and civil society engagement in land-tenure issues and discussions with

government officials, policy makers, village leaders, community members, CSOs, and

academics during this study indicate constituencies for change that should be supported.

Note: This paper has drawn upon the very detailed review of the Indonesia’s land sector

undertaken for the World Bank during 2012-14, Towards Indonesian Land Reforms:

Challenges and Opportunities, A Review of the Land Sector (Forest and Non-Forest) in

Indonesia, (Srinivas and Bell, 2014). The paper also discusses recent developments

regarding the land-related policies and priorities of the new Indonesian administration.

18

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Biographies of Authors

Shivakumar Srinivas, has more than 30 years’ experience in the land sector working for

the World Bank and FAO, and recently lead-author for the World Bank report on

Indonesian land reforms.

Keith Clifford Bell, licensed surveyor and professional engineer, with more than 25 years

in the Australian public and private sectors, has since 2003, been the World Bank’s primary

land policy specialist for the East Asia Pacific Region, including land projects and studies

in Indonesia.

Kurnia Toha, lawyer, is the Director, Center for Legal Development and Public Relations,

Ministry of Agraria and Spatial Planning/National Land Agency for Indonesia. He also

teaches at the University of Indonesia.

Arifin Zaenal, engineer and planner, is the Deputy Director, Urban Affairs, Ministry of

National Development Planning Ministry for Indonesia. He is also the Head of National

Secretariat for Agrarian Reform and the Head of National Secretariat for Urban

Development.

William (Bill) Collier, consultant, has more than 30 years’ experience working on land

and natural resources issues in Indonesia and Southeast Asia. In recent years, he has

advised the Government of Indonesia in the drafting of the Law on Land Acquisition and

preparation of the draft Land Law.