Decentralization of Forest Administration in Indonesia, Implications ...

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Fiscal Balancing and the Redistribution of Forest Revenues
latter. Moreover, it provides only general guidelines for how DAK-DR should be
distributed among districts and municipalities within any given province. This
ambiguity has sparked considerable dissatisfaction on the part of officials in timberproducing
districts, who have argued that the 40% of DR earmarked for ‘originating
regions’ (i.e. the DAK-DR) should largely be distributed among the districts where
the logs are harvested (Resosudarmo 2004b; Oka and Ahmad 2003).
In practice, the allocation of DAK-DR from the central government to
Indonesia’s regional governments follows what is essentially a four-stage process.
First, the MoF sends a team to each province to reconcile the provincial data on
DR payments from timber companies operating in the province and their own data
(Resosudarmo 2004b). Second, the Ministry of Finance then uses the data from the
MoF to determine the amount of DAK-DR that should be allocated to each province
(Resosudarmo 2004b). The Ministry of Finance’s allocation of the DAK-DR is
formalized in a Ministerial Decree, which authorizes each provincial government
to distribute an assigned amount among the districts and municipalities within its
jurisdiction (Resosudarmo 2004b). Table 4.6 summarizes the central government’s
DAK-DR allocation to the provinces for fiscal years 2001-2003.
Third, the provincial government, after consultation with districts/municipalities,
then determines an allocation of DAK-DR for each district and municipality within
the province. The DAK-DR money is allocated according to central government
guidelines based on the following criteria: 1) projected DR receipts of each district/
municipality; 2) the area of degraded forests and critical lands in priority watershed
or sub-watersheds; 3) the level of degraded watersheds/sub-watershed ecosystems;
and 4) the probability of the continuity of rehabilitation activities carried out in the
previous year. 19 Finally, the DAK-DR are transferred directly from the Ministry of
Finance to the individual districts and municipalities according to the allocations
determined at the provincial level.
Table 4.6 shows how the allocations of DAK-DR to regional governments
were distributed during the fiscal years 2001-2003. During this period, the amount
of DR transferred to provinces and districts annually ranged between Rp 462 billion
(or US$ 53 million) and Rp 700 billion (or US$ 68 million). The distribution of
these funds was highly concentrated, with provincial and district governments in
East Kalimantan, Central Kalimantan, and Riau receiving 75% of the total amount
distributed to regional governments in 2003.
It is significant that the DAK-DR transfers from the central governments
to districts and municipalities do not pass through the provincial government.
Nevertheless, this process does give provincial governments significant influence
over how DAK-DR are distributed among districts and municipalities. Provincial
governments are able to determine, for instance, the relative weighting of each
criterion under the central government guidelines; and the application of these
guidelines therefore differs from province to province. As an example, the provincial
government of South Sulawesi structured the criteria in a manner that placed greater
weight on levels of land and watershed degradation than on the amount of DR
revenues a district had generated (Oka and Ahmad 2003). 20 Officials from forestrich
districts complained that this method of distributing the DR did not return the