Illegal logging: It's not just about law enforcement

Luca Tacconi, Senior Economist, Center for International Forestry Research (CIFOR), Jakarta

In 2001, the most recent year for which relatively accurate statistics are available, Indonesians consumed some 19 million cubic meters of timber in the form of paper, sawn timber, plywood, and other products. In the same year, Indonesia exported the equivalent of 40.7 million cubic meters of timber, again mainly as pulp and paper, plywood, and sawn timber.

The trees harvested to produce this amount of timber products would cover an area of some two million hectares of forest, or some 2.4 million soccer fields. In 2001, forestry products contributed 1.1 percent to Indonesia's Gross Domestic Product, and about US$5.1 billion in exports. The officially reported log harvest for 2001 was an estimated 10 million cubic meters.

This means that of the total harvest of about 59.7 million cubic meters, about 50 million cubic meters were logged illegally. In other words, the volume of illegally harvested logs was almost five times greater than legally harvested logs. From this, it is obvious that large-scale operations are involved in the illegal logging, rather than the odd small-scale operators often singled out to show that law enforcement is working.

It also implies that illegal logging involves issues that go far beyond mere law enforcement. Quite clearly, illegal logging also involves a range of structural and capacity issues across Indonesia's timber industry.

Some of those concerned about the conservation of forests in Indonesia have proposed downsizing the forestry industry to a level that matches sustainable levels of timber production. The Ministry of Forestry has set the annual allowable cut for 2003 at 6.3 million cubic meters. To operate at this level, the forestry industry would have to reduce its timber output by roughly 90 percent compared to 2001.

But this begs the question: Where will the products demanded by Indonesian and overseas consumers come from if the Indonesian timber industry is downsized? The answer is probably from other tropical forests, which would almost certainly mean shifting illegal logging and deforestation to other countries. Although, over a period of time, these products may also eventually come from already developed countries that are experiencing an increase in planted forests.

The Indonesian government has made a commitment to the international donors participating in the Consultative Group on Indonesia to downsize the timber industry so as to reduce illegal logging and to achieve sustainable forest management. It is apparent to most observers that the Indonesian government has been reluctant to act on that commitment. This reluctance may be explained by two simple reasons.

First, downsizing the forestry industry has obvious economic costs, represented by increased unemployment and a reduction in gross domestic product and exports. Second, the negative economic impacts could have serious political ramifications for national and local politicians seeking re-election.

But these arguments are insufficient reason for doing nothing to change in the Indonesian forest sector. It is clear that the forest sector does not have a long-term future if current policies remain unchanged and the industry continues to over- exploit and illegally use the nation's forest assets.

However, the solution is not simply a matter of downsizing the forestry industry. The solution also requires providing inducements to industry to establish plantations and removing the incentive to carry out illegal logging.

Such changes would require a mix of regulatory and market oriented approaches. For example, trade barriers such as the ban on the export of logs -- which in effect reduce domestic log prices -- would have to be removed. And illegal logging activities would need to be made prohibitively more expensive by introducing chains-of-custody systems to ensure timber products reaching the markets are manufactured from legally harvested timber. Implementing independent and honest monitoring systems would also make it tougher for illegal loggers.

As with so many of Indonesia's development challenges, not just the government but each and every single Indonesian citizen must get genuinely serious about fighting corruption. It is a public secret that companies have to pay bribes whether they deal with legal or illegal timber. Less corruption will bring about considerable improvement in the sector. To achieve this, politicians and senior managers need to show the way. Committed and honest leadership is crucial to reducing corruption.

Solutions to the forest sector's existing problems must be found both within Indonesia and in the international arena. It should not be forgotten that at least one third of the wood products manufactured in Indonesia are also consumed domestically. Nor should we forget that although most of Indonesia's timber exports leave the country legally in the form of plywood, pulp, and paper, most of them are sourced from illegal logging. The illegal export of logs accounts for only between five and ten percent of total log production.

Unless regulatory and market reforms take place, the economic and environmental benefits the forest sector currently provides will not last much longer. Then we certainly will see not only considerable job losses and serious economic impacts, but also the loss of one of the world's greatest natural treasures -- the Indonesian rainforests.