Decentralization of Forest Administration in Indonesia, Implications ...

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Forest Administration and Forestry Sector Development Prior to 1998
sector, with much of this coming from commercial logging. In 1960, the government
formed Perusahaan Negara Perhutani, a state-owned forestry enterprise, which was
given authority to manage the forests and plantations of Central and East Java, as
well as some 6 million ha of forests in parts of Kalimantan.
Because the central government was assigned no specific authority under
Regulation 64/1957 to administer commercial logging activities in the Outer Islands,
the Forestry Department in Jakarta was only able to allocate this vast tract of
forestland to Perhutani after first exempting it from the 1957 regulation. National-level
policymakers did so by issuing a series of decrees which effectively exempted these
areas from being covered by Regulation 64/1957. Although the central government
succeeded in securing 6 million ha in this manner, each of these acquisitions was
preceded by a political struggle between Jakarta and the provincial government
concerned (Magenda 1991). 8
In an effort to generate export revenues, Perhutani entered into a productionsharing
agreement with a consortium of Japanese timber interests in 1963 (Barr 1999).
The Kalimantan Forest Development Cooperation Co., Ltd. (FDC) was made up of
Japanese trading companies, machinery manufacturers, shipping companies, and
plywood producers (JATAN 1992). According to the production-sharing contract, the
FDC agreed to provide Perhutani with US$ 30 million in credit to construct logging
roads, loading facilities, and timber camps and to obtain the felling equipment and
log transport vehicles that Perhutani would need to initiate timber extraction in East
Kalimantan. Perhutani, in turn, agreed to export 70% of the logs cut to the FDC at
pre-set prices and to allocate 30% of its log exports toward repayment of the credit
extended (Gibson 1966).
Under this agreement, Perhutani established seven logging concessions covering
a total of 280,000 ha in East Kalimantan between December 1963 and March 1967.
The state forestry corporation also opened two concessions totaling 205,000 ha in
South and Central Kalimantan under a similar agreement with the Mitsui Overseas
Forestry Development Corporation (Directorate General of Forestry [DGF] 1967).
These production-sharing operations never met either party’s expectations, however,
as output consistently fell far short of the 1.6 million m 3 annual production target
announced when the original agreement was signed (Gibson 1966).
In 1965, Soekarno’s last full year in office, Indonesia exported only 209,000 m 3
of hardwood logs, generating US$ 2.6 million in exchange earnings (FAO Yearbook;
Sacerdoti 1979a). This volume accounted for less than 2% of overall timber exports
from insular Southeast Asia, as Indonesia’s log shipments were far surpassed by those
of the Philippines and Malaysia.
2.3 New Order Timber Policy and the Basic Forestry Law
of 1967
With the emergence of Soeharto’s New Order regime in 1966, the national government’s
authority to administer forest resources in the Outer Islands expanded dramatically
(Barr 1999). This was largely driven by the new government’s interest in opening the
forestry sector to large-scale commercial logging. At that point, Indonesia’s economy