Decentralization of Forest Administration in Indonesia, Implications ...

Barr, C. et al. 95
With HPH licenses functioning as an important form of political patronage, most of
the timber concessions distributed by the New Order government were assigned to
large forestry conglomerates with close ties to national-level state elites (Barr 1998).
Moreover, the government allowed HPH-holders to retain a substantial portion of
the economic rents associated with their operations by keeping timber royalties well
below the stumpage value of the logs harvested (Ross 2001; Brown 1999).
To the extent that district-level actors shared in timber profits under the
Soeharto regime, they did so indirectly and the benefits were relatively minimal.
District governments received only a very small portion of the timber royalties and
fees paid by concession-holders, and most of these came to district in the form of
budgetary allocations from Jakarta (see Chapter 4). HPH-holders also made cash
and in-kind contributions to villages located in and around their concession sites
to fulfill the ‘bina desa’ community development requirements of their concession
contracts. Finally, logging companies often provided employment for inhabitants of
the villages and districts within which they operated. Such employment, however,
was usually temporary and involved difficult, and frequently dangerous, work
conditions. Moreover, work opportunities at logging concession sites were usually
temporary, lasting only until the accessible timber was depleted. Collectively, local
expenditures by logging companies generally amounted to little more than a fraction
of the economic rents associated with their concessions (Soetarto et al. 2003; Gillis
1988; Ruzicka 1979).
The flow of timber profits away from the nation’s forest-rich regions under
the New Order regime generated deep-seeded resentments among actors at the
provincial, district, and village levels. In each of the districts covered in the CIFOR
case studies, informants described feeling a great deal of enthusiasm over the fact that
under decentralization and regional autonomy, a substantial portion of the benefits
associated with timber extraction would now be retained within the district and used
to support local development (cf. Soetarto et al. 2003; Barr et al. 2001; Casson 2001a,
2001b; McCarthy 2001a, 2001b). Many emphasized that they hoped the processes of
decentralization and regional autonomy would not only channel substantially greater
amounts of formal revenue to the district government’s budget, but also would create
opportunities for ‘children of the region’ or ‘local sons’ (putera daerah) to participate
more directly in the profits generated by logging activities. In districts where large
numbers of HPHH and IPPK permits were allocated during 1999-2002, substantial
formal and informal profits did, in fact, flow to a range of actors that were largely
marginalized under the Soeharto government’s HPH timber concession system.
Under most district timber regimes, logging companies that obtained such
permits were frequently structured as joint ventures between local entrepreneurs (i.e.
putera daerah) and regionally-based Indonesian or Malaysian timber companies. In
such ventures, the local entrepreneur often played a dual role: On the one hand, he
was responsible for identifying areas of commercially valuable forest that could be
logged, and for working out a harvesting arrangement with local communities that
may have had tenure claims in these areas. In many cases, the entrepreneurs were
forest product traders able to draw on long-standing commercial and familial ties
with forest communities to secure such arrangements.