1 - INTRODUCTION

Summary

The fall of President Soeharto provided the impetus for the transformation from an authoritarian society to a more democratic one in Indonesia, and for the move from a highly centralised towards a much more decentralised system of government. These transformations offered the prospect that Indonesia would be able to manage its natural resources better, and achieve a long-term development path that embraced both resource sustainability and equity.

Thus far, however, the radical changes that have taken place in Indonesia have created an environment of political uncertainty, inconsistent laws and regulations, weak law enforcement, a weak governmental system and insecurity of land tenure. The immediate effects have been to increase the number of conflicts between various levels of government, local communities and companies carrying out natural resource extraction activities, increase the level of corruption in local areas, and increase the number of local taxes and local natural resource extraction licences. The management of natural resources in the country may not have worsened, but neither has it improved.

BACKGROUND

Indonesia is a massive archipelago stretching between the Indian and Pacific oceans and linking the continents of Asia and Australia. It is a diversified country both in terms of its population and in terms of its natural resources. In 2004 Indonesia had a population of approximately 230 million consisting of around 350 ethnic groups. Most of these groups have their own language and customary (adat) laws, regulations and norms. The two largest ethnic groups are the Javanese (45 per cent of the population) and the Sundanese (14 per cent). The population is growing at an annual rate of about 1.5 per cent.