Rate and Causes of Deforestation in
Indonesia:
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LOGGING AND THE TIMBER INDUSTRY
The forests of Indonesia are being logged at a rate of roughly 40 million cubic metres per year (m cum/yr), whereas the "sustainable" rate recommended by the Ministry of Forestry is 22 m cum/yr (World Bank 1995: i). Reportedly only a small portion of forest concessions are conducting enrichment planting. Some believe the development of the timber industry is being achieved at too great an economic and environmental cost to Indonesia (Gillis 1988: 181-2; Ahmad 1995) and that the overall contribution to economic development is low (Hariadi 1993; Ahmad 1995). The estimates of deforestation caused directly by logging range from 77,000 ha to 120,000 ha annually (Table 2), which is approximately 10-20% of the total area deforested, and 10-15% of the 800,000 ha logged annually. [20] In none of the studies is it specified in what sense logging is assumed to cause deforestation. It is not known if the studies measure this phenomenon in terms of : (1) clear-felling on lands designated for non-forest uses; [21] (2) areas under bad silvicultural management, leading to invasion by imperata grasses or forest fires; (3) areas where conversion to agriculture has been inadvertently facilitated through logging and through non-enforcement of concession boundaries; or some combination of the above. While the studies fail to specify this crucial information, they imply that inadequate concession management and a short-term investment horizon on the part of concessionaires play a crucial role in this form of deforestation. Why do some concessionaires exploit forests at an unsustainable rate, fail to manage their sites appropriately, and have no view to long-term investment? Most explanations point to a variety of government policies and practices that they view as inadequate and that must be reformed. The inadequacies can be classed in terms of the three following phenomena. (1) The method of concession allocation gives too much land to concessionaires. Certain concessionaires thus have low incentives to prevent encroachment by smallholders, or are unable to stop such encroachments. Thiele (1994: 187) says low concession fees induce concessionaires to acquire vast areas, "more for insurance purposes or speculation than for timber harvesting". He adds "this not only implies that public resources are lying idle but also that deforestation by shifting cultivators is encouraged, because concessionaires have little incentive to control encroachment if they have excess area". In addition, the timber royalty fees in Indonesia are based largely on the volume of extraction rather than on the area of concessions, thus abetting the tendency to have overly large concession areas. (2) Certain policies encourage rent-seeking behaviour and thus undermine incentives for long-term management. The rate of royalty payments to the government is low, meaning that concessionaires are able to capture a large share of the potential rents of concessions. According to Thiele (1994: 190) "high potential excess profits encourage 'rent seeking' activities in acquiring concessions and open the way for corruption so that the enforcement of concession agreements is endangered". Low royalty fees, in combination with 20-year limits on the concession period, lead to the problem of "premature re-entry", where concessionaires re-enter their site after the first cut and prior to the expiry date, thus damaging immature timber stands. [22] Ascher (1993: 2) suggests low rent capture encourages bad management not only because forest resources are under-valued, but also because concessionaires are in a hurry to extract timber for fear that the present favourable royalty rates might increase. In 1990 surveys found that up to 40% of the standing stock was damaged in logged concessions, thus greatly reducing their value and undermining incentives to protect them from encroachment and fire (World Bank 1990: xxi). Low royalty fees and high export taxes on logs and wood products from Indonesia depress their domestic price, thus limiting interest in replanting (World Bank 1995: ii, 8). [23] Ascher (1993: 4) says considerations other than quality of concession management enter into the concession renewal process, thus undermining incentives for good performance. (3) There is insufficient support for provincial-level protection of forests. Provincial-level governments receive a low share of royalty fees collected by the national government which, as explained above, are already quite low. The World Bank (1995: 19) explains that "governments in provinces with extensive forest cover may be encouraged to replace forest with other forms of land use more able to generate revenue at the provincial level, or at least provide more income opportunities to communities living near the forests whose income might otherwise become a burden on provincial resources". There is the additional problem that forestry personnel are disproportionately concentrated in Java, rather than in the outer islands, where there are far greater forest resources. [24] Commentators on the Indonesian forest situation make the case that concession management could be improved through the following policy reforms:
It is argued that these policy changes could encourage improved custodianship of production forests, as well as produce substantial revenues for government, a portion of which could be used to enhance enforcement of forest laws. If this is the case, then why are there not stronger interests within the government to ensure that these kinds of policy reforms are enacted? Ascher (1993), Dauvergne (1994), King (1996) and Ross (1996) argue that the answer to this question is essentially political. Ascher (1993) argues that the Government and the Ministry of Forestry view forests as an asset to be liquidated in order to diversify the economy; rent capture is kept low to facilitate this process. Dauvergne holds essentially the same view (1995: 503-507), that deforestation is fundamentally rooted in Indonesia's political structure and process, and government decision-makers "view forests as a valuable, yet expendable resource, useful for generating foreign exchange to finance industrialization". Ross (1996) says that in many developing countries, including Indonesia, forest concessions are allocated as a form of political patronage to influential people within the "governing coalition". He adds that "the timber industries of developing states are almost always in the hands of allies of the governing coalition; the government, in turn, is loathe to act against the industry's interests" (Ross 1996: 170). King (1996: 216) sees improved management of the forest sector as blocked by the patrimonial characteristics of the Government, and that significant reform will likely require a "regime change, a critical shortage in timber supply, or external threats to Indonesia's exports of forest products". While there may be an element of truth to these explanations, they do not satisfactorily answer why there are some concessionaires who are said to conform to forestry laws, do manage their sites well and do replant. Comparative research on concessionaires would be of great use in trying to better understand the role of logging and the timber industry in Indonesia's forest cover change. An additional area of useful research would be the forest management implications of multi-sectoral investments. What are the practical consequences of the fact that some of the larger concessionaires have investments not only in forestry, but also in other sectors of the economy? Is it possible that timber exploitation serves as a form of "seed capital" for other industries, thus undermining incentives for long-term conservation? Conversely, is it possible that forest sector investment is a crucial adjunct to extra-sectoral investments, thus requiring certain concessionaires to maintain forests on a sustainable basis? |