Decentralization of Forest Administration in Indonesia, Implications ...

Ida Aju Pradnja Resosudarmo, Christopher Barr, Ahmad Dermawan, and John McCarthy 63
in or near the concession site. Most timber concessionaires generally fulfilled their
bina desa (literally, ‘village guidance’) obligations by providing material assistance
directly to local communities through allocations of seed or farming equipment or
through the construction of schools, mosques or village facilities. Initiatives and
benefits varied significantly.
As Table 4.2 shows, the three main taxes and fees collected by the government
in the forestry sector accounted for between US$ 578 million and US$ 810 million
annually during the last five years of the New Order regime (i.e. FY 1993/94 – 1997/98).
Of all forestry payments, the DR was by far the most significant in monetary terms,
generating some US$ 486 million on an annual basis. The PSDH/IHH and IHPH, by
comparison, together generated approximately US$ 230 million annually.
Table 4.2: Government Revenues from Major Forestry Taxes and Fees During FY
1993/94 – 1997/98
Tax or Fee
Type
Annual Revenues (Million Rp)
FY 1993/94 FY 1994/95 FY 1995/96 FY 1996/97 FY 1997/98
IHPH a 21,690 38,367 29,268 20,690 22,147
PSDH/IHH 383,650 473,293 585,134 622,145 814,967
DR b 996,257 1,069,703 1,233,185 1,253,783 1,844,077
Total 1,401,597 1,581,363 1,847,586 1,896,619 2,681,190
US$ equivalents
(million) c US$ 665.55 US$ 724.12 US$ 810.14 US$ 800.88 US$ 578.15
Source: Derived from MoF (various years)
Note:
a
Consists of HPH License Fees (IHPH) and timber plantation license fees (Iuran
Hak Pengusahaan Hutan Tanaman Industri, IHPHTI)
b
Consists of DR receipts and interest
c
Based on Bank Indonesia’s average monthly exchange rate for the period covered
The degree to which forestry revenues were shared across the various levels of
government varied quite considerably among the three main forestry fees and taxes.
The central government exerted virtually full control over the Reforestation Fund,
for instance, with all payments to the fund managed outside the national budget by
the Minister of Forestry in Jakarta. Formally, DR were to be used to finance activities
related to reforestation or forest rehabilitation outside HPH areas; development of
timber plantations in forest areas deemed to be ‘degraded’ and/or ‘commercially
unproductive’; and land rehabilitation in areas designated by the MoF. Informally,
however, the New Order leadership also used the Reforestation Fund as a significant
source of finance for numerous off-budget expenditures that had little to do with
improving the quality of forests (Christanty and Atje 2004; Ernst & Young 1999). 8
In 1997, the central government began to restructure the management of offbudget
funds and revenues through the passage of Law 20/1997 on Non-Tax State
Revenues. This law stipulated that non-tax revenues from natural resources were
to be included in the state budget. 9 This meant that forestry funds, particularly the
DR, would now be administered by the Ministry of Finance, and their allocation