Decentralization of Forest Administration in Indonesia, Implications ...

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Ida Aju Pradnja Resosudarmo, Christopher Barr, Ahmad Dermawan, and John McCarthy 69 provincial and district tax regulations, and to cancel these if they fail to meet the requisite criteria. However, the Ministry must work within a tight deadline if it wishes to cancel a perda. Law 34/2000 also delineated a broader list of areas where provincial and district governments are authorized to collect taxes and levies. Provincial governments are allowed to collect taxes on motor vehicle use; river and maritime shipping; transfer of ownership for motor vehicles and shipping; fuel purchase; and the exploitation and use of ground water and surface water. District governments are authorized to collect taxes on hotels; restaurants; entertainment; advertising; street lighting; parking; and the exploitation of category C-grade mining (for sand, stones, etc.). Regional governments are also authorized to apply three types of levies: public service levies, business service levies (retribusi jasa usaha), and specific licensing levies. As discussed below, this law enabled forest-rich district governments to apply levies on the issuance of district logging licenses during 1999 and 2000. Regional Borrowing The fiscal balancing law authorizes regional governments to borrow funds from domestic sources in order to cover some portion of their expenditures. 11 It allows regional governments to borrow funds from foreign sources only through the central government. Regions may take out long-term loans “to finance infrastructure development that represents a regional asset and to generate income to pay back [outstanding] loans, as well as to provide public service benefits” (Art. 11). In cases where regional governments fail to repay loans from the central government, the latter is authorized to recover the loans by deducting these from grants made to the region under the General Allocation Fund. 12 (Since Law 25/1999 was ratified, however, the Ministry of Finance has issued several decrees that prohibit regional governments from taking out long-term loans, arguing that these would undermine the country’s financial recovery process). 13 Under Law 33/2004, regions are not allowed to borrow funds from foreign sources directly. Regions are allowed to borrow from the central government, other regions, financial instituions and to public (by issuing bonds). The central government sets out the maximum amount of regional borrowing, up to 60% of the Gross Domestic Product at the corresponding fiscal year. Other Legal Sources of Income Other legal sources of income include emergency funds and grants. In cases where regional governments face sudden and unforeseen budgetary needs, Law 25/1999, as well as its revision Law 33/2004, stipulate that emergency funds may be made available from the national government budget. 4.5 Forest Revenue Sharing In the years immediately following Indonesia’s fiscal decentralization process, aggregate government revenues generated by the forestry sector’s major taxes, fees, and levies have ranged from a high of Rp 4.8 trillion (or US$ 471 million) in 2001 to a
70 Fiscal Balancing and the Redistribution of Forest Revenues low of approximately Rp 2.0 trillion (or US$ 240 million) in 2003 (Table 4.4). In real terms, these figures reflect a sharp decline in government receipts from the forestry sector as compared to those generated during the years preceding decentralization. As shown earlier in Table 4.2, government forestry revenues exceeded US$ 800 million annually during fiscal years 1995/96 and 1996/97. Table 4.4: Distribution of Forestry Revenues, 2001-2004 Type of Revenue IHPH + PSDH DR Level of Government Annual Revenues (Million Rp) 2001 2002 2003 2004 Center 14 939,030 807,720 399,000 670,400 Provinces 166,920 157,250 66,570 126,960 Districts 666,850 629,010 266,280 504,470 Center 15 2,365,450 2,120,690 868,900 2,029,600 Provinces + Districts 16 700,560 620,680 462,830 800,000 Total 4,838, 810 4,335,360 2,063,580 3,331,430 US$ Equivalents (Million) US$471.35 US$468.12 US$240.75 US$ 372.64 Sources: Various sources 17 It is likely that this drop in government revenues reflects a number of factors, most of which are not directly related to decentralization. These include, for instance, the broad decline in production on the part of Indonesia’s forestry sector industries following the 1997-98 economic crisis; a surge in illegal logging over the last several years; and the MoF’s efforts, since 2003, to implement a ‘soft landing’ policy for sectoral restructuring by sharply restricting the annual timber harvest. The figures shown in Table 4.4 suggest that the distribution of forestry revenues during 2001-2004 may have diverged from the guidelines specified by Indonesia’s fiscal decentralization laws. In each year, for instance, the central government’s share of the IHPH and PSDH has exceeded 50% of the total – which is substantially higher than the 20% allocated to the central government by Law 25/1999 and Law 33/2004. Similarly, the central government’s share of the Reforestation Fund revenues has ranged between 65% and 77%, which exceeds the 60% specified by Law 25/1999 and Law 33/2004. These figures should be treated with caution, however. They have been compiled from a variety of sources (including the MoF, Ministry of Finance, and the National Budget), and may therefore reflect methodological differences or inconsistencies in the data. It should also be noted that in the case of the DR figures reported in Table 4.4, the central government’s portion includes both receipts and interest, which would likely account for at least a portion (if not all) of the amount by which the figures exceed 60% of total receipts. Table 4.5 presents a more detailed picture of how the main shared revenues from the forestry sector – the PSDH and the IHPH – were distributed among Indonesia’s 30 provinces and 407 districts and municipalities in 2004 (see Appendix 3 for more detailed information). In aggregate terms, combined PSDH and IHPH revenues distributed to regional governments in 2004 totaled Rp 631 billion, equivalent to US$
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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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Page 33 and 34: Chapter 2 Forest Administration and
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120 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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