Decentralization of Forest Administration in Indonesia, Implications ...

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Barr, C. et al. 125 percent of the PSDH and 70 percent of the IHPH; and the central government received 55 percent of the PSDH and 30 percent of the IHPH. These changes mark a substantial drop in the central government’s share of these forestry revenues. Similarly prior to decentralization, the central government exercised virtually full control over the Reforestation Fund (DR), which the MoF managed outside of the National Budget. Under Law 25/1999, the DR, has been classified as part of the Special Allocation Fund (DAK), with 60 percent allocated to the central government and 40 percent allocated to district and provincial governments. Since late 2004, the DR has been reclassified as shared revenue, although it has been allocated according to the same 60:40 ratio. During the period 2001-2004, total annual government receipts from the PSDH and IHPH ranged between Rp 731 billion (US$ 85 million) and Rp 1.77 trillion (US$ 172 million). The available data suggest that the central government has continued to control approximately 50 percent of the total PSDH and IHPH receipts during this period – an amount that is substantially greater than that specified for the central government in Law 25/1999. The reasons for this are not clear, and it is possible that this simply reflects a lack of precision and/or inaccuracy in the published data. The distribution of PSDH and IHPH revenues among regions has been highly concentrated among the nation’s major timber-producing regions. In particular, the provincial and district governments in East Kalimantan, Central Kalimantan, and Riau account for nearly two-thirds of the total distributed to the regions. The relative significance of the PSDH and IHPH to individual district and provincial economies varies dramatically among regions, largely depending on each region’s relative access to other sources of natural resource revenues. For East Kalimantan, which has substantial oil and gas revenues in addition to forestry, PSDH and IHPH receipts accounted for only 3.7 percent of the region’s overall natural resource revenues in 2004. By contrast, PSDH and IHPH receipts accounted for 93.1 percent of total natural resource revenues for Central Kalimantan. Aggregate receipts from the Reforestation Fund during 2001-2004 ranged between Rp 1.3 trillion (US$ 155 million) and Rp 3.1 trillion (US$ 298 million). As with the PSDH and IHPH, the distribution of DR funds among regions has been highly concentrated among the largest timber-producing regions. East Kalimantan, Central Kalimantan, and Riau, for instance, have collectively accounted for over 70 percent of total DR distributed to the regions in recent years. The allocation of DAK-DR to provincial and district governments is specifically required to support reforestation and forest rehabilitation activities according to guidelines promulgated by the central government. In each region, however, the provincial government largely determines the relative weighting of these criteria and how they are applied. Although the central government transfers DAK-DR funds directly to recipient districts, provincial governments thereby exercise considerable influence over how DAK-DR are distributed among districts and municipalities. The distribution and use of DR to support land and forest rehabilitation projects at the district level have encountered numerous implementation difficulties since the onset of Indonesia’s fiscal decentralization process. Anecdotal reports suggest that the transfer of funds to the district governments has often been late; districts have frequently had inadequate funds for ‘supporting activities’ such as dissemination of information to
126 Decentralization and Recentralization in Indonesia’s Forestry Sector participating communities and technical extension; districts have sometimes focused on rehabilitating and reforesting lands that are most accessible or most certain of project ‘success’ rather than the areas that are most seriously degraded; and there is often little oversight of the rehabilitation and reforestation projects to assess what they have accomplished. In some regions, district officials have complained that the provincial governments have not used equitable practices for determining how DR should be distributed among districts. Some provinces, for instance, have prioritized the distribution of DR to districts with the most degraded land in need of rehabilitation; while other provinces have prioritized the distribution of DR to the districts with the highest levels of timber production. District and provincial governments have also complained that the 60 percent of the DR managed by the central government has not been administered efficiently or transparently. According to Regulation 35/2002, these funds are supposed to be used to support reforestation and forest rehabilitation in non-timber producing regions, which might not otherwise have access to such funds. Indonesia’s decentralization process has also encouraged district and provincial governments to expand their access to regionally-generated revenues (PAD). During 1999-2002, district governments in timber-rich regions did so both by imposing new taxes and fees on existing HPH concession-holders and by issuing large numbers of small-scale timber extraction and forest conversion permits, often known as HPHH and IPPK licenses. For a brief period between late-2000 and early-2002, Bupatis were also permitted to issue medium − and large − scale IUPHHK timber concession licenses. For some districts, this resulted in a sharp increase in PAD, as a flood of new investors, often from Malaysia, began harvesting timber with district permits. These increases proved to be short-lived, however, as the Ministry of Forestry took aggressive measures to restrict the authority of district governments to allocate timber licenses within the Forest Estate. By mid-2002, district governments had largely stopped issuing such permits. 7.4 The Struggle over Timber Rents As the widespread distribution of HPHH and IPPK permits (and other types of district timber licenses) during 1999-2002 suggests, district officials in many forest-rich regions have viewed forests principally as a source of timber rents. This is, perhaps, not surprising given the heavy emphasis that the central government placed on timber production during the New Order period. For three decades, from the late-1960s until 1998, district-level stakeholders were largely excluded from sharing in the often-enormous timber profits generated by large-scale HPH concession-holders. With the emergence of regional autonomy, district officials seized the opportunity to exert a significant degree of direct control over the extraction of timber within their jurisdictions. The allocation of timber licenses enabled district officials to meet multiple objectives: On the one hand, districts used the distribution of logging permits as a means to increase the district’s formal revenue flows. On the other hand, the allocation of such permits often generated considerable informal profits for the agencies and individual officials involved in the licensing process. In this way, many observers have noted, the high level of corruption that characterized Indonesia’s forestry sector through the Soeharto era also
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Decentralization of Forest Administ
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National Library of Indonesia Catal
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iv 4.5 Forest Revenue Sharing 69 4.
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Preface Indonesia is currently ente
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Acknowledgements This study is base
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Abbreviations AAC ACIAR ADEKSI APBD
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IPHHBK IPHHK IPJL IPK IPKR IPKMA IP
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Glossary Adat, customary or traditi
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Forests and Decentralization in Ind
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10 Forests and Decentralization in
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Chapter 2 Forest Administration and
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20 Forest Administration and Forest
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32 Origins and Scope of Indonesia
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Chapter 4 Fiscal Balancing and the
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60 Fiscal Balancing and the Redistr
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Since the collapse of Soeharto’s
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