Asia

The Development and Resource Politics Between Japan
and Indonesia in the Post-War Period
Prepared by Yoichi Kuroda,
IGES/ JATAN, Japan

1. Pre-War Period

Japan has a long history of their own forestry and forest exploitation.

The large scale forest exploitation started as early as 6^th century when the urban civilization started to introduced from China and Korea, and subsequently, forests near the old capital cities had been destroyed due to the high demands of high quality old growth timber as well as wood fuel for steel , copper, ceramics and other material productions. The second forest crisis appeared during the 16^th and 17^th centuries when the new national rulers from the warriors class started to construct ambitious huge temples, shrines and Buddha images , those new rulers demand to cut highest quality old growth softwood ( mainly cedar and cypress trees) from the Southern islands , such as from Yakushima Island as well as those from the central and Northeast Japan. The logging frontiers had reached up to the southern part of Northern island, Hokkaido by the end of 17^th century, then plantation forestry started ( about 300 years history).

After the Meiji restoration( 1868), the new wood demands has appeared especially western wood based pulping technology was introduced in that period. This new technology required substantial softwood resources, since it was based on it in North America and Scandinavia. After the pulp industry depleted softwood resources in Hokkaido, then only available lands, they moved to colonial territories, such as those in Sakhalin, Manchuria, Korean Peninsular, as well as in Taiwan. Sakhalin became the largest supplier of pulpwood and pulp.

After the end of the World War II, when Japan lost all the overseas forests, Japan suffer chronic wood shortages for the pulp and paper ,timber/ housing as well as the mining sector ( for mining poles).

2. Post-War Japan Development Policies and Forest Resources

1. Pulp and Paper Sector

In the early post-war period, Japanese government( Ministry of Commerce and Industry = now MITI= Ministry of International Trade and Industry) and pulp and paper industry developed new policy, which was 1. To utilize "hardwood pulping technology" which was developed during the late 1930’s and develop domestic deciduous hardwood forest species such as ‘Beech’ in the national forest as well as private forest areas as a short term strategy ( meaning the available resources were limited to 20-30 years term) 2. To develop large scale domestic pulpwood plantation as a long term strategy.

Out of that policies, the hardwood forest development was implemented in a massive scale and speed, so that this resulted to meet many protests from local and national conservation movement in the later stage( since the late 1960s). The second strategy , long term pulpwood plantation one, was not fully achieved, since after they started softwood ( pine) plantation in the clearcut areas, cost performance became problematic and they gave up to implement it in the later stage. In stead of implementing pulpwood plantation within Japan, MITI and JPA(Japan Paper Association) started to develop overseas pulpwood plantation schemes after the 1970s. In the early high economic growth era( the early 1960s), MITI also stimulate to increase woodchip imports as they gave go sign for the new pulp mill capacity investment only when companies agreed to increase woodchip imports from overseas .

MITI have also been being involved for companies to stimulate overseas "resource development and import" schemes, in order to secure the foreign resource flows to Japan as a part of their long term industrial development plans

in the post-war period. As a results, massive government support programs were provided for many resource development projects, such as oil and minerals, forest resources , tree plantations and so on through their own insurance schemes, export-import credits by EX-IM Bank, National Oil Corporation, Metal Mining Agency, JICA, as well as OECF .

2. Timber Imports

• 1960s Timber Shortage

As Japan quickly recover its post-war economy, and annual logging rate was increased, together with introduced mechanized logging and larger clearcut, there was a sudden shortage of old growth softwood for the sawn wood and for housing sector with sharp wood price hike. The government responded to it with further intensive logging and tariff lifting to introduce more and more log imports from United States. During the high economic growth era( 1960- early 70s), Log imports from North America , Russia as well as from Tropics was dramatically increased.

3. Tropical Timber: Development and Import

Japan has started tropical timber imports since early this century, but it was much increased in the post –war period. The key factors and elements were as followed.

• US General Head Quarter( GHQ) agreed to start import of the Philippines logs in 1948 for the post-war restoration, then strong plywood industry began to be developed for the export earnings( mainly to US)
• US military procure plywood during the Korean War resulted economic boom.
• Plywood has been used for 1. provide low cost housing as the part of labor policy, 2. Concrete molding panels since government promote steel and concrete buildings for the urban development ( after the Great Kanto Earthquake, government then gave up to promote western stone and brick made buildings due to their weakness against earthquack)
• Huge population sifts from the rural to urban and new industrial zones during the high economic growth era.

By the end of the 50s, industry identified the depletion of the Philippines forests, they started to negotiate with the government of Indonesia, then the president Sukarno agreed to develop bi-lateral logging joint venture, called Kalimantan Forest Development Corporation (KFDC). Although this project was the first large scale forest development scheme for Indonesia, it was not very successful until the new president Suharto open up the country for the foreign investors.

During the 1970s, massive foreign investment for the forest exploitation and concession were allocated for them.

4. Key factors of continuous timber imports and large scale consumption in the post high growth period

• National Large Scale Land Development Schemes

When Japan’s export oriented economic development reached some limitation for the growth, Kakuei Tanaka, then prime minister in the early 70s, he introduced government sponsored large scale national land development, such as road, urban re-development, new industrial zones, more and more dams and ports and so on and so forth. As the results, there were record high land speculation as well as deregulation of any kinds of developments. Those were the merely the starts of the large scale land and landscape destruction which require tremendous amount of steel, cements, aluminum, plastics, as well as woods such as tropical plywood for many kinds of civil engineer works.

• Japan-US Trade Disputes and US Demands to Increase Domestic Consumption

Because of Japan’s post –war export oriented industrial development pattern caused serious trade disputes against US, Japanese government decided to spend more government money for construction works since 1983 when new prime minister Nakasone introduced further " Deregulation" plans as well as many new amendments of existing laws such as the Basic Architects Act, Urban Planning Act, Urban Redevelopment Act. Since then, government public spending for the construction projects skyrocketed throughout 80s and 90s. It was increased from some tens of billion dollars to some hundred of billions of dollars annually. When the private and public spending for construction combined, Japan became the world largest construction investor in the world. For example, Japan built about 30 million houses for the last 30 years and only less than half number of housing stock increased, which means some 16 million houses were lost or destroyed, and average more than 500,000 houses were being destroyed every year due to the urban redevelopment schemes and number of other reasons. Government Scrap and build policy for many of the material producers as well as US demands were completely implemented. Those disasterous policy resulted a) Massive destruction of Japans urban and natural landscapes, b)massive forest destruction in overseas, c) massive industrial waste dumping problems in Japan’s rural areas, d) Further land speculations and the bubble economy e) Huge government debts including both National government and many local governments as well as private banks.

3. The Role of Japanese AID and TNCs for the overseas forest development

As the author already referred , Government played very central roles to stimulate overseas resource development and imports, through various public schemes including ODA and export credit agencies, such as Ex-Im Bank of Japan. Those were many overseas mining developments( Iron ore mines, Copper mines, Nickel, Uranium, etc.), forests, plantations and pulp mill developments ( Forest developments in Indonesia, Sarawak, PNG , Mangrove forests in SE Asia, Pulp mills in Alaska, BC of Canada, Indonesia, Brazil and so on). Among the various private companies, general trading companies have been most active in the various different types of resource development projects, including woodchip/pulpwood development and imports, pulp mill and pulpwood plantation developments with pulp industry. OECF became to be a major player for the overseas "reforestation" scheme, both for private companies( through their special corporate support division) as well as G-G re- aforestation schemes. Due to the lack of experts with reasonably broader community perspective, and the lack of participatory approach including the lack of sufficient field staffs and relative independence from the government bureaucracy, most of the government reforestation program resulted either waste of public money with no accountabilities, or even promote more corruption. Radical reform in the national legislation level as well as top level government system with regard to control of aid activities are necessary.

4. The Identification of the Major Underlying Causes, Factors and Agents

1. Background Factors

• Chronic Shortage of Wood Due to the Relative Long History of the Domestic Forest Exploitation
• Modern Japan Government Policy Toward Militarization and Economic Expansion to Combat Western Colonization Power
• Modern Wood Based Western Pulp Production Technology and the Lack of Domestic Softwood Resources(As a Starting Point of the Overseas Forest Exploitation Activities)
• Post-War Japan’s Overall Direction towards the Export-Oriented Economic Development ( with the emphasis of the Heavy and Chemical Industry Developments)
• Huge Population Moves from Rural to Urban and New Industrial Zones Over one million Houses construction after the year 1968

2. Government Led Consumption Stimulation after the 1970s

• Prime Minister Tanaka’s Nation-wide Large Scale Development Schemes after the First Oil Shock ( after Japan faced its growth limitations) with the associated Relaxation of Urban, Housing and other Development Regulations
• Prime Minister Nakasone’s Development Policies on the Further Relaxation of the Urban, Housing and other Land Development Schemes and the Changes of the Related Laws and Regulations in the early and mid 1980s
• US government’s Demands for Japan to Stimulate Domestic Material Consumption ( in order to mitigate trade disputes- Steel, Automobile and other aggressive export problems)
• Demand Creation for the Material Industries Whose Production Capacities Became to be far exceeding to the normal consumption and export levels.
• More than 200-300 billion US dollars annual government investment for the Construction / Civil Engineering Activities together with 300-400 billion US dollars annual private investment for Housing and Construction areas.
• 16 million houses loss as the results of above mentioned wasteful government scrap and build policies which maintained very high level of the annual housing and construction activities

• The first peak was early 70s and the second peak was the bubble economy period ( 5 years average was 1,6 million housing starts annually during that period).

• Overall Japanese industries and consumers ignorance of the resource limitation and wasteful attitudes ( They don’t see forest crisis any more unless they started their own forest without overseas massive wood( product) imports)
• Higher and Higher domestic costs of productions, transportation together with the " High Yen" conditions which made imports of anything much lower in cost which made domestic forestry almost impossible to survive- deepened foreign resources dependency which resulted the further collapse of the rural sectors including forestry( partially as a result of the post-war government development policies—higher and higher wages, more and more mechanization with higher investment costs and so on.)

3. Production/ Technology/ Industry Ridden Consumption Linkages

• Paper consumption has been stimulated by the overall economic development.
  According to the Japan Paper Association, Paper consumption is almost directly proportional to the GNP/ GDP growth.
• Paper consumption was stimulated by industrial advertisement activities- Newspapers increased their pages and tremendous numbers of new magazines were started to be published in order to expand space for the corporate advertisements. There was a 20 times more paper consumption compared to the 1930s( the pre-war period peak of the consumption) and 60 % increase during the bubble economy period-1980s
• Out of the 30 million tons of Japan’s paper consumption, more than one third is for cardboard. This was also stimulated by the intensive export activities( for electronics equipment and others).
• Timber consumption has been stimulated not only housing sector itself, but also over invested steel. plastics and other industrial sector’s growth demands, Japan-US trade disputes and resulted US demands for more domestic consumption as well as government massive spending for the construction sector.
• Unbalanced Trading Pattern together with Unbalanced Industrial Development Policies which require continuous imports of large scale forest and mineral resources imports as well as agriculture and fishery products. With such international ( external) relations, government could only support rural sectors mostly through construction investment as the means for income redistribution. Direct subsidies for production or "de- coupling" policy in our rural sector including forestry have been almost prohibited, due to the above mentioned unbalanced trading patterns. Although it could possibly stimulate domestic forestry( from the established plantations) in order to reduce foreign dependency, major timber and wood product exporter governments, such as those of Indonesia, Malaysia, PNG, United States as well as Canada might not allow Japan to do it, or Japanese industrial exporters certainly would not allow it. How we can address and change these very much structural and institutionalized consumption and production patterns? This is the largest question which we must answer now.

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