Illegal logging is not just about smuggling timber

Krystof Obidzinski Bogor

Barely a day goes by without a story appearing in the Indonesian media about illegal logging. Often these stories bemoan the loss of timber smuggled on boats out of Papua, trucked across the Kalimantan-Sarawak border, or ferried through Riau's labyrinthine archipelago.

Preventing timber smuggling is vital. But the intense media focus it receives blinds the public to other important issues in the war against illegal logging.

One thing the media could do is tell the public about how forestry laws are broken daily by licensed forestry operations.

Illegal activities by "legal" operators are wide-spread. Their impact is devastating -- both on Indonesia's forests and on the hundreds of thousands of Indonesians who live in or near them.

Recent research by the Center for International Forestry Research (CIFOR) and The Nature Conservancy (TNC) in the Berau and East Kutai Districts of East Kalimantan has identified a whole range of illegal practices rarely addressed by the media.

One common ruse companies use is to pretend they are temporarily closed-down. In reality their chain saws are decapitating trees as fast as they can.

CIFOR and TNC's research revealed one Berau company cut 58,784 cubic meters of logs in 2004, despite its logging permit (IPKTM) expiring in 2003. This cost the district government Rp 11.5 billion in lost taxes that could have been spent on improving health facilities, schools and other job generating activities.

Another scam is the "plantation hoax", where companies get rich by promising to develop oil palm plantations in return for a logging license.

Between 1997 and 2001 one company in Berau clear cut 9,500 hectares of forest -- that's about 23,000 soccer pitches or Monas Park multiplied by 95 -- and then didn't plant a single palm.

It then failed to pay the district government most of the Rp 53.4 billion taxes owed on the timber it cut down.

Kompas newspaper reported last year that fictitious oil palm schemes caused state losses of Rp. 3.5 trillion across East Kalimantan.

CIFOR and TNC's research also revealed that timber companies understate production figures and manipulate shipping records. Since 2000, the annually reported shipment of sawn timber from Berau was 20,000 cubic meters higher than the reported production of sawn timber. This is a serious level of under-reporting.

The true magnitude of the under-reporting becomes clear when the real production and shipping of sawn timber in Berau is compared with actual sawmill output, not reported output. Research shows real production is 5-7 times higher than the official figure. The situation is similar in Kutai.

As suggested earlier, the cost to the district governments in lost revenue is enormous. In 2003, Berau district alone lost over Rp. 100 billion in unpaid Reforestation Funds (DR), Forest Resource Rent Provision (PSDH) and district timber taxes.

While illegal forest activities drain the government finances and breed corruption, the fact is, they create jobs, particularly for the unskilled.

Closing down timber mills and factories -- both licensed and unlicensed -- is politically difficult. People need jobs. A man with a family to support doesn't care about his employer's legality. All he wants is a wage to put food on the table.

In 2003, unlicensed operators in Berau generated 4,000 jobs -- double the number provided by licensed operators. In East Kutai, the licensed sector supported 5,500 jobs and the unlicensed sector 2,500.

But this greater number of "legal" jobs in East Kutai consists mainly of short-term employment in clearing land for plantations. Without this short-term employment, the unlicensed sector would provide many more jobs than the licensed sector.

Quite simply, illegal forest activities generate a lot of "informal" revenue.

For governments at all levels, cracking down on the companies that generate this wealth is just not politically viable. Not when they contribute so significantly by generating "informal" income. Not when closing them down might lead to civil unrest.

Given this scenario, preventing environmental damage and saving state budget losses are the last to enter the equation.

It all sounds very grim. But with sufficient political will and long-term political vision, progress towards more sustainable forestry practices is possible.

First, current law enforcement measures must go beyond timber smuggling and tackle other illegalities occurring in the forest sector, such as logging outside allocated areas, understating production, manipulating shipping records and evading taxes.

Second -- and this is the tough one -- the overcapacity in Indonesia's timber processing sector must be reduced if the demand for timber that drives illegal logging is to be halted. The capacity of registered mills must be downsized and unregistered mills closed.

To reduce job losses the government will need to create alternative employment opportunities. Improved forest tax revenues, the rapid expansion of the oil palm sector and the intensification of public infrastructure projects could all play a role in absorbing much of the freed-up forestry labor.

Third, bilateral agreements to combat unregulated timber trading must be enforced, particularly between Indonesia, Malaysia and China.

Fourth, good conduct among timber producers should be encouraged through certification schemes and tenure security. Tenure security for local people should also be guaranteed to encourage them to protect their forests.

And finally, grass-root pressure for greater accountability and transparency in the district forestry sector needs to be supported.

None of this will be easy. But establishing a sustainable timber industry, creating forestry jobs and generating local income will be a whole lot harder once the trees have gone the way of the dinosaur.

The writer conducts research into illegal logging for the Center for International Forestry Research (CIFOR) in Bogor.