The Executive Office of The President of The Republic of IndonesiaWest Kalimantan, October 12, 2017

INEQUALITYAND INDONESIA’S POLICY RESPONSES

INEQUALITY IN INDONESIA SINCE 1990s

2

INDONESIA’S RESPONSES

3

POLICY RESPONSE #1: IMPROVING SUBSIDY TO BE MORE WELL-TARGETED

4

• Subsidi on Fuel (solar and fuel)• Subsidy on Electricity (900 VA)• Subsidy on Food (Raskin)• Subsidi on LPG and fertilizer (soon)

341,8

77,3

82,7

0

50

100

150

200

250

300

350

400

2010 2011 2012 2013 2014 2015 2016 2017Subsidi Energi (triliun Rp) Subsidi Non Energi (triliun Rp)

Source: Ministry of Finance

Subsidy on Energy

Subsidy on Non-Energy

BUDGET ALLOCATION FOR SOCIAL ASSISTANCE, 2010-2017

5

68,6 71,175,6

92,197,9

97,2

49,256,7

0

20

40

60

80

100

120

2010 2011 2012 2013 2014 2015 2016 2017

Triiu

n Ru

piah

• Since 2016, budget allocation for National Programme for Community Empowerment (PNPM) is diverted to Village Fund, and there’s been changes on several budget account of SocialAssistance (Bansos) since the establishment of PMK 254/2015

• Temporary Unconditional Cash Transfer (BLSM) ends in 2015

Source: Ministry of Finance

POLICY RESPONSE #2: INCREASING FISCAL TRANSFER AND VILLAGE FUND

6

332,9

417,6

489,4

582,9577,2

732,1 767,8 763,6

344,7403,7

480,6 513,3

573,7623,1

776,3

764,9

300

400

500

600

700

800

900

2010 2011 2012 2013 2014 2015 2016 2017

Belanja Pemerintah Pusat (triliun Rp) Transfer Ke Daerah dan Dana Desa (triliun Rp)

Source: Ministry of Finance

VILLAGE FUND ALLOCATION, 2015-2017

7

20,8

47

60

0

10

20

30

40

50

60

70

2015 2016 2017

Trili

un R

upia

h

• Mengevaluasi formula Dana Desa• Menajamkan prioritas pemanfaatan Dana Desa

(infrastruktur dasar, pemberian makanan tambahan balita, perbaikan faskes/fasdik, infrastrukturproduksi, BUMDES)

• Sinergi Dana Desa dengan belanja K/L dan belanja daerah• Governance

Source: Ministry of Finance

POLICY RESPONSE #3: INCREASING BUDGET ALLOCATION FOR INFRASTRUCTURE

8

110,34

140,73167,32

206,39 209,00

292,52307,13

0

50

100

150

200

250

300

350

2010 2011 2012 2013 2014 2015 2016

Trili

un R

upia

h

• Infrastructure for Growth (MoT, MoPWH, MoA, MoE&MR, etc)• Papua, Celebes, Borneo, etc.

Source: Ministry of Finance

POLICY RESPONSE #4: TAX REFORM, STARTING WITH TAX AMNESTY

9

141

1015

3205

Deklarasi Harta (triliun Rp)

Repatriasi Deklarasi LN Deklarasi DN

Aim of Tax Amnesty according to Constitution is increasing obedient, revenue, and development funding

0,3612,5

5,17

85,9

Uang Tebusan (triliun Rp)

Badan UMKM Badan Non UMKM

OP UMKM OP Non UMKM

Total Deklarasi Harta: Rp4.361 T Total Uang Tebusan: Rp104 TSource: Directorate General of Tax, Ministry of Finance. Data per 10 February 2017 11.10 WIB

POLICY RESPONSE #5A: ECONOMIC POLICY PACKAGES

10

1Expansion of investment, development of tradeindustry, logistics, and rawmaterials

2Deregulation anddebureaucratization ofinvestment

3 Lowering energi cost andsimplification of land permit

4Imporvement of wage policyand access expansion ofCredit for Business (KUR)

5Asset reevaluation, elimination of double tax forreal estate, & deregulation ofsharia banking

6Development of special economiczones (KEK), improving access toclean water/sanitation, and fasterprocess of importing raw material of drugs

7Acceleration of landcertification and incentive forlabor-intensive industries

8One map policy, energiresilience, and incentive foraviation industry

9Development of electricityinfrastructure andimprovement of logistics

10Protection for micro and smallbusinesses, and deregulationof foreign investment

11Increasing competitivenessthrough KUR, real estate, riskcontrol, and pharmaceuticalindustry

12 Improving ease of doingbusiness

13 Affordable housing for thepeople

14 E-commerce road map

Source: Coordinating Ministry for Economy and The National Planning Agency

POLICY RESPONSE #5B: LAW REFORM PACKAGES

11

1Reorganizing regulation for overlapping, inefficient regulation, and irrelevant for law enforcement

2 Revamping institutions and law enforcement entitties

3 Development of legal culture

7Source: Coordinating Ministry of Politics, Law, And Security

6

2

3

4

5

1

Strengthen institution

Development of legal culture

Strengthening human resources, especially law enforcement apparatus

Case handling, especially in court

Public service

Improvement of case management

Reorganizing regulation

TargetsScope Priorities

1 Eradication of illegal charges

2

3

4

5

Eradication of smugglings

Faster services for driving license, vehicle registration, statement of police report, and

Relocation of overcapacity Correctional Institution (Lapas)

Improvement service for patent, merk, design

INDONESIA’S GINI COEFFICIENT, 1993-2016

12

0,397

0,25

0,27

0,29

0,31

0,33

0,35

0,37

0,39

0,41

0,43

0,45

1993 1996 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Source: Susenas, World Bank calculation

Jokowi-JKGlobal

Financial Crisis

Asia Economic Crisis

KEBIJAKAN PEMERATAAN

EKONOMI

3

Lahan

Kesempatan

KapasitasSDM

A

B

C

Ritel dan Pasar

Pembiayaan dan Anggaran Pemerintah

Manufaktur dan ICT

Nelayan & BudidayaRumput Laut

Mengembangkan perumahan terjangkauuntuk penduduk miskin kota

Peremajaan Tanaman Perkebunan Rakyat dan Mendorong Peranan Swasta/BUMN sebagai Off-taker dan pengolahan

Mengalokasikan Lahan PertanianKepada Petani Tanpa Lahan

Mensinkronkan dan Melaksanakan Reforma Agraria dan Kehutanan Sosial

Vokasi, Entrepreneurship danPasar Tenaga Kerja

Sistem Pajak Berkeadilan

Kebijakan Pemerataan adalah kebijakanEkonomi Affirmatif yang bertujuan untukmeningkatkan kemampuan masyarakatekonomi lemah dan menengah agar memiliki equity (terutama lahan), kesempatan dan kemampuan SDM yang mempunyai daya saing

Kebijakan Pemerataan Ekonomi Yang Mendesak Di Berbagai Sektor

7

POLICY RESPONSE #6: MAINSTREAMING POLICY OF ECONOMIC EQUITY

13

• Reforma Agraria adalah proses alokasi dankonsolidasi kepemilikan, penguasaan/akses, danpenggunaan lahan

• Kebijakan Reforma Agraria dilaksanakan melalui duajalur, yaitu TORA dan Perhutanan Sosial

“Bumi, air dan kekayaan alam yang terkandung didalamnya dikuasai oleh Negara dan dipergunakan

untuk sebesar-besarnya kemakmuran rakyat.”

Tujuan Reforma Agraria

UUD 1945 Pasal 33 ayat 3

Dasar Hukum

Apa Itu Reforma Agraria?

Mengurangi ketimpangan

penguasaan dan pemilikan tanah

Menciptakan sumber-sumber

kemakmuran dan kesejahteraan

masyarakat yang berbasis agraria

Menciptakan lapangan kerja

untuk mengurangi kemiskinan

Memperbaiki akses masyarakat kepada

sumber ekonomi

Meningkatkan ketahanan dan

kedaulatan pangan

Memperbaiki dan menjaga kualitas lingkungan hidup serta menangani

dan menyelesaikan konflik agraria

8

LAND REFORM

14

TAXONOMY OF LAND REFORM, TARGET AND SCHEME: LANDS AND SOCIAL FORESTRY

15

LAND Reform

ASSET LEGALIZATION(4,5 Million Ha)

LAND REDISTRIBUTION(4,5 Million Ha) 1 2 ACCESS LEGALITY3

SCHEME 1 SCHEME 2 SCHEME 4 SCHEME 5 SCHEME 6Uncertified

Transmigration Land (0,6 million Ha)

Land Certification Idle Rights to Exploit (HGU) and

Idle Land(0,4 million Ha)

Forest Release (4.1 million Ha)

Access to Natural Forest Management Permit For

Temporary Period(12.7 million Ha)

LAND REFORM Land Object (TORA) Social Forestry

(3,9 million Ha)

Old Transmigration Land 342,344

land unit (220.000ha)

New Transmigration Land 567.124

land unit (380.000ha)

Land from Perhutani and

Inhutani

Land from MoEF

3A

3B

2A

2B

1A

1B

ECONOMIC EMPOWERMENT

16

Area gudang danpengering

Area PenanamanTanaman Pangan

Area agroindustri Area Penanaman hortikultura

Memanfaatkan Lahan

• Menggunakan lahan untuk memproduksi tanaman pangandan hortikultura

• Mengembangkan hasil panenmenjadi bahan yang memilikivalue added dengan konsepagroindustri

• Dilakukan dalam bentuk klaster• Ada proporsi tersendiri atas

pembagian setiap fungsi lahan, sehingga mudah untukmemberikan akses infrastruktur

Membangun desa yang terintegrasi

Apa Yang Akan Dilakukan Penerima Manfaat Reforma Agraria?

Pemberdayaan klaster dilakukan dengan membagi pemanfaatan menjadi beberapa kegunaan dengan berfokus pada penanaman tanaman pangan dan pengembangan nilai tambah (agroindustri).

Penerima (subjek) program RA diberdayakansecara klaster melalui:

1. Penguatan Hak (kelompok) masyarakat atas tanah secara legal sesuai denganpenataan, penguasaan, dan pemilikan tanah

2. Peningkatan kemampuan (kelompok) masyarakat dalam pemanfaatanpeningkatan produktivitas lahan, melaluitanaman pangan & agroindustri.

3. Pemberian akses terhadap infrastrukturjalan dan irigasi (termasuk prasaranapasca panen), pendidikan & latihan, kreditusaha, dan pemasaran

4. Penyediaan “platform” informasi mengenaipasar dari produk pertanian serta bantuanbagi pengembangan usaha produksipertanian

Memanfaatkan Lahan

11

LAND LEGALIZATION AND LAND REDISTRIBUTION REALIZATION (2015 – 2017)

17

LAND LEGALIZATION

o 2.861.556 unito 508.391,11 hao 1.327.028 family

LAND REDISTRIBUTION

o 245.097 unito 187.036 hao 179.142 family

THE TARGET AND REALIZATION OF LAND LEGALIZATION AND LAND REDISTRIBUTION – MINISTRY OF AGRARIA AND SPATIAL PLANNING 2015 – 2017

18

No Fiscal Year Target (unit) Realization (unit) Percentage1 2015 908.353 863.651 95,082 2016 1.060.447 989.501 93,313 2017 (s.d. 29 August 2017) 5.090.935 1.008.404 19,81

Total 7.059.735 2.861.556 40,53

No Fiscal Year Target (unit) Realization (unit) Percentage1 2015 109.840 95.741 87,162 2016 170.562 143.234 83,983 2017 (s.d. 29 Agustus 2017) 24.280 6.122 25,21

Total 304.682 245.097 80,44

LAND LEGALIZATION

LAND REDISTRIBUTION

TAXONOMY OF LAND REFORM (TORA) AND SOCIAL FORESTRY (PS)

19

AGRARIAN REFORM LAND OBJECT (TORA)Granting Rights to Land by MoA&SP According to Law No. 5 /1960 on Basic Agrarian Principles

SOCIAL FORESTRYProvision of Management Rights or Permits forthe Use of Certain Regions by Ministry of E&F

according to Law No.41/1999 on Forestry

LEGAL STATUS/ AGENCY

STATE LAND AND PEOPLE’S LANDUnder the jurisdiction of Ministry of Agraria and Spatial Planning

STATE FORESTUnder jurisdiction of Ministry of Environment and Forestry

To be released from State Forest To be kept as State Forest

CURRENT POSSESSION

STATUS

OtherState Land

Idle Land of the

cultivationright,

rights toconstruct, and rights

to use

ExpiredCultivation

Right

Legalization of

possessedland asset

UncertifiedTransmigration Land

20% of forestreleased for Big

Plantation

20% of givenpermit of

ConvertibleProductionForest to be

released

Unproductive

Convertible

ProductionForest

Transmigration

Settlement, common

and social facility with Principle License

Settlement

commonand

socialfacility

ProductiveLand

(field andPonds)

DryedFarming

and MixedPlantation

as thesource oflivelihood

Customary Forest in Conservation Forest

orProduction Forest

area

Various forest category based on fuctionand allocation (Production, Conservation,

and Protected Forest)

TARGETTED LEGAL

STATUS

Rights ofOwnershi

pRights ofOwnershi

p

Rights ofOwnershi

p

Rights ofOwnershi

p

Rights ofOwnershi

p? ? ? Rights of

Ownership

Rightsof

Ownership

Rights ofOwnershi

p

Rights ofOwnershi

p

Hutan Adat

Scheme

HutanDesa

Scheme

Hutan Tanaman

Rakyat Scheme

Hutan Kemasyara

katan Scheme

Kemitraan

Scheme

TARGET AND REALIZATION OF SOCIAL FORESTRY 12,7 MILLION HA (… 2017)

20

IMPLEMENTATION TARGET

25.863 villagein forest area

Village Forest(491.962,83 ha) Community

Forest(244.434,67 ha)

People’s Plantation

Forest(232.050,41 ha)

Partnership Forest

(71.608,20 ha)

Customary Forest

(8.746,49 ha)

Social Forest Permit in

Forestry Area(4.674,90 ha)

REALIZATION

CONCLUSION: VILLAGE-BASED LAND REFORM

21

FIELD VILLAGE ISLAND VILLAGE, COASTAL VILLAGE

Management of land asset for urban farming production.

Acknowledgement of customary area ownership as Customary Forest; Establishment of village as Customary Village

Village land management based on island’s characteristics;Coastal village management based on ecosystem

Management of village land for poor farmers

Redistribution of ‘state land' of ex-HGU fields

Acknowledging the ownership status of people’s land in State Forest Area;

Enhancing access for village and the people to state forest for Social Forestry

PLANTATION VILLAGE

PRE-URBAN VILLAGE

CUSTOMARY VILLAGE

FOREST VILLAGE

AGRARIAN REFORM

THANK YOU

Managing Director was for SustainabilityGolden Agri-Resources Ltd./PT SMART Tbk.

Agus Purnomo

Managing Director for Sustainability

Golden Agri-ResourcesLtd/ PT SMART Tbk

12-10-2017

7th Regional Conference Human Rights and Agribusiness in South East Asia A reflection on transition from voluntary standards to binding obligations

Voluntary Initiatives as Discussed in EU

European Commission DG Environment commissioned 3Keel and LMC to researchsocial and environmental impact of palm oil. Their draft study was presented on 2 Oct2017 in Brussels, the consultants concluded as follows:

• A significant growth in voluntary initiatives and in reporting of its progress

• Group initiatives and collective commitments are seen as driving the change - butrequire multiple data sources to evaluate properly

• Whilst the initial focus of initiatives was on deforestation and biodiversity loss,initiatives are evolving to encompass social issues

• Whilst most initiatives rely on certification schemes, some are driving change atlandscape-scale, recognizing livelihoods for local communities, and reducing driversof deforestation and peatland conversion

• Some are working with suppliers to improve traceability and transparency ofsupply, mapping supply chains beyond the mill where complexity is high

• Challenges to the voluntary initiatives: more participative land use planning, clarityaround land tenure, mapping of concessions, etc.

➢Legal recognition for the rights of individual and organized entities

to a safe work environment, freedom of expression,access to

education, right to social security.

➢Decisive and speedy judicial processes for alleged human rights

violations – including for tenurial disputes;

➢Reducing problematic/conflicting regulations, such as the use of

fires in agriculture, etc.

➢The need for leadership by the government. Private sector running

faster than existing regulatory framework faced serious obstacles.

The need for binding Regulatory Reform

Thank you

A leading integrated palm oil company

Integrated Agribusiness Company

Perjalanan keberlanjutan GAR; sumber: GAR SR Report 2016

Company’s obligations related to human rights

Company’s obligations

Avoid violations of human rights

Address / reduce the negative impact of human rights

GAR Social and Environmental Policy (GSEP) as a

road map of sustainability

ENVIRONMENTAL

MANAGEMENT

SOCIAL AND

COMMUNITY

ENGAGEMENT

WORK

ENVIRONMENT AND

INDUSTRIAL

RELATIONS

MARKETPLACE AND

SUPPLY CHAIN

POLICY

Social and human rights issues and their

implementation are featured in 12 policy

items that bind all company operations at

all levels of activity

Social and Community Engagement

POLICY

Place human right issues at

the beginning of FPIC activities

Map business aspect related to

Human Rights

Avoid human rights violations

Do remediation if there is human rights violation

Human Rights Fulfillment by GAR

IMPLEMENTATION

Litigation (only be done if there is no agreement)

GAR puts forward mediation efforts and

negotiations

MEDIATION

&

NEGOTIATIONS

PERMA No.1/2016

To support mediation and negotiation efforts,

Sinar Mas has around 100 staff with national certificate as mediator. More than 12 of

them are part of the SMART sustainability team

Regulate human rights protection for local communities

(indigenous people, employees, consumers).

Mediation and negotiation are done by putting forward the FPIC principle

IMPLEMENTATION

Develop system to handle complaints

Data collectionMeeting with

the complainant

Meeting with related parties

Field Verification

Activity plan Monitoring

Data collection in relation to complaints

submitted

Meeting with the complainant

Meeting with related parties involved

If required, the complaints handling

team will conduct field verification

Analyse and set up follow-up action

Monitor progress of related issues until the issue is

resolved

IMPLEMENTATION

COMPANY COMMITMENTS:

▪ Respecting the rights to Free, Prior and Informed Consent (FPIC) for indigenous peoples and local communities and understand the needs of food security in newly developed areas.

▪ Responsible handling of complaints and grievances

▪ Responsible resolution of conflicts

Social and Community Engagement

The company has....

▪ Established a Complaint Handling Procedure in 2015

▪ Worked closely with The Forest Trust (TFT) in developing Participatory Mapping (PM)

▪ Followed by Participatory Conservation Planning

▪ Secured agreement from 10 villages to protect over 7,000 hectares of HCS

▪ Continued to reduce conflict through multi-stakeholder consultations such as BSR, SHIFT, CDP

Community Empowerment

GSEP: Work Environment and

Industrial Relations

POLICY

Our Employees

▪ Provide jobs for 170,700 people including 68,600 plasma smallholders

▪ Pay above minimum wage for full-time and part-time workers

▪ Working closely with unions such as SPSI, SBSI and other unions.

▪ Commissioned study by Business for Social Responsibility to check on labour practices in Q42016

Employment status MALE FEMALE

Part-time workers 40.660 5.640

Full-time workers 30.400 25.400

GAR’s Employees Profiles

Employee Wages 2016

Average daily wages of GAR's Full-TimeWorkers

Rp 91.421

Average daily wages of GAR's Part-TimeWorkers

Rp 87.259

Average daily minimum wage set by localgovernment

Rp 85.689

Facilities for employees

Photo

: G

AR

Susta

inabili

tyR

eport

201

6

Category Housing School and school

Childcare Supportingfacilities (sports,

places of worship)

Annual leave

BPJS BPJSKetenaga-

kerjaan

Polyclinics

Permanent workers(SKU, PHT)

√ √ √ √ √ √ √ √

Part-time workers √ √ √ √ 2 √ √ √

Note 1 Rumah : PHT telah memiliki rumah sendiri di sekitar kebun2 Cuti Tahunan : Syarat dan ketentuan berlaku

1

Protecting our employees

Policy and Work Protection

Photo: GAR Sustainability Report 2015 & 2016

GSEP: Marketplace and Supply Chain

POLICY

MARKETPLACE AND SUPPLY CHAIN

Together with suppliers make the

transformation in sustainable practices

SMART SEED Education Forum

SMART SEED 1

Topics: Sustaining long-term business;

Location: Medan; 143 participants

SMART SEED 2

Topic: ISPO as Foundation for Sutainable Palm Oil

Location: Medan; 137 participants

BSR Labour Assessment within our

operation

Project Objective

BSR conducted an in-depth assessment to

provide Neste and its supply chain partner

Golden Agri-Resources (GAR) with a

comprehensive understanding of country-level

human rights risks and opportunities for the

palm oil industry in Indonesia, particularly in

the area of labour.

Focus Areas Management Systems – SOPS, Policies, Implementation,

Recruitment Training, Communication to workers

Work conditions and terms of employments- contracts ,

wages

Grievance Mechanism

Protection of workforce No Child Labour, Forced Labour

Workers Association- Freedom of Associations

Living Conditions

Supply Chain Workers

DIHR Supply Chain Assessments with Nestle

Purpose: Identify risks, impacts (both + and -) and

follow-up steps on labour issues in

Nestlé’s and GAR’s supply chain

Scope & ProcessThis is not an audit

Looking at national and international

human rights standards

Interviews with different people within

the company and outside

Relevant management representatives:

• Human Resources

• Security,

• Safety & Health, Environment

• Community relations

• Supplier relations (for mills

Ms Joyce Godio - Asia Indigenous Peoples’ Pact (AIPP)

Ms. Joyce Godio, from Asia Indigenous Peoples’ Pact (AIPP), discussed the intricacies of engaging with the ASEAN Inter-Governmental Human Rights Commission (AICHR). AIPP’s experience working with the AICHR has varied depending on the current representatives and their willingness to open up space for indigenous issues as well as their openness to discussion. AIPP have had mixed outcomes following discussions with the Thai and Malaysian representatives of AICHR; the representative from Thailand expressed that his support is restricted within their domestic political situation, the Malaysian representative however, has been more active in extending support to indigenous peoples issues.

In the future, Joyce noted that the continuing development of environmental impact assessment guidelines at the AICHR was an opportunity to highlight the rights of indigenous peoples. There is also an opportunity to engage in the current discussion on the right to access safe drinking water, as the Malaysian member of the commission was keen to raise the issue of dams in indigenous territories.

The ASEAN does have its problems; as it is primarily focused on strengthening itself as an economic block in the region, less attention is paid to human rights than desirable, including not considering transboundary impacts. However disregarding engagement with ASEAN will even further render indigenous peoples issues invisible in ASEAN documents and their overall consideration.