Case Study: IMF Intervention in Indonesia and Deforestation

Hi delegates!

This blog post highlights an aspect of structural adjustment programs that we didn't go very much into in our topic synopsis, but would be a great opportunity for further research for you: the environmental impact of SAPs. Specifically, we'll look at the case study of SAPs in Indonesia and this World Wildlife Fund report from 2001 on the impacts of IMF intervention on Indonesia's rainforest. The report is a bit long and contains a lot of jargon about forest management and economics, so we don't expect you to read and understand everything in it, but it's worth looking through!

Indonesia has the most tropical rainforest and biodiversity of almost any country in the world. Yet, it has issues with deforestation, wildfires, and environmental degradation. For example, from 1985 to 1997, about 14% of its total forest cover was deforested in just 12 years, and the rate of deforestation has only increased since then. The two biggest culprits are timber extraction and the palm oil industry, both of which require ever-increasing rates of deforestation and land conversion.

Like many other Asian nations, Indonesia was hit by a debt crisis in the 1990s. The IMF stepped in with a $46 billion USD bailout package and SAP. However, its actions not only neglected to address Indonesia's forestry issues, but accelerated deforestation and environmental destruction.

Through its SAP, the IMF implemented forest policy reforms such as removing export taxes and implementing measures to improve market efficiency in wood processing. However, these reforms have been described as "cookie-cutter prescriptions" that were generic and did not address the specific shortcomings in the Indonesian government's forestry management systems. 

The IMF's SAP liberalization measures, which we've described in our topic synopsis as adhering to a neoliberal and market-based paradigm, also led to a large influx of foreign investment into Indonesia's palm oil industry. The palm oil industry is a major (if not the largest) contributor to deforestation, and it has also been a catalyst for economic dispossession and social conflict in Indonesia. An estimated 100 million Indonesians, often the rural poor, were dependent on the forest for their livelihood in 1999. However, the palm oil industry has converted mass amounts of land into commercial agricultural land, displacing people and taking away their access to traditional land resources. The practices of palm oil agriculture also cause devastating forest fires; for example, forest fires in 1997-1998 burned over 2 million hectares of forest and caused health and property damage amounting to about $9.3 billion USD. Locals have protested against these practices; thus, the history of palm oil in Indonesia has been marked by demonstrations, intimidation of locals, injuries, and even deaths. Thus, a major criticism in the WWF report is that the IMF policies prioritized growth over sustainable environmental practices and the welfare of the rural population.

Indonesia's tropical rainforests are crucial for the preservation of species and habitats, biodiversity, and carbon cycling to regulate global warming. They have also long been a crucial resource for local populations, who rely on the land and have traditional methods for managing and sustaining it for future generations. However, the IMF's structural adjustment policies have put this resource in jeopardy. This problem is likely not limited to Indonesia; many NAM nations are also home to large amounts of natural resources that have been exploited for SAPs (or may be in the future). As you prepare for committee, think about whether your nation is affected by this issue. What solutions you could develop to address this environmental lens? Additionally, what are the economic and social implications of excessive natural resource extraction for the local population?

We hope this is a useful starting point for further research! Feel free to leave any questions or comments below, and see you at BMUN 70!