INDONESIAN FORESTRY DEVELOPMENT POLICIES
IN THE NEW REFORM ERA
Indonesia has been in the monetary crisis since the middle of 1997, which is obviously affecting the decline of business and economy situation in Indonesia. This condition resulted in the critical points as follow :
In the light of national manpower employment, monetary crisis has resulted in extremely high unemployment. In the early 1998 most of big companies had reduced no less than 1 million employees. By featuring minus 10-15% of the economic growth, it is estimated that unemployment people will reach 13 - 15 million by the end of 1998.
Even, the figure will become extremely higher, bearing in mind that the monetary crises has influenced the economy both in rural and urban areas. Continual drought and other natural disasters such as forest fires and soils that have not been fully overcome yet further worsen the situation. Its direct impacts not only lead to new problems to the environment but also become a primary cause of harvesting failures, but also brought disorder to the economy in the area, particularly in the surround the forests. This may in danger food self-sufficiency in which in the long run it will decline the Indonesian national defense and other problems in economy, social aspects and politics.
Bowing to pressure, the national leader announced his resignation on May 21, 1998 and immediately handed power over to the vice president. Since then, a mature policy and structural adjustment (new reform) in many sectors started to carry out partly in order to reprioritize development activities according to the new political policies (realities) in the country. The priority given in this era is to avoid the above shortcomings through two most pressing economic problems: (1) ensuring a sufficient supply of food and basic needs at an affordable price, and (2) getting the wheels of the economic turning again. To pursue this, the rupiah exchange rate should be stabilized to the normal/logical/affordable rate, high inflation-rate should be controlled, and the international monetary fund (IMF) reform agreements must be implemented in order to restore the Government credibility and to gain trust from foreign and domestic investor. Other objectives in this program include: (1) boosting output from the agriculture products, agribusiness, export oriented industry and tourism sectors; (2) Safeguarding the implementation of the 1998/1999 state development budget; (3) accelerating the bank restructuring program and (4) resolving the problem of (both private and state) corporate foreign debts.
To the forestry sector, the turmoil has also led to unstable conditions to both forest and forestry activities. Wood-based and other forest-related industries, for instance, have drastically reduced their activities. The condition leads partly to the timber stock abundance in the forest lying mostly in vein. In short, the impacts of the turmoil have practically been tremendous.
To overcome the turmoil, in national level has decided to undertake some reform steps, including structural adjustment pledged to the International Monetary Fund (IMF). This commitment was put in the 50-point letter of intent commonly known as Indonesian Memorandum of Economic and Financial Policy Program (MEFP) signed by President Suharto on 15 January 1998. The MEFP is a serious strategic response to the turmoil indicating the necessary of Indonesia to implement liberalization and structuralisation steps in financial, economics, law enforcement’s as well as politics.
Basically, the conditions requested under the memorandum cover various economic and monetary aspects containing an economic recovery package program, 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) re-view investment and expenditure in the public sector including government expenditure for state-owned companies and strategic companies; whilst, privatization will continue including the privatization of government bank after mergers have been completed.
At least there are eight articles of the memorandum directly related to the forestry sector, namely articles 10, 12, 36, 37, 38, 40, 42, and 50. All of these articles basically requested what so-called forestry reforms including liberalization 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 underlined the important to intensify the implementation of the principles of sustainability forest management under economic equity plat-form.
In short, the eight articles substantively require three key points, namely : (a) create consistency and transparency specifically in making decision process regarding utilization of forest as a public goods, (b) open competitive market mechanism, and (c) strengthen property rights in forest utilization to make it more well-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 Utilization and future export market mechanism, especially for wood-based industries.
In order to intensify and accelerate more the implementation of the memorandum, Indonesia and IMF continue highlighting some important and priority points. This lead to the new spirit of implementing more serious the memorandums by stipulating additional memorandums called IMF-PLUS with additional two articles on it as well as revisions on some target deadlines. The new two articles are finalizing and or rescheduling private foreign debt and creating a social safety net. These two points have been considered to be key points in pursuing the better success of overcoming the turmoil.
Either under the previous memorandum or the new scheme of the IMF PLUS, to the forestry sector many reforms has been underlined to be seriously implemented. This includes policies related to the forest product trade and forest-based industries, forest utilization scheme as well as the possibility of privatization especially for some state-owned company in the forestry. On the basis of the new target deadlines, many points of the reform in forestry have been implemented or in the process of implementation. As of April 22 1998 this partly cover the following points :
It is expected that the adjustments in forestry sector mentioned above can be a good indicator of the seriousness of Indonesia in implementing all of the memorandums. It is also expected that the adjustment can significantly strengthen the sector and then support Indonesia in recover from the recent turmoil as soon as possible. Moreover, the adjustment will hopefully revitalize the sector, especially as in the crisis situation forest resources becomes one of the focuses in gaining foreign exchange earnings, which is needed for rehabilitating the national economic condition. In addition, forestry is expected to play an important role to address the social aspects of the crisis through generation of labor intensive activities. Within such policy, the conservation aspect remains another important aspect not to be sacrificed. Efforts will be made towards balancing among utilization, conservation and social aspects.
Besides the implementation of IMF memorandum, some mature forestry policies of the reform have been carried out to accommodate of the people aspirations i.e. to prevent the implementation of the policies from nepotism, collusion and corruption tendencies. These have been identified and programmed in the accepted agenda by the main stakeholders.
In the new reform policies and to counter balance the effect of the economic crisis as well as food shortage, the following major development activities have been identified to be top priority : (1) to launch labor intensive program (food for work) and food security program, (2) to increase country revenue by adopting consumer oriented marketing strategies, (3) to confidence building measures in order to obtain international trust, and (4) to attract the financial aid.
Forestry and Estate Crops Labor Intensive program is activity in the short term activity to solve problems caused by economic and monetary crisis, and continual draughts and in order to use the investment allocated by the Government through reforestation and development of non wood forest products, conservation of forest resources, promotion of eco tourism which based on the community welfare and institutions strengthening scheme.
The objectives of Forestry and Estate Crops Labor Intensive Program are as follows :
The activities and physical target of Forestry and Estate Crops Labor Intensive program are as follows : (1) absorption of people losing their job and employment 30,6 million man days; (2) Development of communal forest 50,900 ha; (3) Development of Labor Intensive estate timber forest 51,340 ha; (3) rehabilitation of mangrove forest 2,110 ha; (4) development of green belt in state forests 9,470 ha; rehabilitation of Protection forest 4,670 ha; (5) development of natural silk 680 ha; (6) development of artesian well 4,330 unit; (6) utilization of land under the forest stand/ inter cropping 105,770 ha; (7) development of buffer zones 499 villages; (7) development of green belt border of conservation areas 6,610 ha, (8) development of fire break is 710 km, (9) construction of roads designated for tourists 200 km, (10) Construction of patrol roads/border 830 km, (11) rehabilitation of forest fire area 1,570 ha, (12) development of green belt on the outside border of forest areas 6,690, (13) education and Training for community and extension workers 2,880 people, (14) forestry extension 360 Farmer Groups.
Forestry and Estate Crops Labor Intensive program will be implemented in 19 provinces among others Aceh, North Sumatra, West Sumatra, Riau, Jambi, South Sumatra, Bengkulu, Lampung, West Java, Central Java, Jogyakarta, East Java, NTB, NTT, South Sulawesi, East Kalimantan, West Kalimantan, Central Kalimantan, South Kalimantan covering 155 Districts (810 villages).
The aspects mentioned above are directed to the roles of forestry sector and estate crops sub sector to give more significant contribution to the implementation of the national development as follows :
The country situation now where manufacturing activities were paralyzed, resource based economic activities with market orientation becomes the main priority to boost export and to generate immediate income earning from foreign trade.
The formal forest industries sector is reasonable well served by their associations (APHI, APKINDO etc), in particular with respect to market intelligence and new products, which are very much export-oriented. The industry associations are a major force, disciplined and tightly run, exercising close control over markets and products allocation.
Plywood, pulp and paper, sawn timber, logs and others currently dominate the export market for forest product. Indonesia’s policy of forest product exports would be aimed at higher export earning i.e. through export of such wood as decorative plywood, carved panels, knock-down furniture, and value added finished products. Quality (including workmanship and design) and reliability (e.g. delivery schedules) are important. A policy of supplying large quantity of raw materials at low price, as a measure to promote export will not be in the interest of environmental conservation or efficiency.
Investment is needed within the framework of export promotion activities, to facilitate the movement of the products to the international market. A constraint is experienced now, not by internal (Indonesian) factor, but the pattern of the international consumer dominated to obtain the successful of this program such as: export tropical forest product ban, stipulating an eco labeling certification scheme, tariff barrier, increase consumption of softwood products and reduced consumption of tropical hardwood product and so forth. Facing such constraints, it is expected that the (green) consumer countries can support Indonesia and other producer countries by compensating the constraint. This may possible partly by designing a particular official mechanism among the consumer countries to guarantee that all environment-based international trade policies are distortions free and not consisting of disincentive trade politics. In other words, the mechanism can ensure that the market mechanism is actually in perfect competition always.
These measures are related to the IPF Proposals for action category I-A and IV.
Many kind of international trades and payments system are not functioning at all at the moment, so that they will have to come up with something like credible mechanism which basically work immediately. In fact, a lot of options have been implemented in order to avoid these shortcomings as follows :
These measures are related to the IPF Proposals for action category IV.
Especially for the time being, Indonesia critically needs additional funds to continue and enhance the implementation of the existing policies and to support the implementations of the new reform policies. Hence, financial international organizations, donor agencies, research institutions, and NGOs are hopely encouraged to participate in this matter.
These measures are related to the IPF Proposals for action category V.