Decentralization of Forest Administration in Indonesia, Implications ...
Decentralization of Forest Administration in Indonesia, Implications ...
Decentralization of Forest Administration in Indonesia, Implications ...
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24<br />
<strong>Forest</strong> <strong>Adm<strong>in</strong>istration</strong> and <strong>Forest</strong>ry Sector Development Prior to 1998<br />
Under this arrangement, the central government imposed a number <strong>of</strong> royalties and<br />
fees on concession-holders, which were divided among the national and prov<strong>in</strong>cial<br />
governments accord<strong>in</strong>g to various formulas. The most significant <strong>of</strong> these at that time<br />
– the ‘HPH License Fee’ (Iuran Hak Pengusahaan Hutan, IHPH) and the ‘<strong>Forest</strong><br />
Product Royalty’ (Iuran Hasil Hutan, IHH) – were to be split between the central<br />
and prov<strong>in</strong>cial governments, with 30% go<strong>in</strong>g to the Directorate General <strong>of</strong> <strong>Forest</strong>ry<br />
<strong>in</strong> Jakarta, 30% to the Prov<strong>in</strong>cial <strong>Forest</strong>ry Service (D<strong>in</strong>as Kehutanan), and 40% to<br />
the prov<strong>in</strong>cial government for development expenditures. By contrast, all <strong>of</strong> the<br />
timber export tax – <strong>in</strong>itially set at 10% <strong>of</strong> FOB value <strong>of</strong> log exports, mak<strong>in</strong>g it the<br />
largest <strong>of</strong> the government’s timber fees at that po<strong>in</strong>t – was earmarked for the central<br />
government budget, giv<strong>in</strong>g Jakarta control over the bulk <strong>of</strong> foreign exchange obta<strong>in</strong>ed<br />
from HPH-holders. 12 (The adm<strong>in</strong>istration <strong>of</strong> the major forestry taxes, and the scale <strong>of</strong><br />
the revenues generated, will be discussed <strong>in</strong> greater detail <strong>in</strong> Chapter 4).<br />
2.4 Banjir Kap 13 and the Timber Boom <strong>of</strong> the Late-1960s<br />
The open<strong>in</strong>g <strong>of</strong> <strong>Indonesia</strong>’s Outer Islands to commercial timber extraction <strong>in</strong> May<br />
1967 set <strong>of</strong>f a logg<strong>in</strong>g boom <strong>in</strong> most forest-rich prov<strong>in</strong>ces <strong>of</strong> Sumatra and Kalimantan.<br />
Dozens <strong>of</strong> mult<strong>in</strong>ational timber companies and domestic entrepreneurs sought to<br />
obta<strong>in</strong> concessions <strong>in</strong> areas that were well-stocked with commercial timber species,<br />
particularly high-value Dipterocarps. Many <strong>of</strong> these ventures <strong>in</strong>volved partnerships<br />
with military <strong>of</strong>ficers or politico-bureaucratic power-holders, scores <strong>of</strong> whom received<br />
HPHs from the New Order leadership <strong>in</strong> order to secure their loyalty to the Soeharto<br />
regime (Ross 2001; Robison 1986). In such ventures, the military or bureaucratic<br />
stakeholder generally functioned as a ‘silent partner’, receiv<strong>in</strong>g a 20% to 25% equity<br />
share <strong>in</strong> the enterprise by virtue <strong>of</strong> the fact that it had secured the concession and<br />
would provide political protection. The foreign <strong>in</strong>vestor or domestic entrepreneur<br />
would contribute the bulk <strong>of</strong> the venture’s <strong>in</strong>vestment capital, equipment, and dayto-day<br />
management <strong>of</strong> the logg<strong>in</strong>g operations. By the end <strong>of</strong> 1970, the national<br />
government’s <strong>Forest</strong>ry Department had allocated 81 HPHs cover<strong>in</strong>g over 10 million<br />
ha (Direktorat Djendral Kehutanan 1972).<br />
While the Directorate General <strong>of</strong> <strong>Forest</strong>ry <strong>in</strong> Jakarta was allocat<strong>in</strong>g such<br />
extensive areas <strong>of</strong> timber concessions dur<strong>in</strong>g the late-1960s, prov<strong>in</strong>cial and district<br />
governments distributed even larger numbers <strong>of</strong> logg<strong>in</strong>g permits to small-scale<br />
enterprises (Mann<strong>in</strong>g 1971). Indeed, the flood <strong>of</strong> foreign buyers seek<strong>in</strong>g to purchase<br />
<strong>Indonesia</strong>n logs meant that forestry concessions <strong>of</strong> any size promised rapid returns<br />
to <strong>in</strong>vestors able to extract timber and transport it to downriver purchas<strong>in</strong>g po<strong>in</strong>ts.<br />
The ready availability <strong>of</strong> logg<strong>in</strong>g permits and highly favorable market conditions<br />
for agathis (Agathis spp.), meranti (Shorea spp.), and keru<strong>in</strong>g (Dipterocarpus spp.)<br />
logs produced an “overwhelm<strong>in</strong>g mobilization <strong>of</strong> speculators” <strong>in</strong> many timber-rich<br />
prov<strong>in</strong>ces, especially East Kalimantan (Peluso 1983). There, this process resulted<br />
<strong>in</strong> the distribution <strong>of</strong> over two million ha <strong>of</strong> forest land, with “concessions as small<br />
as 100 ha [be<strong>in</strong>g] given to friends and political allies <strong>of</strong> the district heads and the<br />
governor, while the subdistrict heads issued licenses to local residents who worked<br />
<strong>in</strong>dependently or with their families and friends” (Peluso1983; Mann<strong>in</strong>g 1971). In