Asia

Summary of Indonesian Case Study
Prepared by Indonesian Working Group on Underlying Causes
of Deforestation and Forest Degradation

Introduction

Based on research conducted in Indonesia, one of which was in West Sumatera (Fenley 1983), it was concluded that from 20,000 to 14,000 years ago, vegetation in the area was definetely different compared to nowadays. Between the range of time, 14,000 to 7,000 years ago, vegetation gradually immigrated to its recent places and developed new population especially in mountain-forest.

In this past few thousands years, it was recorded that there were more anthropogenic forest created (the forest caused by human’s interferes). Based on records, the first anthropogenic forest was created in 9,000 B.C. The next phase of forest ecosystem development was influenced by human’s activities. In Indonesia, there was no profound study of human’s activities history in ancient forest. However, the process of forest ecosytem development influenced by human’s activities was expected not too different from other countries. Day (1993) had studied about the influence of ancient Indian in forest ecosytem of North East of North America.

Forest Lost in Indonesia

Up to 1966, seventy five percent of Indonesia teritory or 144 millions hectares were still covered by forest. In the beginning of forest resources exploitation that started the ‘timber boom’ era in the seventies, it was also known as the ‘Forest Development Olympiad’ era. In this era, Indonesia with the assistance from foreign companies (the involvement of the companies was possible due to Foreign Investment Law in 1967), has become the biggest log exporter in the world. In the year of 1982, when the oil was declined in price, forestry sector became the second highest contributor to foreign exchange in Indonesian economy after oil and gas sector. In 1983, five hundreds and sixty private companies held the Forest Concession for 65.14 million hectares of the forest area ( this area exceeded the total area of production forest as alocated in the Forest Land Use Allocation).

In 1980, government restricted log export and begun to promote plywood industry development. In the end of the nineties, Indonesia was the biggest producer in the world for plywood and managed to fulfill 75% of the world market demands at the time. Meanwhile, the overestimate on forest resources, the weakness in management and law system, and the overcapacity of plywood industry, caused even higher acceleration rate of primary forest exploitation.

In 1982, satellite aerial photos taken by Indonesia government showed that the forest coverage in Indonesia has decreased to 92,4 millions hectares (this area covered the after cutting forest of Private Concessionaires (HPH) and the Timber Estate which were developed by clearing the natural forest). From those 92.4 millions hectares of forest area , the 20.6 millions hectares of permanent forest were left open.

From the data above, deforestation rate estimated from 1982 to 1993, have reached 2.4 millions hectares per year. This rate were considered higher, compared to the rate estimated by Forestry Department and FAO in 1990; which was expected to be 900,000 to 1.3 millions hectares per year. The deforestation rate in Indonesia was also higher than the average rate of tropical forest in the world which was only 987,000 per year.³ Primary forest coverage left nowadays are only 53 millions hectares or 37% of total forest area before (WALHI, 1998).

Underlying Causes of Deforestation and Forest Degradation

Indonesian case study concluded that underlying causes of deforestation and forest degradation in Indonesia are as follows.

• Development paradigm adapted by government of Indonesia influenced by structural adjustment loans, bilateral and multilateral loans.

The year of 1966 was an event of political change when Soeharto - a long-power holder until May 1998 - took the power of the nation from his predecessor, Soekarno first president of Indonesia. Under His leadership, the New Order was beginning in 1966. In the same year, Indonesia joined IMF as a member and received first structural adjustment loan. During that time Indonesia also agreed to received bilateral loans. To follow up those foreign agreements, government of Indonesia established law on foreign investment in 1967. It was also new era of forest resource management through establishment of The Basic Forestry Law of 1967 as a product of new national development policy – development paradigm based on economic growth - influenced by above foreign agreements. The Basic Forestry Law of 1967 constituted a legal instrument facilitating commercial access to and development of income streams from legal rights to forest resources. Article 5 of The Basic Forestry Law states all forest areas within the boundary of Republic of Indonesia including natural resource in the areas are authorized by the government. The Basic Forestry Law is then being used as a mechanism to legitimize state claims of ownership over forest resources and to arbitrarily sanction the removal of local control from forest communities, including indigenous ones (Moniaga, 1993).
Following the Basic Forestry Act, Forest Land Use Policy (referred as TGHK) was established under Government Regulation No. 33 in 1970 and formalized in a set of Minister of Agriculture Decrees in 1980 and 1981. The deadline completing Forest Land Use Policy (TGHK) designations was 1985. Based on Forest Land Use Policy, the permanent forest is categorized into : 1)production forest (64.3 million hectares); 2)protection forest (30.7 million hectares); 3)natural conservation area and nature preserved forest (18.8 million hectares); 4)convertible forest (26.6 million hectares).

Until 1966 some 75 % (144 million ha) of Indonesia was covered with tropical rainforest. The common prevalance of the prized tree species Dipterocarpaceae in Kalimantan and Sumatra made Indonesian rain-forest one of the most baluable in world. Large scale logging of timber began as a follow up of establishment of the Basic Forestry Law in 1967 when all Indonesian forests were declared state property. The Basic Forestry Law also followed by opening of opportunity for foreign investments in logging activities. All policies enacted during that period supported the exploitation of the Indonesian rainforest as part of national development policy mainly to finance foreign debts. During the timber boom in the 70’s with the help of well-connected foreign companies Indonesia became the worlds biggest raw log exporter. Timber became the second biggest earner after oil and gas in the Indonesian economy after the oil price decrease in 1982. By 1983, 560 logging concessions had been granted on 65.4 million hectares, more than the total area of Indonesia’s production forests stated in the Forest Land Use Policy. Before designation completion of Forest Land Use Policy (TGHK) in 1985 which included forest lands demarcation, it has been commonly known that logging companies operate within unclear demarcation areas. Over-logged areas within conservation areas (national parks, nature reserves) is evidence of the mismanagement.

Another product of new national development policy – development paradigm based on economic growth - influenced by above foreign agreements during 1966-1967 is Basic Mining Law which was established in 1970. This law supports any mining possibilties in any forest areas in Indonesia.

• International and regional trade pressures.

Large scale logging of timber began as a follow up of establishment of the Basic Forestry Law in 1967 when all Indonesian forests were declared state property. The Basic Forestry Law also followed by opening of opportunity for foreign investments in logging activities. During the timber boom in the 70’s with the help of well-connected foreign companies Indonesia became the worlds biggest raw log exporter. Timber became the second biggest earner after oil and gas in the Indonesian economy after the oil price decrease in 1982.

The timber boom in the 70’s was also supported by increased demand of round wood in Japan and Korea. During that period, plywood companies in Japan and Korea started to seek alternative source of raw material after Philippine as their main source had lost most of her forest due to over exploitation.

Influenced by high demand and good price of plywood, the government changed its forest policy by introducing ban on raw log export in 1980 and promoting development of plywood industry. By the late’s 80’s Indonesia was the world largest plywood-producer and has achieved a 75 percent market share in the mean time. However, overestimation of forest resources, poorly managed large-scale operations, non-compliance of concessionaires to the principles of sustainable forestry, lack of law enforcement, an overcapacity in the plywood industry and meager reforestation resulted in rapid exploitation of primary forests (Hurst, 1990). After continous short-term and profit-oriented timber exploitation, forest coverage in Indonesia had decreased to 119.3 million ha (62 %) in 1982 (RePPProt 1990) and 92.4 million ha (48,6 %) in 1983, including plantations and vas logged-over secondary forests (Bobsien and Hoffmann, 1998).

At international and regional level, there has been also evidence of increasing demand of pulp and paper since 70’s. Government of Indonesia started to see this situation as an opportunity to get foreign exchange after facing natural resources depletion. In the mid 80’s, government of Indonesia started to establish policies which support development of pulp and paper industries. The following paragraphs discuss about those policies.

• Economic growth development paradigm under depleted natural resources

The overall macroeconomic situation and the specific situation in the relevant policy fields created high need for policy change. Since Indonesia’s oil resources will be depleted soon (~ 2005), and the country will then not only lose oil export revenues but will become an oil importer, the national development planners like to boost the economic performance of other sectors. Amongst other promising businesses, pulp and papers as well as agrobusiness (especially tree crops) were identified to be further potential export revenues. On the other hand, in the mid 80’s there was clearly visible evidence in forestry sector of a up-coming timber crisis due to over-logging. At that time industrial plants in some parts of Sumatra already suffered from raw material shortages, and in 1990 timber shortages also emerged in Kalimantan. In the initial stage the government tried to solve the problems by establishing timber estates program (to referred as HTI, Hutan Tanaman Industri). In order to resolve the dilemma, the government seemed to settle on timber estates as a scheme for providing alternative sources of wood. For this reason, three types of timber estates were proposed : a)HTI pertukangan, hardwood plantations to relieve supply shortages of construction and woodworking raw materials; b)HTI kayu energy, timber estates to supply raw material for fuelwood and charcoal production; and c)HTI kayu serat, timber estates to support the pulp, paper and rayon industry.

Third type of timber estates which is pulp and paper plantation received the most attention and investment by the private sector and government since pulp and paper business is the most profitable one. Despite the originally purported goal by the government to use timber plantations to counter hardwood shortages, in practice the thrust of the timber estate scheme is creating fast-growing tree plantations to support the development of the pulp and paper industry. In 1990, the Ministry of Forestry started granting Industrial Timber Plantation Rights (HPHTI) which allow concessionaires to plant and harvest plantation timber on so-called unproductive areas of permanent production forest. Various government ministers stated that Indonesia is aiming to become the greatest supplier of paper pulp and palm oil in the world. Thus in the 90’s is a enormous program is underway to convert primary forest into timber as well as rubber and oil palm plantations in Indonesia.

Another ambiguous governmental development program to increase export revenues is the development of tree-crop (oil palm, coffee, cocoa and pepper) plantations. Plantation development also serves the government’s long standing goal of relocating people from densely populated island of Java to the outer islands (to be referred as transmigration program). Official incentives include low-cost financing for estates where 80 % of the land belongs to smallholder transmigrants and 20 % to the company. Some 35 companies are developing plantations in conjunction with transmigration. However, only the big conglomerates can afford the investment costs of setting up transmigration sites.

There is a recent trend that Malaysian businessmen seek for land to establishing new plantations in Indonesia. Some of the reasons are : a)Malaysia’s over-aged rubber plantations and decreasing oil-palm production; b)In Indonesia land can be cleared more easily owing to the lack of control and the Indonesian counterparts freely take out the remaining trees (Bobsien and Hoffmann, 1998).

Until 1996, Indonesia exports of palm oil products has increased 32 % since the last five years, and were worth more than $ 1 billion. Government plans call for the production of 7.2 million tons of crude palm oil by the year of 2000, with the plantation area move at 2 million hectares and the Ministry of Agriculture has announced that an additional 1.5 million hectares will be added in 1998 as part of a new policy to address the monetary crisis (CIFOR, 1998). With respect to the present economic crisis the palm oil business is very attractive, because investment needs and operation costs are in Rupiah, but export sale will return investment in dollars. The government then lifted its export ban on palm oil on April 22 1998. The integration of Forestry and Plantation into one Ministry in 1998 which support "one-roof" authorization of forest lands conversion into plantations, can be used as evidence of government ambiguous plan on plantations.

Some measures of the IMF package directly concern the palm oil sector. For example, Point 39 requires Indonesia for removing "all formal and informal barriers to investment in palm oil plantation" - a requirement which is clearly detrimental to environmental concerns, because it will highly increase additional pressure from international investors to convert forest land. Point 50 of the IMF catalogue requires the government to "reduce land conversion targets to environmentally sustainable levels by the end of 1998" - a requirement, which is contradictionary to the first one, and the timing is ill-fated to prevent major forest fires in 1998.

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