UK-Indonesia Partnership: Empowering Local Action Through Fiscal Innovation

Ecological Fiscal Transfers Schemes 

In Indonesia, our Environmental Governance unit, with support from the UK Foreign, Commonwealth and Development Office (FCDO), is taking significant steps to support Indonesia’s climate goals and environmental protection through the implementation of Ecological Fiscal Transfers (EFT).  

• EFTs incentivize national and provincial governments to allocate funds to districts based on their environmental performance. 

• This approach promotes awareness, competitiveness, and public engagement in sustainable practices.  

• Previous funding models failed to motivate regions effectively, EFTs address this by establishing clearer performance indicators for low-carbon development.  

UK Foreign, Commonwealth and Development Office Support 

As Indonesia and the UK celebrate 75 years of diplomatic relations in 2024, their collaboration to address climate challenges continues to grow. Demonstrating support, United Kingdom Minister for Development, Women, and Equalities, Anneliese Dodds, visited Maros district, the first district in South Sulawesi to adopt EFT’s Ecology-based Regency Budget Transfer (TAKE) scheme.  

In Makassar, the SETAPAK initiative collaborates with local civil society organizations like PINUS and TLKM to empower women-led forest defender groups managing 96 hectares of community forest under the social forestry scheme, a form of licensing for the management and utilization of state forest areas, in which local communities are granted rights to manage and use forest resources sustainably.These groups produce various agroforestry products, including palm sugar, pine resin, honey, and bamboo. 

Minister Dodds engaged with local communities, including women leaders and members of Social Forestry Business Groups and the Budget Study Group in Tukamasea and Bonto Manurung, who play a crucial role in fostering inclusive green growth through their initiatives.  

The work on Environmental Fiscal Transfers (EFTs) is vital in empowering local authorities with financial resources to implement tailored environmental policies. EFTs represent a strategic integration of ecological considerations into fiscal policy, promoting environmental health and social equity. During her visit, Minister Dodds observed how the Asia Foundation-supported TAKE scheme was successfully implemented for development initiatives in the Eastern part of Indonesia.