Logging Jeopardizes Indonesian Aid

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WORLDWIDE FOREST/BIODIVERSITY CAMPAIGN NEWS

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Forest Networking a Project of Forests.org

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2/4/00

OVERVIEW & COMMENTARY

The deteriorating situation in Indonesia's forests, where both legal

and illegal unsustainable logging is in full boom period, appears to

have finally caught up with the government. New data from European

donors show that "wood-processing industries now rely on illegal

logging for more than half of their raw materials, as the forest of

120 million hectares shrinks 1.5 million hectares a year." The

International donor community is increasingly voicing concerns over

this liquidation of Indonesia's precious rainforests, and there

appears to be unprecedented consensus that the second-largest expanse

of tropical forest must be preserved--and that this is important

enough to be linked to economic consultations. Forest sustainability

will require real protection for National Parks which are being

illegally logged in some cases, and clamping down on illegal logging

and sawmilling in general. The excesses of the "legal" timber

industry that is too large, and practices overly intensive management

of forest concessions, must also be addressed. Over-capacity in the

forest industries sector will require canceling existing non-compliant

concessions. If the Indonesian government does not strengthen its

commitment to forest sustainability, they may be unable to get over $4

billion in desperately needed new loans. In my opinion this is

justified, and the donor community is correct on insisting that

economic aid hinge upon forest sustainability. If the forests are

lost--as current trends indicate will occur in important lowland

forests by 2010--any short-term economic gains based upon donor aid

will be far outweighed by immediate declines in both environmental

quality, and the potential for sustainable economic activity based

upon forest resources. This situation has garnered a lot of press,

the two best of which are attached here.

g.b.

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ITEM #1

Title: Indonesia Faces Forest Dilemma

Donors Seek Curbs on Logging, but Powerful Interests Are

Involved

Source: International Herald Tribune

Date: February 1, 2000

Byline: Michael Richardson International Herald Tribune

JAKARTA - When representatives of Indonesia's principal aid and

financial donors meet here Tuesday and Wednesday, they will not be

simply seeking evidence of progress in returning the country's

administration, finances, banks and companies to health.

For the first time, the 33 members of the Consultative Group on

Indonesia will seek firm assurances that the government will take

action to stem an alarming increase in the rate at which the country's

tropical forests - second in size only to those of Brazil - are

disappearing, mainly because of illegal logging.

The issue appears to be of critical importance to the group, which is

composed of representatives of donor countries and international

financial institutions that provide Indonesia with billions of dollars

a year in loans to help the nation recover from recession.

''I've never seen the donors, especially those from Europe, steamed up

on an issue like this,'' a senior World Bank official said.

Saying that if there is no commitment from the government on forest

reform, it will be difficult to continue aid programs for the

Indonesian forests. But if there is a real commitment, they would be

willing to provide more.''

At the heart of the forest destruction in recent years, officials and

environmentalists say, is the expansion of the forest products

industry, which previous governments encouraged as a way to increase

exports and provide jobs in the world's fourth most populous nation.

''The wood-processing industry has been allowed to expand without

reference to the available supply of timber, resulting in vast

overcapacity,'' said Muljadi, a senior official in the Ministry of

Forestry and Estate Crops. ''The shortfall in the official timber

supply is being met largely by illegal logging, which has reached

epidemic proportions.''

Fires in 1997 and 1998 burned nearly 10 million hectares (24.7 million

acres) of Indonesian forest, an area similar in size to Hungary or

South Korea.

The fires, coupled with the rapid conversion of forest to plantations

and agriculture, have hastened the permanent disappearance of

Indonesia's natural forest to the point where some analysts are

warning that there may soon be no commercially significant lowland

forests left to exploit in Indonesia.

In 1994, when Suharto was president, the government said Indonesia had

140 million hectares of land under forest, with 49 million hectares in

protected status and 63 million hectares managed for sustainable

production of timber.

But recent forestry ministry studies using satellite photographs show

that on Kalimantan, Sulawesi and Sumatra - three of the largest

forested islands of Indonesia - more than 17 million hectares of

forests disappeared in 12 years, from 1986 to 1997. The ministry now

estimates that the nationwide annual deforestation rate is at least

1.5 million hectares, nearly twice the estimate published by the World

Bank in 1994.

A World Bank analysis shows that lowland dry forest, the most valuable

type for logging and biodiversity conservation, is disappearing

fastest, said Thomas Walton, senior environmental specialist in the

bank's Jakarta office.

''Such forest is essentially defunct as a viable resource in

Sulawesi,'' Mr. Walton said. ''It is likely to be gone in Sumatra by

2005 and in Kalimantan by 2010.''

This is serious news for a country that last year earned about $8

billion from exports of forest products, including logs, sawn timber,

plywood, pulp and paper.

A 1999 report by the Indonesia-U.K. Tropical Forest Management

Program, a British-funded aid project, warned that unless action was

taken immediately, the Indonesian natural forest would ''disappear

forever, taking with it the myriad benefits that it provides to the

Indonesian people and the Indonesian economy.''

Mr. Walton said illegal logging had become rampant, even in national

parks, and was now taking place on a scale that exceeded the volume of

legal logging.

''Authorities look the other way,'' he added, ''while the government

loses tax revenue at the rate of roughly $500 million each year.''

Mr. Muljadi, the ministry official, said that according to the most

recent estimates available, legal log production in 1998 was just over

21 million cubic meters (27.3 million cubic yards), down from 30

million cubic meters in 1997, while illegal logging jumped to 57

million cubic meters to account for 70 percent of total wood

consumption for the year.

Agus Purnomo, executive director of the Indonesian branch of the World

Wide Fund for Nature, said that the problem of overcapacity was

especially troublesome in the pulp and paper industry, which invested

$8 billion in the past 13 years to expand output.

''While Indonesia's largest producers are now working to establish

pulpwood plantations,'' he said, ''it is extremely doubtful that the

limited areas being planted will yield the volumes of wood needed to

satisfy the industry's growing processing capacity at any point during

the next decade. Ultimately, overcapacity will require a substantial

downsizing of the country's wood-based industries.''

Poverty, greed, the breakdown in law and order across Indonesia over

the past few years and the loss of central government power in the

regions, are fueling the increase in illegal cutting of forests.

Under Mr. Suharto, who ruled Indonesia with military backing for 32

years until forced to resign in 1998, huge tracts of state-owned

forest were given as production concessions to members of his family,

business associates and those with the right political connections,

including senior military officers.

''For too many years, our forests have been managed for the benefit of

the well-connected few,'' said Kwik Kian Gie, the coordinating

minister of the economy, finance and industry. ''They must now be

managed to serve the nation at large, including those individuals who

depend directly on the forests for their livelihood.''

But analysts say the government of President Abdurrahman Wahid, the

first to be democratically elected in Indonesia in more than 40 years,

will have to make and enforce some very painful decisions if it is to

achieve sustainable and equitable management of the country's forests.

But some powerful interests are involved. Logging, both legal and

illegal, has created timber barons who buy protection from government

and military officials.

''Illegal logging is not simply about destruction of the forests,''

said A. Ruwindrijarto, director of Telapak Indonesia, an environmental

group. ''It's also about the system of corruption and wealth it

creates.''

ITEM #2

Title: Indonesia -- Wood Cuts:

Illegal logging could stem the flow of aid to Indonesia

Source: Far Eastern Economic Review

Date: January 27, 2000

Byline: Margot Cohen in Jakarta and Pecu Lembang, Aceh

On a dirt road in southern Aceh, fresh tyre tracks mark a thriving

trade that threatens foreign aid to Indonesia. Rumbling back and forth

to a desolate clearing, a convoy of trucks hauls timber stolen from

the Gunung Leuser National Park -- a once-pristine tropical forest

where the European Union has spent 8 million euros ($8.2 million) in

an unsuccessful attempt to halt the illegal logging.

At the clearing, no one seems too concerned. But Indonesia's donors

are fed up with watching the nation's precious forests dwindle. The

donors are consumed by the urgency of preserving the planet's second-

largest expanse of tropical forest, which for Indonesia is a prime

source of foreign exchange. They persuaded the Indonesian government

to host an unprecedented crisis meeting on January 26, drawing

together ministers, activists and industry representatives to discuss

the devastation of Indonesia's rainforests, which has worsened sharply

since the fall of former President Suharto in 1998.

New data from European donors show the country's wood-processing

industries now rely on illegal logging for more than half of their raw

materials, as the forest of 120 million hectares shrinks 1.5 million

hectares a year.

Will the crisis meeting produce fresh strategies for the future? If

not, it might be difficult for Indonesia to obtain the $4 billion to

$4.5 billion in new loans its economy urgently needs. The donors'

consortium issued its first warning at a Paris meeting in July,

slamming Indonesia for failing to take prompt action to halt illegal

logging. Jakarta also must heed domestic demands to reverse the dismal

environmental legacy that resulted from the political corruption of

the past three decades.

Under former President Suharto, timber resources were concentrated in

the hands of a few cronies, and managed by a graft-ridden bureaucracy

that allowed the military to dive into illegal logging. Some donors,

environmental activists and business leaders say only substantial

reforms will ensure the viability of the industry and salvage the new

government's credibility.

But if Indonesians and foreign-aid officials are hoping that the new

minister of forestry and estate crops, Nur Mahmudi Isma'il, will

chart a bold new direction, they might be disappointed. So far, Nur

hasn't tried to extricate the military from the illegal logging

business. Nor does he hide his view that foreign-aid officials are

overdramatizing the forestry crisis.

"I think it's a little over the top," he says in an interview with the

REVIEW. "We need to make an effort to preserve our natural resources,

but we shouldn't make any hasty decisions. We don't need drastic

change in our policy orientation."

The caution extends to his approach to the proliferation of thousands

of illegal sawmills, which consume far more than the legal timber

supply. Rather than shut them down promptly, Nur says, "we need to

warn them that what they are doing is illegal. If we remind them once,

then twice, and they still insist on operating, only then should we

take action against them."

Nur continues to learn on the job, which isn't unusual in Abdurrahman

Wahid's National Unity cabinet. Power-sharing pressures forced the new

president to appoint more politicians than skilled technocrats. Nur,

for instance, was propelled by his position as president of the small,

Muslim-oriented Justice Party, and can point only to an academic

background in food science.

Still, change doesn't depend entirely on Nur. Incipient reform

efforts will corral all the related ministries to tackle the forestry

problem together. The military is an integral part of the problem, so

the late January brainstorming was to include Defence Minister Juwono

Sudarsono.

Another key issue is regional autonomy. Far-reaching decentralization

planned for 2001 runs the risk of even more rapid depletion of the

forests. They could disappear chunk by chunk if governors and district

chiefs take advantage of new regulations allowing them to issue

permits for logging concessions of as much as 10,000 hectares. Local

moves to convert forestlands to oil-palm plantations and other crops

also are causing alarm. The International Monetary Fund is insisting

that conversion permits be subject to public scrutiny.

The government is maintaining a moratorium on converting any more

forestlands, but Nur says his ministry can't always control insistent

local officials. He expects the moratorium to last another year, while

his ministry completes a remapping of the forest that could alter the

boundaries of logging areas and protected areas.

The fevered pace of forest destruction dismays Indonesian planners,

but they don't want to turn their backs on business. Wood-processing

industries remain a vital component of the local economy and critical

to debt repayment. Indonesia is the world's largest plywood producer,

and the plywood industry serves as the country's second-largest earner

of non-oil-and-gas foreign exchange, after the textile industry. Last

year, foreign-exchange earnings derived from wood products were

estimated at $8.5 billion.

Moreover, wood-processing industries provide a crucial source of

employment, with nearly 5 million workers. And Indonesia is still

trying to become a major world supplier of pulp and paper, though the

Asian economic crisis curbed expansion somewhat. Official figures

cite six pulp-and-paper plants, 107 plywood factories and 1,701

sawmills.

The industry's voracious appetite for new wood far exceeds the legal

cut, which hovers at 25 million cubic metres, a level considered

environmentally sustainable. Illegal logging fills the gap. According

to European donors, illegally harvested wood has reached more than 30

million cubic metres a year.

It's hard to say who should be blamed. The wood-processing industries

developed helter-skelter without proper coordination among ministries,

say analysts. They add that Indonesia failed to collect adequate taxes

and royalties from timber tycoons in the Suharto years. University of

Washington researcher David Brown estimates the government missed out

on $14.3 billion from 1973 to 1998.

Further, the government extended millions of dollars in interest-free

loans to wood-processing companies and pulp-and-paper mills to

establish industrial-forest plantations. That programme proved to be a

failure. Just 1.9 million hectares were planted out of more than 7.6

million hectares allocated for such efforts.

Meanwhile, forestry officials accuse trade officials and provincial

governments of handing out too many industry permits. For their part,

trade officials blame forestry officials for arbitrarily changing

limits on legal cutting, and refusing to share vital forestry

statistics that would have aided planning.

Still, some industry figures are starting to argue that closing some

mills will be crucial to ensuring long-term wood supplies. "The

government must find some means of rationalizing the industry," says

Soetono Pratomo, director of Timberdana, which manages a forest

concession in East Kalimantan. "There should be sacrifice."

Trade officials remain resolutely opposed. "We have already issued the

licences. We can't suddenly withdraw them. Investors would get

scared," argues Hariyanto Ekowaluyo, director-general of forest

products at the Trade Ministry.

As for the illegal sawmills that don't have licences, or cling to

licences wrongly issued, Hariyanto is equally pessimistic. He says the

government has no data on the location and the number of illegal

sawmills, and adds that conducting a wide-ranging survey would be far

too costly.

But the most potent argument advanced by both Hariyanto and like-

minded officials is the social cost of getting rid of such mills.

"That would create unemployment and trigger provincial instability,"

Hariyanto says.

There is no denying that many villagers are increasingly dependent on

illegal logging to survive. "If the government wants to forbid the

cutting and succeeds in creating new jobs, that's good. But if not,

I'm going to keep on cutting," says a 32-year-old chainsaw operator at

Gunung Leuser National Park.

Nonetheless, other alternatives are available that would keep the

timber factories running and still preserve the forest. Some experts

say small farmers should be allowed to plant more trees and market

them to industry. "They could certainly diversify the source of

supply, if they have the option to manage their own systems," says Jim

Tarrant, team leader of the U.S.-funded Natural Resources Management

Programme in Jakarta.

Such efforts will require both creativity and flexibility on the part

of the public and private sectors. So will attempts to encourage local

communities to guard against illegal logging. Clearly, the police and

forest rangers aren't up to the job of keeping 120 million hectares of

forest safe from intruders, and Indonesia's legal system offers few

deterrents. Just ask the managers of the Gunung Leuser National Park,

where 76 people are responsible for guarding an area spanning 795,000

hectares. In Aceh, the European Union funded 17 government raids

against illegal loggers; despite ample evidence, not a single case was

prosecuted.

If Indonesia continues to rely on the law of the jungle, there won't

be any jungle left.

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