Decentralization of Forest Administration in Indonesia, Implications ...

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Ida Aju Pradnja Resosudarmo, Christopher Barr, Ahmad Dermawan, and John McCarthy 81 Forest-rich districts employed a variety of approaches to generate PAD from timber extraction, particularly during 2000-2002. Many issued large numbers of smallscale logging licenses known as Forest Product Extraction Permit (HPHH) and forest conversion permits known as Timber Extraction and Utilization Permit (Ijin Pemungutan dan Pemanfaatan Kayu, IPPK). From a fiscal perspective, the allocation of HPHH and IPPK permits has been accompanied by the introduction of several new types of fees. In East Kalimantan, for instance, most districts required IPPK-holders to pay two new fees: 1) a one-time Third Party Contribution (Sumbangan Pihak Ketiga) based on the area covered by the logging permit; and 2) Production Charges (Retribusi Produksi) based on the volume of timber harvested. (The structure and significance of HPHH and IPPK permits will be discussed in detail in Chapter 5). One example can be found in Malinau district in East Kalimantan. The Malinau government set the Third Party Contribution at Rp 200,000 per ha in early 2000, and the Production Retribution at Rp 15,000 per m 3 of timber harvested (Barr et al. 2001). It has been estimated that the kabupaten government was able to collect Rp 53 billion in revenues for the district budget from the 39 IPPK permits, covering 56,000 ha, that it issued between April 2000 and February 2001 (Barr et al. 2001). This is equivalent to approximately US$ 6.2 million (at Rp 8,500 per US$), or roughly 10 times Malinau’s planned district budget for FY 2000. Bulungan, the neighboring district of Malinau, is another example. The Bulungan government set the Third Party Contribution at Rp 200,000 per ha for an IPPK permit. The district also applied log charges, depending on the volume and the species of the timber harvested. For example, the charge was set at Rp 60,000 per m 3 for Dipterocarps. The district government also imposed a log export tax in 2001. In total, during 1999-2002, the district generated approximately Rp 12.6 billion from charges associated with the issuance of IPPK permits (Samsu et al. 2004). The sharp increase in PAD that many districts obtained by issuing HPHH and IPPK permits proved to be short-lived, however. Indeed, the central government moved aggressively to stop district governments from issuing small-scale timber extraction and forest conversion licenses within the boundaries of the Forest Estate, and by early 2004 revenue flows from these operations had sharply declined. Moreover, even during the height of the HPHH and IPPK permits (i.e. 2000-2002), the overall impact of the small-scale forestry concessions on district government finance was somewhat mixed. While the issuance of HPHH and IPPK permits enabled most forestrich districts to generate sharp increases in their PAD revenues during the first few years of decentralization, this did not necessarily translate into ‘self-sufficiency’ or ‘independence’ from central government transfers. Indeed, PAD generated from fees associated with the issuance of small-scale timber extraction and forest conversion licenses was generally small compared to the district’s total budget. For example, IPPK activities in Bulungan accounted for 50% of PAD recorded during 2000 and 2001, the first two years after the licenses were issued. However, in each of these years they accounted for less than 4% of the district’s overall budget (Samsu et al. 2004) (see Table 4.7). Similarly, revenues derived from the forestry sector in Kapuas Hulu increased from about 8% of the district’s PAD in 2000 and
82 Fiscal Balancing and the Redistribution of Forest Revenues 2001 to more than 85% in 2002. However, the forestry component of the district PAD accounted for less than 1% of the total district budget in 2000-2001 and 9% in 2002. Table 4.7: IPPK Receipts as a Source of PAD in Bulungan District, East Kalimantan Year Value (billion Rp) US$ Equivalent Portion of PAD (%) Contribution to District Budget (%) 2000 2.3 269,672 50 2.5 2001 8.7 851,859 40 3.9 2002 1.5 162,549 8 0.3 Source: Samsu et al. (2004) Note: Average exchange rate from Bank Indonesia: Rp 8,534 (2000), Rp. 10,266 (2001) and Rp. 9,261 (2002). During the initial phase of the decentralization period (i.e. 1999-2000), another notable initiative to generate PAD from forest resources was documented. This involved district governments charging fees on timber that had been harvested ‘extra-legally’. In Kotawaringin Timur district in Central Kalimantan, for instance, the district government in March 2000 began charging a fee of Rp 87,000 per m 3 for all timber harvested outside the formal HPH timber concession system, regardless of whether or not it was accompanied by a legal permit (Casson 2001b). The fee generated a fiscal windfall for the district government almost immediately: the district raised some Rp 24 billion (US$ 2.8 million at an exchange rate of Rp 8,500 per US$) during the three-month period April-June 2000 alone (Casson 2001b). Similar fees were introduced in other districts in Central Kalimantan, including Barito Selatan (McCarthy 2001a). The introduction of district government fees on timber that has been harvested illegally was widely criticized by stakeholders at the national and provincial levels. As McCarthy (2001a, 2001b) and Casson (2001b) explain, in the early years of Indonesia’s decentralization process, these regulations allowed timber to be exported from the district as long as it was accompanied by a receipt indicating that the requisite fee has been paid to the district government. In this way, the issue of whether or not the logs had been harvested from legal sources was obscured, and the timber assumed the appearance of being fully legitimate. It should be noted that some district governments sought to obtain PAD from illegally harvested logs without legitimizing illegal logging. McCarthy (2001b) describes how Kapuas district sought to obtain PAD from illegally harvested timber not by imposing a levy and allowing the ‘owner’ to retain possession of it, but by confiscating it and auctioning it to the highest bidder. Some district governments also imposed charges on timber being transported beyond the district borders, regardless of where the wood had been harvested. The district government of Tanjung Jabung Barat in Jambi Province, for instance, built check posts to collect charges from all timber harvested within the district to be transported to the neighboring districts. The argument for these charges was ostensibly to save
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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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Chapter 2 Forest Administration and
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20 Forest Administration and Forest
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132 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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