Decentralization of Forest Administration in Indonesia, Implications ...

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