Decentralization of Forest Administration in Indonesia, Implications ...

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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
64 Fiscal Balancing and the Redistribution of Forest Revenues and use would be subject to the approval of the House of Representatives (DPR). Moreover, as part of Indonesia’s January 1998 Letter of Intent with the International Monetary Fund (IMF), the government agreed to commission an independent audit of the Reforestation Fund and to manage the fund more transparently (Ernst & Young 1999). The less lucrative PSDH (and before it, the IHH) was distributed much more equitably. Under Presidential Decree 67/1998, revenues from the PSDH were divided as follows: 30% went to the originating provincial government, to be used as development funds; and 15% to the originating district or municipality (town council), also to be used as development funds. The remaining 55% went to the central government (with 40% earmarked for national forestry development and 15% for regional forestry development). The central government, likewise, retained only 30% of the IHPH, with 56% going to the provincial government and the remaining 14% to the district or municipal government (Prakosa 1996) (see Table 4.1). In addition to forestry royalties and fees, timber producers have been required to pay a number of lesser fees and taxes that were not specific to the forestry sector. These have included Corporate Income Tax (Pajak Penghasilan Perusahaan), Land and Building Tax (Pajak Bumi dan Bangunan, PBB), Value Added Tax (Pajak Pertambahan Nilai), and a Charge for Motorized Vehicles (Retribusi Kendaraan Bermotor). Of these, the Charge for Motorized Vehicles was the only source of revenue that district governments were authorized to collect, based on the number and size of vehicles using public roads. 4.4 Fiscal Balancing Under Decentralization Under decentralization Indonesia’s regional governments have assumed significantly greater authority and responsibility to manage their own budgets than they had during the New Order period. Law 25/1999 on Fiscal Balancing specifies that costs associated with the implementation of decentralization shall be covered by regional government budgets (Anggaran Pendapatan dan Belanja Daerah, APBD). This law also indicates that ‘regional’ governments (Law 22/1999 defines a region as provinces, districts, and municipalities) can obtain the funds needed to finance decentralization from any of the following sources: • Balancing Funds (Dana Perimbangan) • Regionally Generated Revenues (Pendapatan Asli Daerah, PAD) • Regional borrowing (Pinjaman Daerah) • Other legal sources of income The following sections describe the principal components of each of these. Balancing Funds (Dana Perimbangan) Law 25/1999 specifies three types of Balancing Funds: 1) the General Allocation Fund (Dana Alokasi Umum, DAU); 2) the Special Allocation Fund (Dana Alokasi Khusus, DAK); and 3) shared revenues from land and natural resource taxes.
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Decentralization of Forest Administ
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National Library of Indonesia Catal
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iv 4.5 Forest Revenue Sharing 69 4.
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Preface Indonesia is currently ente
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Acknowledgements This study is base
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Abbreviations AAC ACIAR ADEKSI APBD
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IPHHBK IPHHK IPJL IPK IPKR IPKMA IP
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Glossary Adat, customary or traditi
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Forests and Decentralization in Ind
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10 Forests and Decentralization in
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114 The Impacts of Decentralization
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122 Decentralization and Recentrali
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References Agrawal, A., Ostrom, E.
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136 References Casson, A. 2001a. De
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138 References GFW/FWI. 2002. The S
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140 References Manurung, E. G. T.,
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142 References Ribot, J. C. 2002. L
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144 References Van Zorge Report. 20
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146 Annex 1. Timeline of events tha
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148 Annex 1. Timeline of events tha
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Annex 2 Indonesian Laws and Regulat
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152 Annex 2. Indonesian Legislation
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154 Annex 2. Indonesian Legislation
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156 Annex 3. Distribution of Shared
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Since the collapse of Soeharto’s
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