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Indonesian Forestry: A Regional Context

Indonesian forest products exports came of age in the early 1980s and are showing the growing pains of a sector set on a rapid course of improvement in terms of foreign exchange earnings and of employment through value-added processing. Second only to oil-based exports in 1989, forest product exports bring annually between US$3 and 3.5 billion of gross foreign exchange earnings - slightly more than 50% of the US$6 billion of positive balance of visible trade for the nation.

A common perception is that appropriate policies and strategies have succeeded in giving Indonesia rapid development of very positive international trade trends and the achievement by Indonesia of its rightful position as a world leader in trade of tropical forest products.

The phenomenal development in economic and trade growth in the East Asia Region (including China) and South East Asia has given positive impetus to Indonesia's foreign trade. Additionally, the Republic of Korea, Taiwan Province of China, China's Hong Kong SAR, and Singapore and other ASEAN member countries have until recently shown quite high economic growth. The position of Indonesia in the regional econo-political constellation in Asia has benefited from the performance of these economies; however, Indonesia faces the challenge of cost-competitive labour from the developing countries in this region. The development challenge is likely to be harder in the future considering that, like Indonesia, some other ASEAN countries are now suffering from the recent economic and monetary crisis.

ASEAN Free Trade Area (AFTA) has wide implications for the national economy and economic relations among ASEAN member countries, some of which export similar forest products to Indonesia; this must be anticipated and considered in determining the policy of national economic development including in forestry. AFTA would then be used to strengthen solidarity and enhance the spirit of ASEAN to increase the bargaining power of its member countries towards the future free market under the General Agreement on Tariffs and Trade (GATT) and successor arrangements under the World Trade Organization.

One of the problems of GATT which will put South countries under pressure is the issue of trade related aspects of intellectual property rights (TRIP). TRIP is perceived to be mainly meant as an effective mechanism to slow down technology transfer. The implementation of GATT will open the market access of forest products industries in the international market. In the open market system, only, high quality products will (easily) sell and these can be produced only by countries with qualified human resources. Given the recent economic crisis situation in some Asian countries, such as the Republic of Korea, Thailand, Malaysia, Singapore and also Indonesia, competition to attract foreign investors will get tighter. Indonesian forestry industry therefore has difficulties to specify precisely its orientation to the future, since almost all economic sectors in the country are now still looking for the easiest solution for relieving the effects of the crisis through economic and political reform.

In addition to being mainly a wood source, it has been realised that Indonesian forests have a number of multiple functions, including: (a) as a storage of germ plasm of great diversity, a storage (in the form of wood) for carbon, and producer of non-wood products; (b) as protector of the life-supporting ecology, through the hydrological, carbon/oxygen, and nutrient cycles; (c) maintaining the existence of biodiversity and the ecosystem; and (d) as a resource for research, education and nature appreciation through tourism and recreation services.

The functions and uses of forest will be continuously enjoyed if the management pays due respect to principles of sustainability. The mission of forestry development in Indonesia is to carry out management of forest resource for the needs of present and future generations, through wise utilisation with due respect to the multiple functions of the forest. Ecotourism is one of the major forms of sustainable utilisation of the forest being continuously developed in Indonesia. It will be developed more in both Nature Recreation Parks and Hunting Parks. There are 34 established National Parks ready for developing ecotourism areas; ecotourism will also be developed in production and protection forests. Ecotourism is likely to be another major avenue of forest utilisation in the near future.

In supporting conservation objectives, Indonesia is also involved and actively participates in the implementation of the Convention on International Trade in Endangered Species (CITES) and Ramsar Convention protecting wetlands. Indonesia ratified the Convention on Biological Diversity (CBD) and also hosted the third Conference of the Parties of the convention. Besides, Indonesia has also been intensifying the maintenance of its allocated 49.5 million hectares totally protected area (TPA) in order to conserve its wildlife ecosystem richness. It consists of protection forests and conservation areas to include national parks, nature reserves, game reserves, hunting parks, and grand forest parks. In line with the spirit of UNCED, Indonesia has also made serious efforts to implement continuously the integrated conservation and development programme approach in the management of national parks.


The forest fires which repeatedly occurred between August - November 1997 have been a major environmental issue to Indonesia because of their global impacts. It has been reported that the disturbance of smoke and haze from the fires spread widely over some neighbouring countries mainly Singapore and Malaysia. In this period the fires burned thousands of hectares of forest and plantation land in the two major islands of the country, Sumatera and Kalimantan. Some valuable help came from Malaysia to fight the fires ass rapidly as possible. All the efforts and the changes of weather have allowed significant progress in gradually terminating the fires. Again, forest concessionaires and tree crop plantation have been considered to be major contributors. They have been a key factor increasing the possibility of the fires to occurs. One of the implications is that the fires set back the implementation of forest management according to SFM requirements. Facing the issue, the government implement some practical efforts to cope the fires and reduce the impact.

In the first week of February 1998 new forest fires started and burned some 6,200 Ha of East Kalimantan forest land. The most recent information indicates that in order to overcome the fires in Indonesia, the government through the Agency for Technological Investigation and Application (BPPT) is seeking international co-operation. Together with Canadian International Development Agency (CIDA) Indonesia is going to design an integrated forest fires protection system and will carry out mapping to classify forest areas having potential for serious forest fires. Meanwhile, with Malaysia, Singapore, and Brunei Darussalam, Indonesia is going to establish a forest fire information system. The first cooperation will be implemented over two years beginning this year (1998).5

5 Kompas Daily, February 18, 1998.

In addition, the GOI also maintains a National Team for Forest Fire Control. To anticipate the occurrence of forest fire during the dry season, every year, the GOI launched a Forest Fire Awareness Campaign led by several cabinet ministers related to forestry. There was no major forest fire occurrence during the 1995, but serious forest fires occurred in 1997 partly because of long-dry season and El-Nino effects. Forest concessionaires and tree crop plantations, however, have been considered to be major contributors to the starting of fires.

Population pressure on forest areas is still an issue; pressure is expected to be more serious over time. The government, however, is continuously intensifying many social-related forestry programme such as forest village development scheme (PMDH), community-based forest management, and people's participation in forest management. In 1995, forest disturbance considered to be caused by the pressure of people is shown in Table 2.

Table 2 - Forest Disturbances in 1995


Type of Forest Disturbances

Area (Ha)


Forest land encroachment (stealing)



Illegal occupancy



Overlapping forest utilisation



Illegal cutting



Forest fires




Source: 1995 Forestry Statistics of Indonesia. Secretariate General of Ministry of Forestry (recalculated)

The village development scheme (PMDH) is a kind of legal arrangement for the involvement of local communities in forest management. The scheme involves forest concessionaire, the dwellers and/or local communities, local government, and the Ministry of Forestry (MoF) itself. Under this scheme, forest concessionaires have obligation to care for the local communities through creation of activities designed and determined by them by fully involving local communities participation and responding to its aspirations. Besides, the PMDH programme together with other similar activities like social forestry were also designed to alleviate property (tenure) problems. It is reported that as of July 1996 there are 475 units of prospective PMDH implemented, covering 689 villages around the country and involving no less than 62,723 households of villagers (MoF, 1996).

The recent monetary and economic crisis is another major issue being faced by Indonesia. The crisis has had negative impacts on the confidence of people in the Indonesia currency (Rupiah), market structure, and even in the political stability. The exchange rate of the US dollar to the Rupiah has recently been considered to reflect irrational behaviour of local and international speculators; to cope with the crisis, Indonesia has signed a 50-points Indonesia - IMF memorandum called "Letter of Intent" indicating the necessary liberalisation and structural reform steps to be taken by Indonesia in financial, economic as well as political spheres.

The conditions requested by the IMF cover various economic and monetary aspects containing an economic recovery package programme, namely: (a) the recovery of the financial sector, (b) fiscal policies, (c) monetary policies including policies related to currency exchange rates, and (d) structural adjustment.

Structural adjustment is basically aimed at increasing the national efficiency and the competitiveness of the Indonesian economy. It partly covers: (a) gradual reduction of import duty tariffs, (b) gradual reduction of exports barriers including export tax, (c) review of investment and expenditure in the public sector including government expenditure for state-owned companies and strategic companies. Privatisation will continue, including the privatisation of government banks after mergers have been completed.

There are at least eight articles of the IMF memorandum directly related to the forestry sector, namely articles 10, 12, 36, 37, 38, 40, 42, and 50. All these articles basically call for so-called forestry reform including liberalisation in forest industry and trade. The articles are mainly aimed at increasing the national forest industry efficiency and its competitiveness in the future international market. The articles also underline the importance of intensifying the implementation of the principles of sustainability forest management. In short, the eight articles substantively require three key points, namely:

· create consistency and transparency specifically in decision-making processes regarding utilisation of forests as a public goods,

· open competitive market mechanism6, and

6It is understood that among key liberalisation measures will be freedom to export logs (Editor).

· strengthen property rights in forest utilisation to make it more clearly defined. The most important thing to Indonesia now is then how all these point can completely be taken into account in formulating policies regarding production forest utilisation and future export market mechanisms, especially for plywood industries.

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