Financing Indonesia's path to circularity

Plastic bags on a beach

Our work at the Alliance to End Plastic Waste is about meeting a global challenge of unprecedented proportions. Even so, I am always reminded that success comes down to individuals and what drives them.?

When I think of individuals with powerful personal motivations, social entrepreneur Dian Kurniawati from Indonesia always comes to mind.?

The starting point of her journey was much like the kind of situation we all experience from time to time. She noticed something that signalled a problem, and she paused to think about it and question it.???

It happened during a weekend visit with friends to Indonesia’s uninhabited islands. As a city dweller, Dian was, unhappily, used to seeing plastic waste on the streets. “But here, far from the city, there were plastic bags washed up on the beach, possibly from mainland Jakarta or West Java,” she remembers.???

Grim findings lit a fire

It was a moment of dismay, which deepened as she researched to find out more. First came the shocking realisation that plastic doesn’t stay where it is used –?it gets everywhere.??

She learned that not only was plastic waste spreading widely, it was rapidly increasing in quantity. One estimate, by The Ellen MacArthur Foundation, indicates that there will be more plastic in the ocean than fish by 2050.?

Dian’s realisation about the scale of the plastic waste problem ignited a fire in her. In 2017, she founded a recycling start-up called Tridi Oasis. It recycles polyethylene terephthalate (PET) bottles, and collects hard-to-recycle multi-layer plastics such as single-use sachets for instant noodles, shampoo and washing powder. The Buat Bumi (meaning “For The Earth) programme that came out of it incentivises stallholders and households to collect these by issuing stamps that can be exchanged for groceries and other essentials.???

I remember being filled with respect and gratitude when I first learnt about Dian’s initiatives. With Alliance funding, the Buat Bumi programme has expanded to a capacity of 1750 tonnes of multi-layered plastic waste a year. To date, 1.18 billion plastic sachets have been collected, recovered and diverted from the environment. Tridi Oasis is working with partners to convert the material into warehouse pallets or fuel.?

Dian’s success led to a more ambitious project, this time in partnership with the Alliance and with Alba Asia Plastics Recycling Limited. The target is to recycle 34,000 tonnes of PET bottles each year. This will generate food-grade recycled PET that can be used to make new bottles or other products for the local and global market. Construction of the plant began late last year and it is scheduled to be running by the first half of 2025.?

Funding, frameworks & firsts

It is clear that solutions like these hold the key to achieving Indonesia’s ambitious national targets: to reduce marine plastic waste by 70% and to create a circular economy for plastics by 2040.??

But such solutions that feed into the national targets need funding.??

Let me provide an idea of the kind of funding that’s needed.??

In November 2020, the Indonesia National Plastic Action Partnership (NPAP), supported by the World Economic Forum, launched a financing roadmap for achieving Indonesia’s targets. It estimated that a total capital investment of US$18.4 billion will be required by 2040 to create the systemic change in plastic waste management that is needed. Within the same period, an increase of US$1 billion in operational financing per year is also required.???

These sums cannot come from taxpayers or traditional development aid alone. What’s needed are innovative financing approaches that require strong collaboration between the government, private sector, civil society, and investors.??

The Indonesian government is also working to incentivise capital markets to boost sustainable development through novel financing instruments that optimise the state budget and mobilise external funds.???

In 2018, the country launched the world’s first green sukuk (a type of bond that is compliant with Islamic principles) to finance the transition towards a low-carbon economy. Waste management solutions were among the projects in scope for funding; green sukuk issuances are now annual.??

Additionally, the government has established entities such as the Indonesia Environment Fund (BPDLH) to mobilise and manage funds and develop sustainable projects. It works with a diverse range of actors including businesses and the UN Development Programme to build support for national sustainability programmes through blended finance schemes.???

Individual entrepreneurs like Dian have the ideas, the local connections, and the drive to create solutions to the plastic waste problem. And it goes without saying that start-ups and SMEs like Tridi Oasis will always be a rich source of ideas and entrepreneurial drive.??

By definition, though, they lack the financial muscle to scale up. To address this, the Indonesian government has established partnerships with a range of private companies to support such social enterprises. These will connect founders with impact investors, provide access to professional guidance, access to capital that’s needed to scale operations and innovative new ways to finance those ideas.??

The Buat Bumi programme’s work with stallholders has proven how small and medium-sized enterprises are critical to a successful outcome. And this applies especially in Indonesia, where 91% of workers are employed by such businesses. It is in everyone’s interests to help SMEs adopt sustainable business practices — from reducing plastic packaging to proper waste disposal — in order for Indonesia to meet its recycling targets.

Dian envisions a day when Indonesia’s environment is cleaner for everyone, when plastic waste no longer sullies the environment. And it will be eminently achievable if the different forms of innovation and support come together in alignment.?