Results of the modeling exercise showed that labor absorption for the moderate growth path will 

approximately equal the supply of labor.  For the high growth scenario, labor shortages are 

predicted.  Inadequate testing of model assumptions about gains in labor productivity probably 

accounted for an overly optimistic employment scenario.  For example, gains in labor 

productivity for the wet rice sector would amount to 45% before the year 2010.  For the livestock 

sector, the same figure is a massive 66%, while for most manufacturing sectors 40 50% gains 

were predicted.  The likely shift in skills, demanded from the changing structure of the economy, 

is of great concern; growth in the service sector will increasingly demand a higher proportion of 

the labor force (NRMP Report No. 31).  More importantly, the structure of the economy, 

although not implicitly included in the prescribed objectives, does change. The analysis 

highlights the potential changes to the economy.  Natural resources intensive sectors will 

continue to grow faster than manufacturing and service sectors. Specifically the electricity, 

energy, and water utility sectors have high growth rates. The lower growth rate in manufacturing 

and high value adding sectors confirms the need for further deregulation to enable an export led 

industrialization growth path. 

Environmental indicators for forestry land requirements and natural forest cover indicated a 

growth in needs ranging from 1.66 to 5.86 times the level in 1985.  Using the more conservative 

scenario of moderate growth with technological improvement resulted in a predicted increase in 

land requirements for plantations and an increase in area required for natural forests.  This was 

the only scenario where demand for land was less than land availability.  Any of the high 

economic growth rate scenarios created land demands in excess of supply. 

The input output model also suggests that Indonesia will be able to maintain rice self sufficiency 

provided substantial investment towards improving irrigation efficiency occurs.  For example, a 

100% increase in water delivery efficiency is required to ensure water is not a constraint.  

However, a strategic issue arises.  While rice self sufficiency is achievable, it will require land 

conversion away from other food products, such that the cost of self sufficiency will include the 

cost of importing other food products.  In particular, importation of increasing quantities of feed 

grains to support the rapid growth in intensive livestock production will be needed. 

Planning mitigation strategies for expected economic growth pathways can target the most 

important variables by sector.  Evaluating mitigation strategies in terms of their cost benefit or 

cost effectiveness will provide input to public policy initiatives during the same planning period.  

Planning policy, whether it be regulatory (e.g., clean air requirements), market based (e.g., 

 polluter pays  principle), or public intervention (e.g., investments in infrastructure and 

education) can avoid environmental costs. Establishing appropriate planning policy is 

considered to be more cost effective than reparation and mitigation at a later date. 

Future Directions for Trade Policy and Environment Links  

The NRMP modeling exercise (NRMP Report No. 31) provided a useful representation of how 

economic development and the environment interact over a 25 year period.  While trade policies 

can be used to encourage industrialization, the process of industrialization causes a number of 

potential negative impacts on the environment.  The ability to link policy with planning requires 

understanding the trade off s involved and identifying appropriate indicators for the scale of the 

economy, based on the magnitude of impacts on the environment. 

Planning and policy development can forecast these trade offs and proactively develop 

responses.   Given the increasing reliance on market processes to allocate resources within the 

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