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1 Project Document APPROVED March 17, 2020 UNITED NATIONS UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION Global Eco-Industrial Parks Programme - Indonesia: Country level intervention Project Document 17 March 2020 Project number: 190324 Global Eco-Industrial Parks Programme - Indonesia: Country Level Project title: Intervention Thematic area code Energy and Environment Starting date: 1 July 2020 Duration: 2 years and 6 months Project site: The Republic of Indonesia Government Ministry of Industry (MoI) Coordinating agencies: Main counterparts: Ministry of Industry (MoI) Ministry of Environment and Forestry (MoEF) Selected industrial parks and tenant companies Other counterparts Industrial Estate Association of Indonesia (HKI, Himpunan Kawasan Industri Indonesia) Executing agency/ UNIDO cooperating agency: Project Inputs: - SECO inputs: 1,379,994 CHF - Support costs (13%): 179,399 CHF - Counterpart inputs: In-kind contributions - Grand Total: 1,559,393 CHF 1 Project Document APPROVED March 17, 2020 24.04.20 Contents Executive Summary ................................................................................................................................. 5 A. Context ........................................................................................................................................... 8 A1. Eco-industrial parks and the GEIPP .............................................................................................. 8 A2. Indonesian background .............................................................................................................. 10 Summary of existing policies related to the GEIPP ...................................................................... 12 RECP and GEIPP in Indonesia ....................................................................................................... 14 A3. Problem analysis ......................................................................................................................... 15 A4. Sustainable Development Goals ................................................................................................ 16 A5. Project beneficiaries ................................................................................................................... 17 B. Reasons for UNIDO assistance ..................................................................................................... 19 B.1. Relevance .................................................................................................................................. 19 B.2. Demand ..................................................................................................................................... 20 C. The project ................................................................................................................................... 21 C.1. Objective of the project ............................................................................................................. 21 C.2. The UNIDO approach ................................................................................................................. 21 C.3. Results-based management (RBM) code and thematic area code ........................................... 22 C.4. Expected outcomes, outputs and activities .............................................................................. 22 C.5. Timeline of activities .................................................................................................................. 29 C.6. Programme governance and management ............................................................................... 31 C.7. Risks and assumption ................................................................................................................ 31 C.8. Gender mainstreaming .............................................................................................................. 32 C.9. Environmental and social assessment ....................................................................................... 33 D. Inputs ............................................................................................................................................ 34 D.1. Counterpart inputs .................................................................................................................... 34 D.2. UNIDO inputs ............................................................................................................................ 34 E. Budget .......................................................................................................................................... 35 F. Monitoring, reporting and evaluation ......................................................................................... 36 G. Prior obligations and prerequisites .............................................................................................. 37 H. Legal context ................................................................................................................................ 37 I. Logical Framework ....................................................................................................................... 38 J. ANNEX .......................................................................................................................................... 45 3 Project Document APPROVED March 17, 2020 Abbreviations CSSC Country Specific Steering Committee CTA Chief Technical Advisor EIP Eco-industrial park GDP Gross Domestic Product GEIPP Global Eco-Industrial Parks Programme GHG Greenhouse gas GIZ Deutsche Gesellschaft für Internationale Zusammenarbeit (German Corporation for International Cooperation GmbH) HQs Headquarters HKI Industrial Estate Association of Indonesia ICPC Indonesian Cleaner Production Center KEK Special economic zone KIK Collective Investment Contract KPI Industrial designation area LCS Limited Concession Scheme MoI Ministry of Industry, Indonesia MoEF Ministry of Environment and Forestry MOT Ministry of Tourism OECD Organisation for Economic Co-operation and Development OSS Online Single Submission PPP Public-private partnership RECP Resource efficient and cleaner production RRTR Detailed Spatial Plan SDG Sustainable Development Goal SECO Swiss State Secretariat of Economic Affairs SEZ Special Economic Zone SME Small and medium-sized enterprise TA Technical assistance UN United Nations UNIDO United Nations Industrial Development Organization UNEP United Nations Environment Programme (now UN Environment) USD United States Dollar VGF Viability Gap Fund WBG World Bank Group WPPI Industrial Development Centre Region 4 Project Document APPROVED March 17, 2020 Executive Summary The development objective of the project is in line with that of GEIPP, i.e. to demonstrate the viability and benefits of eco-industrial park (EIP) approaches in scaling up resource productivity and improving economic, environmental and social performances of businesses and thereby contribute to inclusive and sustainable industrial development in Indonesia. Industrial parks have played an important role in the economic growth of many developing and advanced-developing nations. They are usually located on the edges of, or outside the main residential areas of a city. Interest in industrial parks has grown substantially in recent decades, in that, through the grouping of industrial firms in a defined location, industrial parks offer important potential collaborative and efficiency gains. However, as developing and emerging economies seek increased industrial output, there is a pressing need to balance economic growth with environmental and social objectives. Strategic planning and effective management of industrial parks are needed to achieve economic, social and environmental goals. The EIP concept has increasingly been recognized as an effective tool to overcome challenges related to inclusive and sustainable industrial development in line with the Sustainable Development Goals (SDGs). Broadly, EIPs can be defined as a dedicated area for industrial use at a suitable site that ensures sustainability through the integration of social, economic and environmental quality aspects into its siting, planning, management and operations. Definitions have evolved to reflect the importance given to the three pillars of sustainable development, namely economic, environmental and social. International experience from UNIDO has demonstrated that EIPs can be useful vehicles for sustainable development in developing countries and economies in transition. The types of economic, environmental and social benefits that EIPs offer are numerous and varied, transcending conventional business case benefits: UNIDO has collaborated with international organizations to provide a common vision for EIPs. More precisely, a close cooperation between UNIDO, the World Bank Group and the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) led to the development of an international framework for EIPs.1 This framework provides a common understanding of EIPs and an approach for defining minimum performance requirements for EIPs. Since 2014, manufacturing companies are required to operate in industrial estates (or industrial parks or industrial zones - IZs) in Indonesia, and the number of IZs has been increasing significantly. The IZs have been developed in a bid to strengthen the competitiveness of the industry and equalize the development across the country. Under the Industrial Park Development Policy, the Ministry of Industry (MoI) is responsible for and has committed to
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