Decentralization of Forest Administration in Indonesia, Implications ...

Chapter 2
Forest Administration and Forestry Sector
Development Prior to 1998 1
Christopher Barr
2.1 Introduction
In the forestry sector, Indonesia’s decentralization process has occurred after three
decades of highly centralized control over forest administration and intense timber
extraction under Soeharto’s New Order regime. When the New Order government
came to power in 1966, however, commercial timber extraction in the vast hardwood
forests of Indonesia’s ‘Outer Islands’ 2 existed on only a very small scale, and the
central government held little authority to administer forests in these regions. The
Soeharto government moved quickly to secure the state’s legal-regulatory control
over the nation’s forests with the introduction of the Basic Forestry Law in 1967.
After a brief period of sharing administrative authority with provincial and district
governments, the New Order leadership concentrated control in the hands of the
national forestry bureaucracy and embarked upon a project of large-scale industrial
logging.
Over the ensuing decade, the New Order government distributed some 60
million ha of Outer Island forests to private and state-owned timber companies, many
of which were closely linked to military and political elites. During the early-1970s,
Indonesia emerged as the world’s largest exporter of tropical logs, and the forestry
sector became the country’s second-largest source of GNP. With a national ban on
log exports in the early-1980s, the government pushed the sector downstream into
plywood production and concentrated the industry into the hands of a few powerful
conglomerates. Through the 1990s, the government also provided lucrative subsidies
to support a series of major investments in the pulp and paper industry. In adopting
such policies, the New Order government transformed the forestry sector into an
important engine for national economic development. At the same time, it also
effectively transferred several billion dollars in timber rents to a relatively small
number of companies associated with the regime’s senior leadership.
This chapter traces the changing dynamics of administrative and regulatory control
in Indonesia’s forestry sector from the period following the nation’s independence
in 1945 to the end of the New Order regime in 1998. In doing so, it describes the
historical context within which the considerable pressures for decentralized control
of forests during the post-Soeharto period have emerged. Indeed, the policies and
practices employed by the New Order government to secure timber rents for elites at
the national level generated deep resentment among stakeholders in forested regions
throughout Indonesia. At the same time, the Soeharto regime’s emphasis on rapid
timber extraction as a means to generate both government revenues and informal