Forests more profitable dead than alive

One of the biggest challenges of climate change is that countries are forced to redesign their economic model. They have to avoid doing business as usual while at the same time maintain, or even improve, its level of prosperity

By: Isyana Artharini | Climate Change Media Partnership| n December 9th, 2011

For Indonesia, the key to reaching economic prosperity is by using its forest resources. At the same time, Jakarta has stated the government’s commitment to reduce 26% of its greenhouse gas emission by 2020. Keeping forests alive is the best way to achieve that.

For over 40 years, Indonesia has been relying its national income from natural resources. According to Daju Pradnja Resosudarmo, a researcher on forestry governance from the Centre for International Forestry Research (CIFOR),  around 70% of Indonesia’s non-tax revenue comes from natural resources.

The efforts to keep forests alive are facing stiff competition from the flurry of activities surrounding mining and oil palm industry. Daju mentions the increasing trend of expansion in mining activities and oil palm plantations. Oil palm plantations needed land converted from forests. Coal deposits are also mostly stored in forest lands in Borneo.

Both of these industries are backed with a steady flow of foreign investors, low interest rates from banking institutions, and relatively cheap tax on land. Put all these factors together, it’s a no-brainer. Keeping forests dead is still the more profitable option than keeping forests alive.

The way Daju puts it, “Other development sectors are heavily subsidised. If governments make land more expensive, then it lessens the competition on forest land. Therefore the government should start subsidising more environmental projects.”

Indonesia has expressed interest in an economic scheme called REDD or Reducing Emissions from Deforestation and Forest Degradation. The scheme obliges forest-owning developing countries to keep their forests intact. In return, developed countries would pay financial incentives to ecosystem services from the forests of developing countries. Unfortunately for the last five years countries have yet to agree the financial mechanism of the REDD scheme.

In order to benefit from this scheme, Indonesia would need to proof that they really can protect their forests from degradation or excessive logging. Unfortunately, deforestation rates in Indonesia continues to be high. Daju mentions five main factors contributing to the high rate of deforestation, one of them is administration.

In 2010, President Susilo Bambang Yudhoyono has stated a moratorium on granting new licenses to manage primary natural forests and peat lands for the next two years. Although this does not apply to existing licenses.

Forests cover 70% of Indonesia’s land area. All of those forests areas are state-owned. However, a decentralisation programme is returning forest management back to local and regional government. This situation creates many overlapping licenses of forest land management. The five-year political cycle also creates a problem. After the election of regional leaders, there appears to be a trend of issuing new forest licenses to party donors.

Indonesia is now facing a dilemma. On one hand, there is an international commitment and (promises of) economic incentives when forests are protected. On the other hand, forests and its services are still one the country’s main income. The country also has to fulfill its projected growth of 7 percent by 2014.

After decades of relying on its natural resources to build its economic power, Indonesia is now faced with the challenge of thinking about other sources of income.

Chief of the Presidential Work Unit for Development Monitoring and Control Kuntoro Mangkusubroto acknowledges this. As of September 2010, he has also been chairman of REDD+ task force. One of his task is to find the best way to balance reaching economic growth while still protecting forests.

When asked what is the proposed economic model that Indonesia would use to switch from natural resources, his response was that at the moment, his team is still trying to find a model that will address balancing economic growth with finding solutions to the problem.

The two years moratorium, according to him, gives him the time to take pause and review laws and regulations of natural resources that have been there for four decades.

He sees the main problem in forests protection is regulation. “We know there are loopholes, overlaps, and gaps in current legislation. It fails to recognise indigenous rights and it is open for corruption on forestry governance.”

For the first time he announced that Indonesia has a single official map of forests. Before, each ministry, regional government or central government, had their own map of forests. The result is there can be two or three different licenses to manage a single forest.

“To start managing forest, we need to come up with a new set of laws that would address the cross-cutting nature of the issue. There are already two task force assigned by the president. Their job is to produce a new legislation draft to be submitted to house of legislation.”

The World Bank’s Managing Director, and also Indonesia’s ex-finance minister, Sri Mulyani Indrawati, sees forestry as the big test for Indonesia to proove its commitment internationally. “If we can show proof of it (protection) that can be verified internationally, that we are committed to REDD, I see it as a very good for Indoensia’s credibility, especially when (Indonesia is) trying to get more and more funding outside of forestry and REDD itself.” The key to implementing it, she said, is tackling the regional and provincial level, where the most of the main players are.

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