No sign of much-needed reform

Down to Earth No 52, February 2002

As M. Prakosa settles into his job as Indonesia's fourth forestry minister in four years, the direction of forest policy is becoming clearer.

Forestry minister Prakosa made it clear from the start that he did not intend any immediate radical changes. In the hand-over ceremony from Marzuki Usman, he pledged to build on the foundations laid down by his predecessors rather than introduce new programmes. Soon after his appointment, President Megawati instructed Prakosa to focus on five forestry priorities for the next 5-7 years: illegal logging; forest fires; reforestation; decentralisation; and restructuring the forestry industry. The signs are that the minister, who has a master's degree in forestry economics and a PhD from the USA, is taking a macro-economic approach to the forestry sector.

To date, Prakosa has shown next to no interest in the social issues which are part of the crisis facing Indonesia's forests. There have been no pronouncements about promoting community forestry. All attention has focused on increasing revenues by controlling illegal logging and timber smuggling and on restoring commercial productivity through extensive reforestation. Much less has been said in public about reducing the over-capacity of Indonesia's wood-processing industry, including the thorny issue of paper pulp companies which have relied for years on unsustainable and often illegal logging and are now heavily-indebted (see also APP article).

The six months' temporary log export ban which Prakosa introduced in October has more to do with protecting raw material supplies for domestic industry than conservation of Indonesia's forests (see DTE 51). Already, a senior trade ministry official has been sacked for breaching the export ban. He had granted a dispensation to eleven companies that had failed to meet the export deadline allowing them to export 72,147m3 of logs worth US$21.6 million.


Industry prioritised?

The new minister relaxed a ban on the use and export of the rare tropical hardwood ramin (Gonystylus sp) introduced by his predecessor. The ban, under the United Nations Convention on International Trade in Endangered Species (CITES), came into force on August 8th. Prakosa's decree, issued in late October, allows companies to continue to sell stockpiled ramin until December 31st 200.

Whether local authorities will take any notice of forestry policy decisions made in Jakarta remains to be seen. District officials in Kapuas, Central Kalimantan, said they would not implement the ramin ban. Local regulations which protect industry's rights to fell timber will be respected instead.

The department of forestry is even considering amending the 1999 Forestry Act, which bans open pit mining in protected forests, to help lure investors to the mining sector (see Mining the forests in this issue).



In December, Prakosa announced a review of all forest concessions. Concession holders will, by the end of 2003, need a certificate of sustainable forest management. This new pro-industry move will allow Indonesia to comply with its ITTO commitment that all exported timber should be certified, without making the 375 current logging concessions subject to scrutiny under the internationally recognised Forest Stewardship Council (FSC) timber certification scheme. No details of the new scheme have been given, but conditions are likely to be far less stringent than the FSC's, jointly implemented in Indonesia by the Ecolabelling Foundation (LEI). NGOs and indigenous peoples' groups argue that no large-scale commercial forestry operations in Indonesia can meet these principles and criteria because there are no formal mechanisms to recognise customary land rights and resolve social conflicts. An independent review by a team of Indonesian and international experts, initiated by WALHI and the Rainforest Foundation and commissioned by WALHI and the indigenous peoples' alliance AMAN, is currently underway and should report in mid-2002.


Demands for reform

A change in the whole paradigm of forest management was one of the recommendations of the 3rd Indonesian Forestry Congress held in Jakarta 25-28 Oct. This prestigious gathering, only held every ten years, has previously been dominated by industry and government representatives. This time, indigenous peoples' representatives, forestry academics and pro-reform foresters combined forces to subvert the agenda to reflect the interests of communities living in and around Indonesia's rapidly dwindling forests.

On the second day, there was uproar in the auditorium as members of the audience expressed their dissatisfaction at the forestry minister's opening speech and hisunwillingness to answer questions. Prakosa was forced to return to the microphone for another hour.

There was public acknowledgement from former environment minister Emil Salim and reform-minded forestry officials that there had been serious mistakes in Indonesian forestry during the Suharto era and a new paradigm was needed.

The final statement called for a change from the current timber-dominated model to a forest management system which supports local peoples' livelihoods. Forest-dwelling communities should play an active role in forest management and indigenous peoples' rights should be restored and acknowledged. The Congress also agreed to a moratorium on logging in natural forests as part of commitments to the incremental reform of forestry in Indonesia (Click here for full text).

Meanwhile, the international donor community is driving action on illegal logging. This is ironic since several recent reports blame the IMF's so-called economic rescue package for increased pressure on Indonesia's forests (see box below). A new WALHI report claims that illegal logging increased from 16.4 million cubic metres in 1998 to 20.2 million cubic metres in 1999, following the Letter of Understanding between the IMF and the GoI which set out conditions for the IMF loan. The NGO Forest Watch Indonesia estimates that deforestation rates doubled after 1998 to 3.6 million hectares per year.

State Ministry of Environment statistics show the forest destruction rate is between 2 million and 2.4 million hectares a year. The rate was highest during the last two years. Illegal logging has caused an annual loss of 56 million cubic meters of timber worth US$8.4 billion (each cubic meter costs $150). WALHI says deforestation rate is 3 million ha/yr; that only 40 million ha remain and that Kalimantan - which has the fastest rate of logging - could be logged out in 5 years.

Illegal logging topped the list of eight action points drawn up by the Consultative Group on Indonesia (CGI) and the Indonesian government just before their February 2000 meeting. Donor lobbying later extended that agenda to twelve key issues (including tenure; a moratorium on forest conversion; heavily indebted forestry companies; domestic timber demand) and working groups were set up to monitor progress towards agreed targets.

At the Forest Law Enforcement and Governance conference (FLEG), organised by the World Bank, USAID and DfID in Bali last September, ministers signed a statement committing their countries to immediate action on illegal logging and 'forest crimes' at the national and regional level (see DTE 51). Malaysia did not attend, but later announced that it would ban all imports of logs from Indonesia after the export moratorium was imposed. ITTO figures for 1999 show that illegal imports from Indonesia to Malaysia were in excess of 500,000 cubic metres. International timber smuggling across the Kalimantan and Sarawak border is still rife.

Recent Indonesian action on illegal logging has included a new get tough policy launched by the environment and forestry ministries and the navy. In December, environment minister Nabiel Makarim announced that charges would be filed against three internationally owned ships which were picked up by the navy in the first of large-scale anti-logging operations in the country since the Megawati administration. Some of the seized timber worth US$4.7 million (S$8.6 million) is believed to have been logged from Tanjung Puting National Park.

(Suara Pembaruan 13/Aug/01; Tempo 31/Aug/0; AP 8/Oct/01; Kompas 11/Aug/01, 7/Nov/01; Banjarmasin.Post 24/Oct/01; Jakarta Post 10, 12/Oct/01, 10/Dec/01; WALHI 6/Nov/01; Reuters 2/Nov/01; Bisnis Indonesia 7/Aug/01; AFP 1,3/Dec/01; Jakarta Post 10/Dec/01; Straits Times 11/Dec/01)


IMF and World Bank reforms increase deforestation

Policy reforms driven by the International Monetary Fund (IMF) and World Bank following Indonesia's 1997 financial crisis and the resultant severe recession have increased deforestation and undermined macroeconomic stability, according to a report by the World Wildlife Fund and CIFOR and a study by WALHI.

Heike Mainhardt, senior forest programme officer at WWF's US-based macroeconomics office, argues that IMF-supported financial and corporate sector restructuring and trade liberalisation measures encouraged timber extraction and accelerated conversion of forest land by facilitating "unsound investments" in Indonesia's wood, paper pulp and palm oil industries. Major pulp and paper companies failed to bring adequate areas of pulpwood plantations into production and are now facing raw material shortages. Investment in oil palm plantations promotes deforestation and contributes to social conflicts over land rights.

WALHI's research also shows that the IMF's agreement with the Indonesian government stimulated log exports and the conversion of forest to other uses, such as oil palm and agriculture. According to WALHI director, Emmy Hafild, the impacts of increased illegal logging and forest product smuggling cannot simply be eliminated by reapplying the log export ban which the IMF forced the government to lift.

She also points out that, under IMF measures, Indonesia's budget has to pay the principal and the interest on debts, including the costs of bank recapitalisation. The conversion of foreign private debts taken on by Indonesian conglomerates into public responsibilities under the Indonesian Bank Restructuring Agency (IBRA) has reduced the state's ability to allocate funding to environmental and social justice programmes. Allocation of public funds for environmental programmes and energy conservation has decreased by nearly 50 percent in real terms. WALHI urges Megawati's government to reduce its dependence on the IMF's structural adjustment package which is both environmentally and economically damaging. If this not possible, institutional arrangements must be improved so that the IMF takes more responsibility for the impacts of its policies.

WALHI's position is supported by Friends of the Earth-US which calls for the IMF to tie environmental standards to its loans in its report entitled 'The IMF: Selling the Environment Short'. This points out how the IMF's role in setting economic stabilisation and structural adjustment policies gives it a major impact on the environment. Past efforts at reform have not made much difference said Carol Welch of FoE: "We've called on them to push for environmental and social assessments to determine whether a loan will lead to deforestation," but "we haven't gotten very far".

(Source: Asia Times 27/Oct/01 WALHI statement 6/Nov/01; Greenwire 30/Jan/02)


CGI & forests

International donors belonging to the Consultative Group on Indonesia (CGI) committed US$3.1 billion towards balancing Indonesia's 2002 budget at its 11th meeting held in Jakarta on 7-9th November. Of this, $1.3 billion is conditional on economic reforms (see also DTE Factsheet on CGI). Political uncertainties following the September 11th tragedy and the bombing of Afghanistan were blamed for the absence of a high profile donor meeting on forestry immediately before the CGI session. Nevertheless, forestry featured prominently on the agenda which had the overall title of 'Working Together to Reduce Poverty'.

In its pre-CGI statement, the World Bank said: "As in most other areas of governance, the laws and policy instruments for managing natural resources are mostly in place; what seems to be missing is the will to use them effectively. Nowhere is this more true than in the forestry sector where the larger crisis of governance has affected the environment - and development - with tragic consequences."

At the meeting itself, Prakosa presented a draft of the National Forest Statement, the first step towards the long-awaited National Forestry Programme, but gave a lack lustre performance. Several donor representatives expressed disappointment at the lack of political will towards forestry reform. They concluded that the goal of sustainable forest management cannot be achieved through the activities of Ministry of Forestry alone and pressed hard for the revitalisation of the Inter-Departmental Committee on Forestry (IDCF).

Indonesian NGOs represented in the Coalition for Forests and Debt presented a strong statement to the CGI meeting calling on the international community to stop financing deforestation in Indonesia. They accused the Indonesian government of 'business as usual within the forestry sector' and raised concerns that the new government had reduced the forestry action plan from twelve to five points, without any consultation with stakeholders within Indonesia. Important issues such as tenure were no longer a top priority, with the risk that they would quietly drop off the government's agenda.

The statement, read by Togu Manurung from Forest Watch Indonesia ended by saying:

"There have already been more than enough workshops and meetings with lots of recommendations, but no concrete action. Therefore we call for:

  1. A moratorium on large scale commercial logging in natural forests until there is genuine forest reform.
  2. The formulation of a cross-sectoral mechanism, directly under the President's control, to address the crisis in Indonesian forestry. This should be supported by holistic reform, including legal and institutional reform, on land and natural resources tenure and management.
  3. Proof that the government is serious about eliminating corruption, collusion, nepotism from Indonesian forestry. There should be serious action to enforce the law against forest crimes.
  4. Heavily-indebted wood based companies must repay their debt in full. Companies that cannot demonstrate a sustainable supply should not be recapitalised or restructured; they should be allowed to collapse.
  5. A stop to the involvement of the military and police forces in forest exploitation and the imposition of sanctions on parties/individuals who do not fulfil their responsibilities to forest protection.
  6. Greater accountability, transparency and responsibility by local and central government in the management of natural resource.

The CGI should assist the Indonesian government to implement the above steps. In addition, all members of the CGI must adopt and apply comprehensive social and environmental standards to all their grants, investments, credit guarantees and loans to Indonesia."

See Forests on our campaigns page for NGO CGI statements and for a summary of news items on forestry since Megawati's government came in. 
(Source: Reuters 8/Nov/01 Working Group statement, Nov 2001 on