Towards Greener and More Inclusive Societies in Southeast Asia

1. Overview

Southeast Asia’s remarkable economic growth has relied heavily on natural resources. Today, the region faces significant environmental challenges. Environmental degradation, pollution and biodiversity loss from deforestation, natural resource depletion and overfishing are starting to have economic and social consequences. The region is particularly vulnerable to climate change-related disasters due to the high percentages of its population living in coastal areas and having jobs that are linked to the environment. These people are often already in precarious situations.

Environmental protection and green growth are therefore becoming policy priorities for Southeast Asia. Southeast Asian countries show commitments towards sustainable development through an array of international declarations, regional guidelines and national strategies. Despite these efforts, evidence indicates that the region is not on track to achieve the sustainable development goals and is showing slow progress and even regression on environment-related goals (UNESCAP, 2021[1]).

A transition towards a green growth approach will cause some sectors to disappear and others to emerge, with inevitable consequences on the number and nature of jobs. This will result in changes in employment prospects for millions of Southeast Asian workers. The negative impact will be felt more strongly among those who are already disadvantaged in the current labour market. Understanding the redistributive effects and implementing policies to protect and reallocate affected workers will be key to ensuring political acceptability of necessary environmental reforms.

This study assesses the share and type of jobs susceptible to environmental degradation in Southeast Asia and the possible effects on labour of a green transition in energy and agriculture based on simulations in a few countries. Chapter 2 discusses Southeast Asia’s environmental challenges and reviews policy frameworks related to green growth. Chapter 3 identifies employment vulnerabilities linked to environmental shocks or degradations across seven Southeast Asian countries. Chapter 4 portrays the characteristics of workers in winning and losing sectors in the context of a transition towards renewable energy, focusing on Indonesia. Chapter 5 presents the results of a simulation exercise that looks at the effects on jobs and income of adopting organic farming practice for rice cultivation in Southeast Asia.

Southeast Asia’s green growth needs labour protection schemes and job reallocation strategies

In Southeast Asia, the risks of climate change are adding to the already significant human and economic costs of frequent natural disasters. By 2060, Southeast Asia is projected to lose more than 5% of its regional GDP due to climate change (Dellink et al., 2014[2]). Green growth – achieving economic development while maintaining environmental sustainability – can provide a framework for sustainable growth strategies. Many countries in Southeast Asia are adopting economic development that considers environmental and social values. However, Southeast Asia’s overall performance level according to the Green Growth Index is currently below the OECD average, especially on social inclusion and exposure to pollution levels. Nonetheless, defining and measuring progress on green growth has been a challenge, largely due to its context-specific nature.

Since the 1980s, Southeast Asia has been integrating environmental concerns into regional agendas. The Association of Southeast Asian Nations (ASEAN) has issued joint statements, established committees, set up financing schemes, and supported programmes, partnerships, policy dialogue and research to support green growth. After the COVID-19 crisis, ASEAN considered sustainable development to be an integral part of post-COVID-19 economic recovery and long-term socio-economic development strategies. The ASEAN Economic Community (AEC) and ASEAN Socio-Cultural Community (ASCC) Blueprints 2025 demonstrate the region’s commitment to sustainable growth. At the national level, Southeast Asian countries acknowledged the role of mitigation and adaptation measures in economic growth and have been mapping out green growth strategies since the mid-2010s. All ten ASEAN countries have now included green growth objectives in their national development plans, and five countries (Cambodia, Malaysia, Lao PDR, Singapore and Viet Nam) have separate green growth strategies as of 2023.

Most studies simulating the impact of green growth on jobs show a net positive effect on employment, with winning sectors outweighing losing sectors. A more granular look shows that low-skilled workers in environmentally linked jobs such as utilities, waste management and mining will be disproportionately affected. Southeast Asia recognises the employment implications of green growth as stated in the ASEAN 2018 Declaration on Promoting Green Jobs for Equity and Inclusive Growth. However, policy frameworks are not adequately prepared for workers’ protection during the green transition, and social protection and equity issues are usually mentioned separately from green growth.

Understanding the job implications of climate impacts and the green transition in Southeast Asia is a crucial step for promoting inclusive green growth. The region’s labour markets are highly informal and vulnerable, with around 244 million workers lacking labour and social protection (ILO, 2019[3]). However, current policy frameworks for green growth provide little information on the short-term impacts on employment and worker protections. Social protection and skills training to protect vulnerable workers and facilitate job reallocation need more prominence in green growth development frameworks.

Environmental degradation will affect workers already in difficult employment situations

The environment matters, not least for emerging Southeast Asian economies. Natural capital ranges from 25% of total national tangible capital in Indonesia to 61% in Lao PDR (World Bank, 2021[4]). Despite the importance of natural resources, deforestation – due primarily to land clearing for agriculture – is happening at a rapid pace, with 15% of the region’s forest area lost since 1990. Indonesia and Malaysia, the world’s top palm oil producers, accounted for 89% of the region’s deforestation from 2005 to 2015 (Estoque et al., 2019[5]). This trend is not only endangering one of the most important global biodiversity hotspots, it also has economic and social costs.

One in three Southeast Asians rely on the environment and ecosystem services for their jobs. About 37% of jobs in the region are strongly linked to the environment, ranging from 27% in the Philippines and 38% in Indonesia to 52% in Myanmar. This concerns over 100 million Southeast Asian workers. Most of these jobs are in agriculture, but not only. Up to 5% are jobs in sectors that depend indirectly on natural resources, such as waste management or manufacturing of wood products. In addition, travel and tourism, which is increasingly around nature-based activities and ecotourism, provides jobs for 41.8 million people in Southeast Asia, representing 13.2% of employment and 11.7% of GDP in 2019 (OECD, 2023[6]).

What is alarming is that workers who will suffer most from environmental degradation tend to be already disadvantaged in the labour market. Workers in environmentally linked jobs earn 20% less than the national median labour earnings and typically work in the informal economy where there is no social protection. This lowers their capacity to cope with natural disasters or other environmental shocks. They also tend to have an employment status which is considered vulnerable, such as own account workers and contributing family workers, as opposed to wage jobs. This form of “nature penalty” is most severe in the sectors with direct links, such as agriculture, and declines progressively as the environmental link weakens. Workers in sectors related to the environment have a lower level of education than the national average, with a larger share of people having basic education or less. This is a source of vulnerability as low education implies low job mobility.

In Indonesia, more than half of the labour force is vulnerable to income loss due to natural disasters

Southeast Asia’s typical geographic features as insular and coastal countries makes it one of the most vulnerable regions to climate change. The region faces increasingly unpredictable weather events such as heat waves, floods and droughts. In order to better understand the income vulnerabilities of workers in relation to natural disasters, a more in-depth analysis was conducted for Indonesia and Viet Nam. Provinces prone to a high frequency of floods and droughts are identified and overlapped with job characteristics in these geographic areas. A worker’s income vulnerability to environmental shocks is defined by three concomitant factors: 1) sensitivity due to the economic activity’s link to the environment; 2) exposure to environmental degradation; and 3) capacity to cope with and adapt to natural disasters through social protection for example (informality). In this analysis, sensitivity is measured by the share of the workforce engaged in environmentally linked activities. Exposure to natural disasters is measured by the frequency of floods and droughts. Capacity to cope with and adapt to natural disasters is measured by the worker’s access to social protection through formal employment.

In Indonesia over half of the labour force (51%) is vulnerable to income loss due to natural disasters. In Viet Nam, this concerns 21% of the workforce. The two countries have similar levels of informality and share of workers in environmentally linked jobs. The reason for Indonesia’s higher share of vulnerable workers is the concentration of its population in Java, a region where natural disasters are prevalent. In Viet Nam, natural disasters concern mostly the sparsely populated North Central Coast region.

Social protection is key to reducing workers’ vulnerability to environmental degradation and natural disasters

In Southeast Asia, people working in environmentally linked jobs tend to be in the informal economy and low educated. Furthermore, natural disasters increase income vulnerabilities of workers as they have limited coping and adaptation mechanisms. It is urgent for the countries in the region to strengthen their social protection systems. As climate change-induced disasters continue to intensify, Southeast Asian workers will need more support to protect their livelihoods through universal healthcare, unemployment insurance and cash transfer schemes. Public social expenditure in the region as a share of GDP ranges from 3% to 8% in 2019, well below the OECD average of 20% (OECD, 2022[7]). Many ASEAN countries do not have unemployment benefits or pension schemes.

In the absence of unemployment insurance, workers affected by natural disasters or environmental degradation could receive cash transfers to sustain their livelihoods. The random occurrence of natural disasters calls for social protection systems to be agile, with immediate intervention right after the event. Cash transfers are flexible and scalable and therefore can provide fast temporary relief to workers and their families. However, improving the social protection system, especially for those workers and families likely to be impacted by climate change-induced disasters is a priority, as they are currently the more disadvantaged group of the population. Social protection options need to be provided to informal economy workers through contributory schemes. This should include developing broad-based social protection systems that are shock-responsive and accelerate the development of unemployment insurance programmes. Disaster responses can leverage existing social programmes and take the form of temporary measures. In the long term, countries should rely less on cash transfers and develop income-enhancing programmes as part of disaster resilience strategies. Adaptation measures through new skills, technologies and practices are needed, particularly in the agriculture sector.

A green transition in the energy sector promises jobs in Indonesia

Southeast Asian countries are committed to reducing reliance on fossil fuels to tackle climate change and air pollution. As the region’s largest economy and also the world’s largest exporter of coal, Indonesia’s transition towards more sustainable sources of energy will have an impact on emissions and can be an example for countries that rely on fossil fuels to follow suit. The Indonesia Long-Term Strategy for Low Carbon and Climate Resilience 2050 sets ambitious goals, including reducing greenhouse gas emissions by 29% compared with a business-as-usual scenario by 2030. This represents opportunities but also challenges from a labour market perspective: it will likely create winners and losers across industries, skill types and geographies.

To analyse the effects on employment, a sustainable development scenario by 2030 (referred to as 2 degrees scenario or 2DS) is compared to a business-as-usual scenario (referred to as 6 degrees scenario or 6DS) The simulation shows that an energy transition under the 2DS would result in a total net employment gain of 1 089 000 in Indonesia, or 0.86% more than the 6DS. The analysis builds on a model by the International Labour Organization (Montt et al., 2018[8]) where the world adopts sustainable energy production and uses 2DS to reduce global emissions in accordance with the Paris Agreement.

Employment gains in Indonesia are expected to benefit a wide range of sectors, from electricity and gas and construction to mining (other than fossil fuel) sectors. New employment opportunities could also benefit workers with various educational backgrounds. The electricity and gas, trade and construction sectors capture the largest employment gains. Further disaggregation of the electricity and gas sector shows the largest increase in employment in solar photovoltaic. Public sector-oriented activities, such as those in social work, health, education and public administration remain virtually unaffected. The mining and manufacturing of fossil fuels are the only sectors expected to lose about 31 000 jobs.

Even though job gains far outweigh job losses, what remains a concern is the geographic concentration of job losses in Kalimantan, the Indonesian region specialised in fossil fuel extraction. The profiles of workers who would be negatively affected by an energy transition are mostly men, wage employed in the formal economy, with higher earnings than the national average and good education level. Still, a non-negligible 44% of them are in the informal economy, without social protection. In the absence of an adequate job reallocation strategy and territorial development to diversify economic activities in the affected region, the energy transition will have economic costs but also consequences on the social cohesion of the country.

Sectoral and territorial development plans are needed to avoid labour market disparities during the energy transition

Indonesia needs to consider both the sectoral and geographical impacts as it transitions away from fossil fuels as the main source of energy. Workers involved in fossil fuel mining and manufacturing need appropriate policy support for skill training, job seeking, relocating and protecting their basic needs. Working conditions in the winning sectors need to be improved, as the share of informal workers remain high. Policies aiming at reallocating workers from fossil fuel mining to metal or other mineral mining could be considered, provided overall working conditions in the latter are improved. Lack of local employment alternatives in the affected region or difficulties relocating workers in other areas must be addressed through local development plans and support programmes for displaced workers. Finally, while shifting from fossil fuel to metal mining might seem like a good reallocation option, a careful assessment of potential environmental consequences, such as water pollution from nickel extraction, needs to be carried out and adequate measures put in place.

Equity is crucial in ensuring political acceptability of the energy transition. To minimise the negative impacts on affected workers, the government should provide reskilling or upskilling opportunities, compensatory income support, and local development strategies. Social protection schemes for informal workers are urgently needed. As it rolls out its blueprint for decarbonisation and energy transition, the Comprehensive Investment and Policy Plan 2023 for Indonesia’s Just Energy Transition Partnership, the country must carefully consider the social consequences of climate action to ensure broad public support and unlock a “triple dividend” of environmental sustainability, economic efficiency and equity.

The green transition in agriculture and its effects on labour: The organic rice case study

Agriculture contributes on average to about 11% of GDP in ASEAN countries. The sector remains an important source of livelihoods for millions of Southeast Asians, accounting for about 96 million workers, or 27% of the total workforce in 2020. The region includes some of the top exporters of rice, maize, soybeans, cassava and sugar, as well as palm oil, coconut and rubber, which accounted for 8.3% of the world’s agricultural products traded in 2021. Agriculture is closely linked to natural resources such as land, water and biodiversity and holds great potential for green growth in the region. Implementing sustainable agricultural practices could therefore reduce environmental impacts while fostering technological innovation and development.

Behind Southeast Asia’s growing agri-food industry, however, is the degradation of its ecosystem. While agricultural production is heavily reliant on biodiversity, natural cycles and ecological processes, paradoxically, current agricultural practices accelerate freshwater depletion, soil degradation and air pollution in Southeast Asia. The increased need for arable land for livestock and higher-value crops has led to the massive conversion of primary forests for agriculture. Agriculture is also the second biggest contributor to global greenhouse gas (GHG) emission after energy. The need for a transition in agriculture towards sustainable practices is urgent from both biodiversity conservation and climate change mitigation perspectives.

Understanding the green transition in agriculture and its potential effects on employment is essential to ensure that policies and interventions are designed to mitigate any adverse effects on rural livelihoods and vulnerable workers while maximising the benefits of sustainable agriculture. Input-Output modelling was used to analyse the potential effects on employment and income of a conversion from conventional to organic rice farming in Indonesia, the Philippines, Thailand, and the region. Despite some data limitations on organic farming in developing countries, the simulation provides insights into the economic effects of a shift towards organic agriculture and the possible changes along the rice value chain.

An increase in organic rice farmland results in more jobs and income than an equivalent increase in conventional rice farmland

An expansion of organic rice farmland to reach a 5% share of total rice farmland (medium scenario) results in an increase in employment and income. The scenario creates 5.4 times more direct jobs than an equivalent land size expansion of conventional rice farmland. When looking at both direct and induced effects on the overall rice sector, the scenario creates 21 times more jobs. This is explained by the fact that organic farming tends to be more labour intensive, but also by the induced effects from increased income and demand for rice. Indeed, the same scenario increases income for rice farmers/workers by about USD 8 more per month than in the conventional farmland increase. In countries where farmers’ monthly income ranges from USD 20 to USD 400, this increase can represent a significant contribution.

Analysing the changes at the sectoral level provides a dynamic picture of the rice value chain and its closely linked sectors. Changes in output value are most interesting to observe. Not surprisingly, the agricultural sector (including hunting and forestry) sees the largest return from the expansion of organic rice farmland. It is followed by several closely linked sectors such as food products, beverages and tobacco, and wholesale and retail trade. The medium scenario creates an additional USD 0.7 million in agricultural output, on average, for countries in the region compared to the equivalent area expansion of conventional rice farmland. The chemicals and chemical products sector, on the other hand, is estimated to lose USD 1.17 million in output. Employment and income effects at the sectoral level are not significant but still positive and higher for the organic expansion scenario than the conventional. The small effects likely relate to the small contribution that organic rice farming makes to overall employment and wages compared with other sectors in the economy, as well as the small percentage of land increase simulated.

An increase in demand for organic rice combined with an expansion of organic rice farmland area leads to a more robust and positive impact on output and employment. On average in the region, there is an additional USD 3.05 million increase in output under the medium scenario land increase combined with a USD 100 000 increase in final demand spending. At its highest, the output increases by a factor of nine in Indonesia and more than triples in the Philippines. When compared with the medium scenario, the boost in employment from an additional USD 100 000 in final demand spending increases the number of FTE jobs by 0.042 for the region as a whole, by 0.009 in the Philippines and by 0.223 in Indonesia.

The green transition in agriculture will require multiple layers of policies to support farmers and reallocate workers from losing sectors

Promoting sustainable agriculture is becoming an important agenda for Southeast Asia. The simulation using organic rice farming practice demonstrates that countries could experience increases in output, employment and income in the agricultural sector. By adopting sustainable farming practices, such as organic or other nature-friendly techniques on a larger scale, Southeast Asian countries could mitigate the negative impacts of agriculture on the environment, conserve natural resources and improve food security and livelihoods. To achieve a smooth transition to greener agriculture, the transition plans would also need to include policies that promote consumer awareness about the benefits of organic food and other sustainable production methods.

The distributional impact on labour of the green agricultural transition will need to be carefully assessed and policy measures put in place to protect workers at risk of losing their jobs. Workers in the losing sector, like chemicals and chemical products, tend to be younger, more educated, paid more compared with the national average, and are more likely to live in urban areas. Facilitating their labour mobility through a combination of reskilling/upskilling and social protection will likely be cost-effective. The simulation also indicates that an increase in organic rice agriculture combined with increased final demand spending could help to balance out the losses in negatively affected sectors.

As a green transition could create jobs and increase income in the agricultural sector, making this sector attractive in order to recruit new talent should be a priority. Countries could launch campaigns highlighting the employment benefits and opportunities in sustainable agriculture, such as organic farming, in order to attract new recruits among the youth population. At the same time, governments should collaborate with educational institutions, research centres and industry stakeholders to develop vocational training programmes focused on sustainable agricultural practices and technologies.

Supporting existing farmers to convert to sustainable agricultural practices is also important. Converting conventionally farmed land to organically farmed land can take up to three years, during which time farmers can expect both yield and income losses. Subsidies and access to low-cost financing schemes during this transition phase will be necessary in order to protect the livelihoods of farmers. Furthermore, farmers will need support for technology upgrades, inclusion of digital inventions, and irrigation system improvements. Providing technical assistance and training to rural financial institutions (e.g. farmers’ co‑operatives and community-based organisations) could enhance their ability to support smallholder farmers in the green transition.

Creating enabling conditions could also make the green transition in agriculture more inclusive. Boosting market demand for sustainable food products has the potential to promote greener agriculture. Enhancing quality control systems is one way to reassure consumers about the origin and production methods used for organic food products. Countries are therefore encouraged to establish reliable certification and labelling systems to inform customers of the sustainable agricultural practices used.

When developing sustainable or organic food value chains, Southeast Asian countries should prioritise investments in agricultural infrastructure in order to strengthen the inclusiveness of value chains. Improving irrigation systems, enhancing storage and processing facilities, and upgrading transportation networks in rural areas can increase the overall efficiency of agri-food value chains, benefiting all actors engaged in the agri-food system.

Finally, while the region has high-level guidelines for sustainable agriculture, country-level implementation lags behind. Governments are encouraged to establish mainstreaming mechanisms that involve integrating sustainable practices and principles into agricultural policies, programmes and practices. Regular expenditure review or strategic assessment of sustainability indicators could help to measure the effectiveness of relevant policies and programmes.

References

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[3] ILO (2019), How to extend social protection to workers in informal employment in the ASEAN region, https://www.ilo.org/wcmsp5/groups/public/---asia/---ro-bangkok/documents/publication/wcms_735508.pdf (accessed on 5 January 2023).

[8] Montt, G. et al. (2018), “Does climate action destroy jobs? An assessment of the employment implications of the 2‐degree goal”, International Labour Review, Vol. 157/4, pp. 519-556, https://doi.org/10.1111/ilr.12118.

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[1] UNESCAP (2021), Asia and the Pacific SDG Progress Report 2021, United Nations Economic and Social Commission for Asia and the Pacific.

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