Financing Waste Infrastructure in Indonesia, City of London

Plastics have become one of the most versatile materials in the world. Plastics use has increased twenty-fold in the past 50 years and is expected to double again in the next 20.

Plastic waste management infrastructure, from sorting, recycling and recovery, has not kept up with the rise in plastic production around the world, leading to plastic polluting the natural environment and local communities, withdevastating effects on environmental and human health as well local livelihoods. The same can be said about the investment needed to scale up waste management infrastructure, with green private capital being concentrated on clean energy and transport infrastructure.

Indonesia has been particularly impacted by this. As developed countries saw their own plastic use explode, they have started to export their plastic waste to other countries – mainly China, until it closed its borders to plastic exports in 2018. Indonesia is one of the main recipients of this plastic waste, with no infrastructure to process this waste properly. On top of this, domestic plastic waste is on the rise and is not well managed – especially in rural and remote areas where waste is rarely collected, let alone processed. Indonesia is home to one of the most biodiverse marine environments. With rapid urbanization, population growth and economic development, the level of pollution entering and destroying these ecosystems from mismanaged Municipal Solid Waste (MSW) will also increase; further exacerbating the current situation.

The costs to people’s health, ecosystem health, fishing and tourism industries are mounting and can only increase if the situation doesn’t improve. Local municipalities responsible for building waste management infrastructure lack the funds and capability to tackle the issue at scale. At the same time, the market for recycled plastics is taking off. Consumers and companies alike, increasingly aware of the impacts of mismanaged plastic waste, are taking action to reduce their use of single-use plastic, increase the proportion of plastic items made from recycled content, and increasing their recyclability so that they can retain value after they are discarded. Indonesia faces a strong imperative to scale up its waste management, in particular to tackle increasing plastic waste generation from its own households – and it has already put in place strong policies to achieve this.

At the same time, Indonesia can tap into this new opportunity that is the growing global market for recycled plastics. Unlocking private capital to support Indonesia’s political priorities in waste management will be key to success. The investment required to achieve appropriate levels of waste collection, sorting, recycling, recovery and disposal is estimated to be $18.4 billion between 2017 and 2040. Indonesia’s public sector will not be able to cover these costs alone; it will be imperative that Indonesia takes action to attract private actors to invest in its waste management sector.