Indonesia: Transparency in the Forestry sector

Fred Stolle

World Resources Institute Forest Team

Overview

• Indonesia's Forests

• New Incentives for Good Forest Governance and Transparency

• Forest Governance in Indonesia

• Steps towards better Forest Governance and Transparency

Overview

• Indonesia’s forests

• Forest Governance in Indonesia

• Steps towards better Forest Governance and transparency

• New Incentives for Good Forest Governance and Transparency

The Indonesian situationIndonesia Area: 200 million ha

(compared to USA 900 million ha)

Population: 210 Million

(compared to USA 300 million)

Forest land: approx 200 M ha

Forest Cover: approx 100 M ha

Deforestation rate 1 - 2 million ha /yr

4

2005 Export values in US$Paper and Paperboard + 2.09 billionWood-Based Panels + 1.47 billion

Plywood 1.37 billionFibreboard + 0.06 billion

Sawnwood + 0.64 billionIndustrial Roundwood + 0.16 billionForest Products + 5.37 biliion

Revenue collected from forest concessions around 200 million US$

Global forest cover

Source FAO-FRA 2005

Southeast /Asia Forest Cover Change

Source FAO-FRA 2005

1980-1990

1990-now

Status of Indonesia’s Forests1980-1990

The total volume of roundwood exports reported by the Indonesia Ministry of Forestry in 2000 was only 10,700 m3

However, reported imports by trade partners was 1,445,400 m3

The total volume of roundwood exports reported by the Indonesia Ministry of Forestry in 2000 was only 10,700 m3

However, reported imports by trade partners was 1,445,400 m3

Annual Conversion of Forest in Indonesia

0

200,000

400,000

600,000

800,000

2001 to2002

2002 to2003

2003 to2004

2004 to2005

2005 to2006

Hec

tare

ss

Overview

• Indonesia’s forests

• Forest Governance in Indonesia

• Steps towards better Forest Governance and transparency

• New Incentives for Good Forest Governance and Transparency

Figure 1: Global greenhouse gas emissions in 2000, by source Sector MtCO2 %

Energy 24,722.3 60.6 Electricity & Heat 10,276.9 25.2 Manufacturing & Construction 4,317.7 10.6 Transportation 4,841.9 11.9 Other Fuel Combustion 3,656.5 9.0 Fugitive Emissions 1,629.3 4.0

I ndustrial Processes 1,406.3 3.4 Agriculture 5,603.2 13.7 Land-Use Change & Forestry 7,618.6 18.7 Waste 1,465.7 3.6 Total 40,816.2

Figure 1: Global greenhouse gas emissions in 2000, by source Sector MtCO2 %

Energy 24,722.3 60.6 Electricity & Heat 10,276.9 25.2 Manufacturing & Construction 4,317.7 10.6 Transportation 4,841.9 11.9 Other Fuel Combustion 3,656.5 9.0 Fugitive Emissions 1,629.3 4.0

I ndustrial Processes 1,406.3 3.4 Agriculture 5,603.2 13.7 Land-Use Change & Forestry 7,618.6 18.7 Waste 1,465.7 3.6 Total 40,816.2

Data for 2000 Country

MtC % of World Total tons carbon per

person 1. United States of America 1,805.50 15.69% 6.4 2. European Union (25) 1,356.60 11.78% 3 3. China 1,345.60 11.69% 1.1 4. Indonesia 837.7 7.285 4.1 5. Brazil 609.4 5.30% 3.5 6. Russian Federation 545.1 4.74% 3.7 7. India 506.6 4.40% 0.5 8. Japan 379.9 3.30% 3 9. Germany 284.4 2.47% 3.5 10. Malaysia 235 2.04% 10.2

Data for 2000 Country

MtC % of World Total tons carbon per

person 1. United States of America 1,805.50 15.69% 6.4 2. European Union (25) 1,356.60 11.78% 3 3. China 1,345.60 11.69% 1.1 4. Indonesia 837.7 7.285 4.1 5. Brazil 609.4 5.30% 3.5 6. Russian Federation 545.1 4.74% 3.7 7. India 506.6 4.40% 0.5 8. Japan 379.9 3.30% 3 9. Germany 284.4 2.47% 3.5 10. Malaysia 235 2.04% 10.2

Global greenhouse gas emissions by country (WRI)

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

To

ns

of

Car

bo

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Figure 2: Greenhouse gas emissions in I ndonesia, by source Sector MtCO2 %

Energy 312.5 10.2 Electricity & Heat 94.9 3.1 Manufacturing & Construction 74.9 2.4 Transportation 65.0 2.1 Other Fuel Combustion 59.8 1.9 Fugitive Emissions [1] 17.8 0.6

I ndustrial Processes [2] 14.4 0.5 Agriculture 123.0 4.0 Land-Use Change & Forestry 2,563.1 83.4 Waste 59.8 1.9 Total 3,072.8

Figure 2: Greenhouse gas emissions in I ndonesia, by source Sector MtCO2 %

Energy 312.5 10.2 Electricity & Heat 94.9 3.1 Manufacturing & Construction 74.9 2.4 Transportation 65.0 2.1 Other Fuel Combustion 59.8 1.9 Fugitive Emissions [1] 17.8 0.6

I ndustrial Processes [2] 14.4 0.5 Agriculture 123.0 4.0 Land-Use Change & Forestry 2,563.1 83.4 Waste 59.8 1.9 Total 3,072.8

East-Kalimantan

Indonesia New Incentives

Petrova, Stolle, & Brown 2006

Protected area t CO2e emitted

2003-2008

t CO2e emitted

2008-2013

Total t CO2e emitted

2003-2013

Apar Besar 8,081,550 9,798,400 17,879,950

Apo Kayan NR/BR 606,680 588,970 1,195,640

Batu Kristal 97,420 97,420 194,840

Bentuang Karimun 0 0 0

Bukit Batikap I,II & III 0 0 0

Bukit Batutenobang 0 0 0

Bukit Soeharto 105,180 0 105,180

Gunung Berau 5,715,410 6,707,760 12,423,170

Gunung Lumut 1,269,420 1,383,770 2,653,190

Hutan Kapur Sangkulirang 2,269,110 3,415,280 5,684,390

Kayan Mentarang 292,430 1,892,950 2,185,380

Kutai 9,329,500 10,570,900 19,900,400

Long Bangun 5,001,940 8,027,390 13,029,330

Meratus Hulu Barabai 0 0 0

Muara Kaman Sedulang 824,970 627,700 1,452,670

Muara Kayan 5,791,640 2,672,430 8,464,070

Muara Sebuku 981,940 2,812,450 3,794,390

Pantai Samarinda 423,720 449,350 873,070

Perairan Sungai Mahakam 871,720 869,860 1,741,580

Sesulu 5,832,060 8,153,030 13,985,090

Sungai Berambai 2,921,560 5,111,660 8,033,220

Sungai Kayan Sungai Mentarang 9,312,300 12,138,190 21,450,490

Grand Total 59,728,540 75,317,500 135,046,040

For the Province of East-Kalimantan:

At a price of carbon around 10 U$ per metric ton, reducing deforestation inside National

Parks would generate 36 million dollars /yr

In 2006 the total budget for National Parks for East-

Kalimantan of approximately 5 million US$ province

What are the challenges?• Permanence

• Leakage

• Baseline data

• Check of status (monitoring)

• Incentives

• Missed targets

• Payment distribution

• Institutional set-up

Indonesia New Incentives

Overview

• Indonesia’s forests

• Forest Governance in Indonesia

• Steps towards better Forest Governance and transparency

• New Incentives for Good Forest Governance and Transparency

Forestry

Industrial Forest Crime

Resource Availability is Declining

Debt and Overcapacity Impede Competitiveness

Balancing Supply and Demand

Distribution of Forests and Poverty

Plantations

Forest Loss

Forest Governance issues

Derived from : WB 2006

Outside Forestry

Over-Regulation and Rent-Seeking

Technology Trends Present Opportunities and Hamper Efficiency

Rights and Access

Conflict, and Inequity

Decentralization and Management

Community Livelihood Promotion and poverty alleviation

Employment Possibilities

Land Use Rationalization

Problems don’t stop in the forest

• Losses in rural livelihoods and ecosystem goods and services.

• Losses in public revenues from illegal logging. More than a billion US$ in revenue was lost to illegal logging practices in 2004

• Losses in access to profitable timber markets and investment in the sector. Poor governance in the forest sector has deterred

• Forest are an important resource in Indonesia:

70% of land; poverty reduction; economic growth; environmental services;

• Establishing forest sector governance sets a precedent for other sectors. Forestry is a microcosm of governance issues, and if governance is delivered in the forestry sector, this demonstrates that it is possible to establish.

• Establishing good governance and curbing corruption are among the top priorities set forth by President SBY and are emphasized in recent instructions to his new team of economic ministers.

Why work on forest governance?

Overview

• Indonesia’s forests

• Forest Governance in Indonesia

• Steps towards better Forest Governance and transparency

• New Incentives for Good Forest Governance and Transparency

Work with the Ministry of Forestry in cooperation with the World Bank

FOMAS

Forest Monitoring and Assessment System

Not a system but a process

FOMAS

“If you can’t measure it, you can’t manage it”

Forest Governance and Transparency

FOMAS focuses on developing a decision-making

environment where reliable, accurate and current

information on forest and timber resources and

related decisions are continuously and publicly

available to the general public (Transparency),

take actions to combat illegal logging and

strengthen law enforcement.

Accurate timely forest cover change maps

All Forest Management units Polygons (Logging concessions, Plantations, National Parks etc)

+

Transparent National yearly updated Database

Decisionssupport

Transparency

Accountability

Governance

Law enforcement

FOMAS

This is not a data exercise but the use of data to improve governance issues

With, and in the Ministry, and in cooperation with NGO’s

MoF Commitment to Transparency

Digitize official data

Provide decision making tools

Atlas of Fires in Indonesia in 2006

Draft Disclosure Policy Plans

The disclosure policy will provide the foundation for public access to forest information, and for public scrutiny of MoF decisions and policies.

The policy will divide forest sector information into three categories:

1. Confidential2. Official Use Only3. Publicly Available

Maps and data are the result of preliminary analysis carried out by the Indonesian Ministry of Forestry in cooperation with: SDSU, UMD, NASA, USGS, ESF, WB and WRI.

Status of Indonesia’s Forests

Forest Landscape ObjectiveLegalLegal

Illegal ?Illegal ?

New revenue distributionConcessions permit Tax: (IHPH, IUHPH)

• This is a one time concessions rights tax

• The Regions gets 80% of the Tax while the Central government gets 20%

• The tax to the regions (the 80%) is split in 16% go to province and 64% to producing district

Royalty right to regional level (PSDH) (so again 80%):

• This is a yearly tax

• Regional gets 80% and 20% to central government• 16% to province, 32%to producing district, and 32 % to other

districts in the province.

The Dana Rebosisasi fund (DR):

• This is a yearly tax

• 40% go to National and 60% to producing district

These taxes together would earn in 2006 (in million US$):

0.6 (IHPH) + 86.8 (PSDH) + 110.4 (DR) = 197

Berau District

Lost Revenue

110 Billion Rp

Or

11 million US$

On a population

of 200,000

in million of US$Forest Operation Types collected lostLogging/plantationsRoyalty 1.5 1.2district tax 1.2 0Reforestation tax 0.7 0District loggingnational tax 0 3district tax 1 0Small-scale logging teamsinformal tax 0.36 0national tax 0 6.5district tax 0 0.08Sawmills and mouldingdistrict tax 0.03 0.9informal tax 0.2 0Timber kiosks and ship buildinginformal tax 0.02 0Pulp and PaperWater tax etc 0.04 0Total 10.4 10.9

Revenue collected

Policy Options•Accuracy, Availability and Transparency

•Curb over-capacity

•Ensure legal supply

•Monitoring

•Planning and incentives

•Law enforcement

•Social forestry

•Land tenure issues

•Fire prevention

•Certification

YEAR

Total Total

1985 23.5 14.6

1989 40.4 24.4

1990 37.9 25.3

1997 47.4 29.5

1998 45.3 19

1999 44.9 20.6

2000 47.8 13.8

2001 49.1 10.1

2002 50.5 8.1

LOG CONSUMPTION (including timber and pulp)

OFFICIAL LOG PRODUCTION (including

timber and pulp)

Comparison of Log Production and Consumption

Source: World Bank 2006

Accurate timely maps

Forest Management Units