Decentralization of Forest Administration in Indonesia, Implications ...

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Decentralization’s Effects on Forest Concessions and Timber Production
On the other hand, the local entrepreneur was responsible for obtaining the HPHH
or IPPK permit from the district government. He was also generally responsible for
securing protection for the resulting logging operation from the regional military,
police, and forestry regulatory agencies. For providing these services, the entrepreneur
typically received an equity share in the joint venture, the size of which varied from
one venture to another. Entrepreneurs in East Kalimantan’s Malinau district, for
example, reported receiving a 30-40 percent share in such partnerships in September
2000 (Barr et al. 2001).
To finance HPHH and IPPK logging operations, local entrepreneurs often sought
out ‘partners’ (mitra) or ‘investors’ (investor, or as they were called in northern East
Kalimantan, inspektur). Through much of Kalimantan, these investors were either
regionally-based Indonesian logging companies that had previously functioned as
contractors to larger HPH-holders, or Malaysian timber buyers, large numbers of
which came into Indonesia after the fall of the New Order regime in search of logs
and sawnwood. Holding a majority share in the timber venture, the investor typically
provided operating capital and the equipment needed to log the areas specified in
the HPHH or IPPK permit. The investor also frequently handled the sale of the logs
harvested from such ventures. Since the onset of decentralization, large volumes of
logs harvested under district timber permits in East, Central, and West Kalimantan
have been exported to the East Malaysian states of Sabah and Sarawak (Obidzinski
and Barr 2003; Soetarto et al. 2003; Barr et al. 2001; Casson 2001a).
Local communities living in and around forested areas also shared in the new
timber profits generated through HPHH and IPPK permits. In many parts of Indonesia,
district governments required recipients of the new permits to establish profit-sharing
arrangements with forest communities located near the areas being logged. Benefits
for local communities typically included cash and material contributions; volumebased
fees for each cubic meter of timber harvested; and promises from the investor
that forest areas cleared would later be replanted with cash crops. In many parts of
Kalimantan, the volume-based fees ranged from Rp 10,000 to Rp 60,000 (or about
US$ 1.1 – USD 7 at the average exchange rate of year 2000 of Rp 8,500 per US$)
during 2000 (cf. Soetarto et al. 2003; Barr et al. 2001; McCarthy 2001b).
Many district officials interviewed for the CIFOR case studies emphasized that
an important purpose of the new permits was to allow local peoples to participate
directly in the benefits generated by commercial logging activities, since they were
effectively marginalized by the New Order regime’s HPH system. In several districts,
however, officials also acknowledged that allowing forest communities to share in
the profits generated under the district timber regimes was essential to maintaining
political stability within the current environment.
As with the HPH concession licensing system at the national level, the process
through which HPHH and IPPK permits were allocated by district governments during
1999-2002 also created new opportunities for district and sub-district government
officials to secure lucrative informal payments. Timber industry actors interviewed
in East Kalimantan during September 2000 indicated that payments were routinely
required at each step of the IPPK permit process where a signature was required (Barr
et al. 2001). Typically, applications required the approval of the village head and/or