Reforestation funds rerouted to other uses

By Sylvia Gratia MN

JAKARTA (JP): The government has raised trillions of rupiah in reforestation funds to finance the country's reforestation projects, but much of the money has been rerouted to other uses.

The idea behind the reforestation fund, introduced in the early 1990s, is clear and simple: it is for reforestation and forest rehabilitation efforts. But in reality, most of the funds raised are not used for this purpose.

The director general of reforestation and land rehabilitation, Harsono, said only 10 percent of Indonesia's reforestation funds raised from timber companies was used for the reforestation program.

"Most reforestation funds are used to finance the development of industrial timber estates rather than for reforestation and land rehabilitation activities."

He said funds used for reforestation efforts amounted to Rp 200 billion per year, while Rp 1.6 trillion per year was allocated for the development of timber estates.

But Harsono said the use of the reforestation fund for the development of industrial estates was not against the initial purpose of the fund.

"Using reforestation funds to finance timber estates is not a problem because the funds go back to the forests."

One could argue the logic for such a statement, but it does not address the controversy surrounding the use of funds for non- forestry activities.

The use of the fund for non-reforestation activities has became a hot topic among environmentalists and non-governmental organizations (NGOs), especially since the resignation of former president Soeharto.

Many environmental and NGO leaders have raised concerns over the misuse of reforestation funds as mandated by Soeharto.

Newly appointed Minister of Forestry and Plantations Muslimin Nasution said earlier this month that the use of reforestation funds to finance businesses owned by former president Soeharto's family and cronies was currently being investigated.

He said his ministry and the Ministry of Finance were working together to ascertain whether there was malfeasance in the use of Rp 1.67 trillion (US$150 million) of the reforestation funds.

The reforestation fund is a mandatory fee imposed by the government on forest concessionaires to ensure that forests are managed in an environmentally sustainable manner. The size of the fee depends on the volume and type of timber felled.

In 1996, the government collected Rp 880 billion in reforestation funds. This year, it is expected to total Rp 747 billion.

Starting April 1, the reforestation funds are accounted for in the state budget as non-tax receipts. Previously, the funds were transferred into the Ministry of Forestry's account. The allocation and use of the funds were governed by presidential decree.

During his tenure in power, former president Soeharto issued several decrees ordering the minister of forestry to allocate reforestation funds to various projects run by his family members and cronies which were not related to forestry development.

In 1996, Soeharto asked the ministry to set aside part of the interest from the fund mostly deposited in state banks for state aircraft manufacturer PT IPTN, which was then chaired by B.J. Habibie, who is now Indonesia's President.

According to the Supreme Audit Agency (BPK), IPTN received Rp 400 billion from the fund, the money later being converted into the government's stake in the aircraft company.

Seven environmental groups filed a lawsuit against Soeharto in 1995 in the State Administrative Court regarding the IPTN allocation. The presiding judge turned down the suit, however, arguing that the court had no jurisdiction over the issue.

In 1997, Soeharto instructed the Ministry of Forestry to set aside Rp 250 billion from the reforestation fund to help PT Kiani Lestari, a company owned by his close friend Mohamad "Bob" Hasan, for its pulp and paper factory in East Kalimantan.

Urea pill fertilizer manufacturer PT Ario Seto Wijoyo, a company owned by Soeharto's grandson Ari Sigit Hardjojudanto, also obtained about Rp 80 billion from the fund.

Other Soeharto decrees allocated Rp 100 billion of the fund for poverty alleviation and Rp 23 billion to purchase shares of a private jet development company linked to IPTN.

In 1995, Soeharto ordered the ministry to set aside Rp 527.2 billion from the reforestation fund's bank interest to finance the creation of new rice fields in Central Kalimantan.

The one million-hectare rice cultivation area was developed by clearing swamps that overlapped the territory of several concessionaires.

The ministry's secretary-general, Oetomo, admitted that the order to allocate reforestation funds to those projects came directly from the state secretary through presidential decrees.

"There were no ministerial decrees regulating loans from the reforestation funds. The loans given to those projects were based on presidential decrees," Oetomo said.

According to Ministerial Decree No. 57/1995, the equity capital of a joint-venture industrial timber estate must consist of government shares derived from the reforestation fund (14 percent), private capital (21 percent), interest-free loans from the reforestation fund (32.5 percent) and loans at commercial rates from the reforestation fund.

The loans from the reforestation fund with commercial interest can only be obtained after a minimum 67.5 percent of the area targeted for a timber estate has been deemed well-developed.

The ruling, however, has been abused by several timber companies linked to Soeharto.

BPKP has questioned a Rp 144 billion loan from the reforestation fund to PT Menara Hutan Buana (MHB), a timber estate owned by Soeharto's half-brother Probosutedjo.

It alleged that MHB marked up the project to get more funding from the ministry. The company said it had developed 68,000 hectares of its project, but only 27,000 hectares were developed in reality, it said.

In all, 18 cases of possible malfeasance have been noted by BPK in its audit reports.

Muslimin is now quickly moving to disclose and end cases in which reforestation funds are misused.

Former minister of environment Emil Salim suggested Muslimin establish an independent team, consisting of "clean" ministry officials, officials of the Attorney General's Office and environmental NGOs, to investigate misuse of reforestation funds.

"It will be very difficult to find the truth if Muslimin only relies on his officials since there is rampant collusive practices in the ministry," Emil said.