Overview of Forestry in Indonesia

In Indonesia under the New Order government, the central government had given privileges to the private sector to exploit the forest in the name of economic development (Samego, 1992; Barber, 1997; Ross, 2001; etc.). Forests have contributed significantly to the national economy, especially through the export of timber. The New Order government had installed many policies dealing with the exploitation of forest products. In 1967, for instance, the government implemented the 'Basic Forestry Law' Act to bolster economic growth at a time both of economic crisis and of transition from the Old Order to the New Order. The government had attempted to attract foreign investors and promoted timber exports by endorsing specific strategies: First, implementation of a new foreign investment law that proposed tax holidays, free repatriation of profits, and a guarantee of compensation and instalment of a second investment law to give similar benefits to domestic firms; Second, assertive recruitment of foreign investors in the timber sector; Third, making forest royalties and taxes low enough to strengthen logging firms in Indonesia in order for them to be able to compete with neighbouring countries (Ross, 2001:166- 7).

In the 1970s foreign investors, particularly from Japan, Republic of Korea, the Philippines and Malaysia were attracted to the forestry sector. The majority of all approved investment in this sector (58 per cent) at the end of 1973 was from abroad (Ross, 2001). Ross further notes that the above policies were aimed at enticing foreign investors. Yet, after 1970 the New Order officials started to participate in lease seizing, partly by 'dismantling the customary rights of forest dwellers' (Ross, ibid: 171).

Under the original terms of the Basic Forestry Law, there was a division of responsibility among several institutions, including the forestry department, provincial governors, district heads (Bupati) and sub district heads (Camat), that could grant concessions of certain sizes (Ross, ibid:173). By having such distribution of power, the provincial and local officials received part of the forest income. The majority of the small scale enterprises in the forestry sector used 'a traditional, non-mechanized logging technique called banjir kap ("cutting during the flood")' (Ross, ibid:174). Banjir kap did not last long because the New Order government put in place Government Regulation No.20/1970 which allowed only a minimum concession size of 50,000 hectares and set that all logging be mechanized. This took the edge off the power of provincial authorities to issue timber concessions and put aside the banjir kap operators. Local people who benefited from the banjir kap suffered under this new regulation. This circumstance was explained as being for the sake of economic development.

Indonesia has benefited from booming timber exports particularly between 1950 and 1995 (Ross, ibid). Indonesia has around 112.3 million hectares of state forests, consisting of protected forest (29.3 million hectares), reserve forest (19 million hectares), and production forest (64 million hectares) (Kartodihardjo, 1999:1). However, the potential and volume of forests has decreased markedly. Since the implementation of the Logging Concession (HPH) of 1967, forestry has significantly contributed to the national economy. During the last ten years, the timber industry has constituted around 20 per cent of the foreign exchange (Kartodihardjo, 1999:1).

The private sector was invited to play a significant role in forest management because the state itself faced a lack of capital. The New Order government, backed by the army, encouraged the private sector to play a part in the utilization of the natural resources (Samego, 1992). Besides private domestic players, many foreign investors from Malaysia, the Philippines, Republic of Korea and the United States have participated in the forestry business. The introduction of the ideology of economic nationalism led to a prioritizing of domestic companies. Samego (1992) argues that the bureaucrats provided favourable conditions for big business and to those who were close to figures of political authority. Foreign investors also sought backing. Evidence of this are the joint ventures between well connected businessmen, backed by the Indonesian Army Reserve Command and foreign investors. Barber et al. (1994) note that by the late 1960s a large number of logging concessions (HPH) were closely connected with military organisations, including the regional military commands in Kalimantan. Supporting the companies that depend on subcontracting agreements or joint ventures with foreign or Chinese companies had become the means for the military to run their concessions (Ross, 2001). Ross further reports that being involved in joint ventures was profitable because the commercial partner was to provide almost all of the capital, to handle the concession and to sell the timber, while the military partner made available the licence and a small part of the capital.

In the late 1970s and early 1980s, most military companies were out of the industry and Chinese businessmen replaced them. During this time, the radical changes also included the establishment of sawn timber and plywood industries and the phasing out of the export of unprocessed logs (Ross, ibid).

The liberalisation of the economy in 1986 and 1988 brought about wider opportunities for favoured groups in society, especially 'members of the Suharto family and Suharto's Chinese cronies', to expand their businesses (Robertson-Snape, 1999:595). In terms of forestry related businesses, Bob Hasan was one of Suharto's Chinese cronies, who had the ability to set up timber exports and determine export levels through the Wood Panel Association (ibid:596). The conglomerates controlled the forestry sector (Barber et al. 1994). Barber et al. note that these conglomerates were silent partners or in ventures with the powerful civilian or military political figures. Perhaps, the roles of military officers or organisations in forestry have not been the same as in the timber boom period, but they still exist. According to McBeth (2002) the army's largest holding company has its finger in many enterprises, including timber and plantations. McBeth (ibid:21) notes that the army foundation has about 22 joint venture companies that are engaged in timber, plantation, and other businesses.

Whilst the military officers or organisations and big businesses were given the privilege to exploit the forest resources especially during the New Order period, the indigenous people, the forest villagers and the local people were pushed aside from their home environments.

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1. Fowzia
   (posted 20 May 2007 / 12:12:10 PM)
   
   This site gives a lot of good information on the indigenous poeple.