Restorative Economy: Could This Be the Economic Model Indonesia Needs Most?

As one of the world’s mega-biodiverse nations, Indonesia’s economy has always been deeply intertwined with nature. Yet, the alarming rate of ecological degradation paints a stark picture. As of 2024, Indonesia has lost 175,400 hectares of forest annually, part of the 95.5 million hectares that make up over half of the country’s land area. Globally, more than 2 billion hectares have been degraded over the last 50 years due to human activity, including land conversion and extractive industries.

Amid these interconnected ecological and economic crises, a promising alternative has emerged: the restorative economy. Unlike conventional economic paradigms that prioritize growth and resource extraction, a restorative economy rebuilds the relationships between people, nature, and economic activity. It is rooted in the belief that true development isn’t just about accelerating production, but also about healing what has been broken, designing products and systems with a full life cycle in mind, from sustainable inputs to recyclable or biodegradable outputs.

Indonesia has long practiced community-based sustainable systems, such as Subak in Bali, Sasi in Maluku and Papua, and Gotong Royong across the archipelago. The restorative economy reframes these traditional wisdoms into a modern, nature-based development strategy: decentralized, inclusive, and regenerative. It offers potential answers to many of Indonesia’s structural challenges: regional inequality, rural unemployment, food insecurity, and resource-related conflict.

Structural Gaps Addressed by the Restorative Economy

The Failure of Extractive Development—From mining to monoculture plantations, extractive approaches have created systemic poverty in resource-rich areas. Restorative economics, by contrast, promotes regenerative models that benefit both people and planet.
Lack of Impact-Oriented, Inclusive Economic Models—Many empowerment programs fail due to lack of economic sustainability. Restorative approaches integrate measurable ecological, social, and economic impacts simultaneously.
Disconnect Between Policy and Local Realities—Top-down policies often fail to meet community needs. Restorative models pioneered by organizations like WALHI and Yayasan Ekologi Sahul advance community-led economies through micro-certification, small business licensing, and social forestry schemes.
Investment Still Biased Toward Large-Scale Projects—Restorative frameworks open space for micro and collaborative financing: local green bonds, progressive taxes, crowd-sourced investments, and rural philanthropy.

The Rising Global Attention and the Urgency

The growing spotlight on restorative economy in global forums like the G20 reflects a mounting recognition: the current economic model is unsustainable in the face of worsening climate crises. In Indonesia, wildlife populations have declined by 69% over the last five decades. Land degradation has contributed to global economic losses estimated at IDR 150 quadrillion.

Left unaddressed, this degradation will deepen poverty, drive up public health costs, and stall inclusive growth. But the opportunity is clear: a 2024 Celios survey shows that 86% of Indonesians believe nature restoration can reduce pollution, and over 85% agree it can lower healthcare expenses. Social readiness is here.

Moreover, restoration is not just an environmental solution—it is an economic strategy. For every IDR 20,000 invested in restoration, an estimated IDR 57,000 in benefits can be generated. Restoring just 100 hectares of land could produce IDR 24.5 billion in economic value and up to 25 million temporary workdays.

The Gaps Still Holding Us Back

Despite its potential, Indonesia’s transition to a restorative economy faces significant hurdles:

Limited Funding—The Ministry of Environment and Forestry’s 2025 budget is just IDR 11.33 trillion less than 0.5% of the national budget.
Lack of Structured Policy Support—There is no dedicated fiscal nomenclature or funding mechanism to support restorative development. Priority still leans toward extractive sectors and massive infrastructure projects.
Investment Gaps—Celios estimates that Indonesia needs IDR 892 trillion in restorative financing by 2045. Only IDR 103 trillion is currently available.
Uneven Local Government Readiness—Only Yogyakarta ranks “very high” on Indonesia’s restorative economy readiness index. Meanwhile, 21 provinces fall into “low” or “very low” categories, showing the urgent need for stronger capacity and political will at the local level.

A Model Whose Time Has Come

The urgency is clear—and so is the opportunity. Indonesia has both the cultural foundations and natural capital to lead the way in restorative economic transformation. What’s needed now is alignment: between local wisdom and national policy, between impact metrics and investment, between ecological restoration and economic justice.

If we dare to shift the question from “How do we grow faster?” to “How do we grow better, together?”—then the restorative economy may well be the best system for Indonesia’s future.