Illegal logging in Indonesia, as elsewhere, is a major and complex problem. Dealing with the many forms of illegal logging is in itself a major hurdle to preventing the problem, as substantial controversy surrounds what is and is not legal. This is especially difficult given inconsistencies in the law and conflicts between formal and customary law particularly in the context of decentralization.

THE FUTURE OF INDONESIA’S FOREST

* Illegal logging * Government policy * Actions to slow deforestation

JFCC PRESS CONFERENCE

Mandarin Hotel – Diponegoro Room, 4th floor
26 April, 2006

MEDIA BACKGROUNDER

Dr. Doris Capistrano – Director Forests & Governance
Center for International Forestry Research

WHAT IS ILLEGAL LOGGING?

Illegal logging in Indonesia, as elsewhere, is a major and complex problem. Dealing with the many forms of illegal logging is in itself a major hurdle to preventing the problem, as substantial controversy surrounds what is and is not legal. This is especially difficult given inconsistencies in the law and conflicts between formal and customary law particularly in the context of decentralization.

Illegal logging can refer to many activities. Some examples include logging without authorization, extracting more than authorized, logging trees that are too large or small, removing trees from prohibited areas like river banks and steep slopes, cutting down protected species and logging in protected areas.

While illegal logging has been implicated in unsustainable forest use, legal logging is not necessarily more sustainable. The villagers in a small forest community may illegally harvest timber for housing or for sale as fuelwood on the side of the road. The resulting environmental, economic and social impacts are often far less serious than the damage inflicted by large timber companies legally felling timber in the ‘virgin’ forests of Papua or Borneo.

Often, the high costs associated with securing the necessary permits, as well as burdensome bureaucratic requirements, make it difficult or impractical to follow the law, especially for small-scale loggers with limited resources. Also, what is legal is not always fair. Without reforms in the legal and policy framework, more vigorous forest law enforcement alone may adversely affect forest sustainability and the livelihoods of forest-dependent communities.

Without doubt, illegal logging is one of the most significant social, economic and environmental issues facing Indonesia and the world. To its credit, the Indonesian Ministry of Forestry (MoF) is working hard to address the problem. But even the Ministry acknowledges it cannot solve the problem alone and is calling for a global approach and greater responsibility from timber importing countries.

ESTIMATE OF AMOUNT OF ILLEGAL LOGGING

In technical terms, the amount of illegally logged timber is the difference between the amount of legally sanctioned harvests and the amount actually harvested. Previously this calculation was carried out fairly accurately using Ministry of Forestry information. Inaccuracies and gaps in reported data make it difficult to calculate illegal logging with certainty.

Recent estimates of illegally harvested timber range from 50 to 80 million cubic meters annually:

• Greenpeace: In 2003, 79 million m3 of Indonesia’s 90 million m3 of timber needs came from illegal sources. (Quoted by MoF in: “Pemberantasan Illegal Logging di Indonesia” 2005)
• DfID: In 1999, 57 million m3 of Indonesia’s 78 million m3 of timber needs came from illegal sources. (Quoted by MoF in: “Pemberantasan Illegal Logging di Indonesia” 2005)
• CIFOR: In 2001, domestic wood industries consumed at least 59 million m3 of timber, but the supply that Dephut considered legal was only 10 million m3, suggesting 49 million m3 came from illegal logging. (CIFOR report commissioned by the World Bank in 2004)

THE AMOUNT OF DEFORESTATION CAUSED BY ILLEGAL LOGGING

International NGO, the ‘Environmental Investigation Agency’ claims the current annual deforestation rate (legal and illegal) in Indonesia is around 4 million hectares – an area the size of Switzerland. CIFOR uses the Ministry of Forestry figure of 2.83 million hectares per year. This almost equals Belgium’s 3 million hectares and amounts to over 10 soccer pitches disappearing every minute.

Estimating illegal logging’s contribution to deforestation is difficult. However, CIFOR research suggests the illegal harvest of 49 million m3 in 2001 affected up to 2.5 million hectares of forest (assuming a harvest rate of 20 cubic metres per hectare).

MAIN MODES OF ILLEGAL LOGGING

Licensed logging operations (HPH, IUPHHK, IPK): Licensed operators often log outside their allocated areas, under report their production levels, tamper with log transport records, and evade taxes.

Unlicensed logging operations: Small logging teams bring timber to sawmills or towns for direct consumption. Police, military and officials ignore the activities in return for financial payments.

Plantation development: Companies often clear land beyond their concession area. Once they clear the lands they often vanish, breaking their contract to establish a plantation and evading taxes. According to Kompas newspaper, fictitious oil palm schemes caused state losses of $400 million in 2004.
Mining: Mining companies often clear land beyond their licensed areas and evade taxes.

MAIN CAUSES OF ILLEGAL LOGGING

Over-capacity in the pulp, paper and plywood industries: Their demand for raw materials is more than what is legally available or environmentally sustainable.

Disparity in domestic & international prices: Lower domestic prices encourage licensed operators to maintain and or expand their capacity and encourage smuggling to countries where prices are higher.

Weak controls and an ineffective legal system: Both licensed and unlicensed operators can evade forestry control and legal consequences by paying bribes.

Forestry provides opportunities for corruption: : Illegal forest activities generate large sums of money. The promise of quick riches from bribes or windfall corporate profits outweighs the fear of prosecution.

ECONOMIC IMPLICATIONS OF ILLEGAL LOGGING

Lost tax revenue: CIFOR research suggests East Kalimantan loses $US100 million annually in lost tax revenue due to illegal logging. Forestry Minister Kaban was reported by the Jakarta Post in December 2005 saying the figure for all of Indonesia is $4 billion per year.

Employment: In recent years, employment in the formal forestry sector has declined and is likely to decline further as timber resources continue to be depleted. While employment in pulp and paper production has increased slightly, this gain has most probably been more than offset by the closure of more labor intensive plywood mills. The current figure is approximately 1-1.5 million jobs. (CIFOR report commissioned by the World Bank in 2004)

Employment figures for the illegal logging sector are difficult to quantify. But using a number of survey instruments CIFOR estimates illegal logging activity employs between 200,000 and 500,000 people on a year-equivalent basis. (CIFOR report commissioned by the World Bank in 2004)

In specific areas, employment from illegal logging can be significantly more than legal logging. In Berau, for example, in 2003, unlicensed forestry operations generated 4000 jobs while licensed operations created 2000 jobs during the same period (Obidzinski et al, 2006)

MEASURES TO HELP REDUCE ILLEGAL LOGGING
LAW ENFORCEMENT PRIORITIES

• Improved and consistent law enforcement.
• Greater focus on preventing logging in protected areas.
• Place more emphasis on catching the “big crooks”, not the small players
• Greater use of anti-money laundering and financial regulations to fight illegal logging.

CORPORATE GOVERNANCE

• Ensure that banks financing forest-related investment implement due diligence and adequate social and environmental assessment
• Require all forest-based companies to publish audited financial and forest management reports.
• Publish monthly data of the timber/wood-based production, wood-based exports, and domestic sales of each of the members of the Forest Industry Revitalization Agency (BRIK).

CLARITY OF LAWS, RESPONSIBILITIES

• Develop a clear, simple definition of “illegal logging” that is accepted nationwide and at all levels of government.
• Clarify the roles of government agencies at the central, provincial, and district levels.
• Promote cross-government approaches where relevant departments jointly publish data on forest resources, forest industries, forest production, and markets. Have the figures independently audited.
• Establish a clear and equitable tenure system that encourages sustainable forest use and that takes into local livelihood needs.

MARKET AND INDUSTRY

• Reduce the overcapacity in the timber industry or pulp and paper.
• Increase the coverage of plantations – this should be done on degraded lands, not on lands that have large natural forests.
• Adjust the Ministry of Forestry’s annual logging quota to more realistic level.
• Establish certification requirements for all timber companies.
• Continue to pursue solutions to address demand for illegal wood (eg through bilateral Indonesia-US agreement to combat illegal logging, and regional arrangements like the Asia Forest Partnership).

ISSUES

Illegal logging is a huge problem in Indonesia with broad economic and social implications. Dealing with illegal logging requires attention and sensitivity to a range of key issues. These include:

Land tenure is a sensitive and difficult issue for governments around the world. Land tenure security for rural communities in forested areas will help reduce conflicts. It also encourages people to manage forests sustainably for the future and reduce illegal logging.

Incentives for sustainable forest management under decentralization: The sharing of forest-related costs and revenues between central and local governments needs to be rationalized in order to create incentives for sustainable forest use and reinvestment in the forestry sector.

Infrastructure development and road building: Building roads has a significant trade-off. Research in Kalimantan and Sumatra shows that opening forest areas with roads is the surest and fastest way to expose those areas to illegal logging.

Law enforcement: Vigorous law enforcement tends to especially hurt poor people and communities that rely on forests for their livelihoods while large scale operators and powerful actors tend to get away. If the government cracks down on illegal logging, some members of local communities are likely to lose an important source of income.

Conflict: Illegal logging can cause social tension between or within communities, or incite hostility between communities and outsiders, and lead to violence that may escalate into partisan conflict.

Further information:
Greg Clough – CIFOR
Telp. 08128646613
(0251) 622622