Mother and child in Indonesia fishing.

Analysing pathways to sustainability in Indonesia

Indonesia is pioneering a new approach to national decision-making that explains the impact high-level decisions have on ordinary people and natural resources like water, timber, land and energy - as well as on the economy itself.

  • 4 December 2009 | Updated 14 October 2011

Introduction

For the first time, a powerful new tool is allowing policy makers to better understand the consequences of macro policy at the micro level.

It will allow policy makers to see how:

  • a major policy decision influences the decisions of families
  • their decisions affect natural resource use
  • this in turn plays back into national economic performance.

It offers the opportunity to fine-tune policy and development plans to get the best outcomes for the nation, the people and the environment that supports them.

This major advance in understanding the impacts of policy decisions is being developed by:

  • Indonesia's National Development Planning Agency (BAPPENAS)
  • the World Bank
  • CSIRO, with support from AusAID.

The Pathways approach

Indonesia and other countries have a wide range of choices for how to develop their economies.

Their goal is to maximise the return on national investment in terms of:

  • growth
  • sustainability
  • poverty reduction.

Pathways uses modelling at the national and household level to understand the consequences of macro policy decisions.

It addresses a particularly thorny issue - the fact that macro policies that appear sound at the national level may have unforseen and adverse consequences for individuals or local communities, including driving people to overexploit natural resources.

For example, policies to deregulate mining have sometimes led to foreign companies exploiting resources and profits, while having negative effects on the health, welfare and environment of local people, and contributing little to the national economy.

Pathways interprets the impact of macro decisions on different income groups in the community, and how their behaviour affects natural resources such as water, soil, energy, fish stocks, timber and minerals.

This approach is designed to support policy makers in making better national decisions.

How Pathways works

Pathways uses novel modelling approaches to understand the triple bottom line (economic, social, environmental) outcomes of proposed macro level policy interventions for local communities.

Pathways links what happens in national policy with how people at the grassroots respond.

It combines an inter-regional computable general equilibrium (CGE) model for the national economy that includes environmental and social variables with micro level modelling.

The micro level modelling seeks to explain how ordinary people will behave in response to the macro level policy signals from above – and the consequences of this behaviour for them, their environment and the wider economy.

To do this, Pathways employs an agent-based model (ABM) at the household level, essentially a computer ‘Sim City’ that creates a realistic representation of human behaviour in response to external change.

This has been constructed by talking to families in East Kalimantan about their likely responses to various policy signals, and then modelling their behaviour.

It is planned to include grassroots responses from other households in Indonesia, as these can vary.

Pathways, for the first time, successfully links what happens at the nationwide level with how individuals and communities react, and how that affects the environment, poverty and other key issues.

It links the economy at different scales, in real life and real time.

This reduces the scope for unforeseen consequences and side-effects from major government decisions by allowing major policy changes to be ‘road tested’ and fine-tuned before they are adopted.

Outcomes

Planned outcomes from the Pathways project include:

  • an evidence based approach to macro policy making
  • a valuable input to Indonesia’s 2009–14 National Plan
  • Indonesian 'Big Island Planning' enhanced by an understanding of community response and sustainability consequences
  • input to the World Bank’s next generation lending programs
  • an approach other countries can use to improve sustainable economic planning.

Who’s involved

Participants in the Pathways project include:

  • BAPPENAS and BAPPEDA, the Indonesian national and provincial planning agencies
  • Government of Indonesia Ministries of:
    • Finance
    • Forestry
    • Energy and Mining
    • Fishing & Marine
    • the Environment
  • The World Bank
  • CSIRO
  • AusAID.

Resources

Visit the Analysing Pathways to Sustainability in Indonesia Resources web page for a pamphlet, fact sheets, models, data and publications from the project.

Find out more about Environmental monitoring and analysis.