timber smuggling in indonesia€¦ · 4.3 turning to palm oil 15 4.4 timber trade out of nunukan:...

Critical or Overstated Problem?

Timber Smuggling in Indonesia

Forest Governance Lessons from Kalimantan

Krystof Obidzinski | Agus Andrianto | Chandra Wijaya

Critical or Overstated Problem?

Forest Governance Lessons from Kalimantan

Krystof Obidzinski

Agus Andrianto

Chandra Wijaya

September 2006

Timber Smuggling in Indonesia

National Library of Indonesia Cataloging-in-Publication Data

Obidzinski, KrystofTimber smuggling in Indonesia critical or overstated problem?: forest governance lessons from Kalimantan/by Krystof Obidzinski, Agus Andrianto, Chandra Wijaya. Bogor, Indonesia: Center for International Forestry Research, 2006.

ISBN 979-24-4670-234p.

CABI thesaurus: 1. illicit felling 2. logging 3. timber trade 4. forest policy 5. concessions 6. plantations 7. forest management. 8. Kalimantan 6. Indonesia 7. Malaysia I. Andrianto, Agus II. Wijaya, Chandra III. Title

© 2006 by Center for International Forestry ResearchAll rights reservedPrinted by Subur Printing, Jakarta

Design and layout by Gideon SuharyantoFront cover photo by Yayasan TitianBack cover photos by Agus Andrianto

Published byCenter for International Forestry ResearchMailing address: P.O. Box 6596 JKPWB, Jakarta 10065, IndonesiaOffice address: Jl. CIFOR, Situ Gede, Sindang Barang, Bogor Barat 16680, IndonesiaTel.: +62 (251) 622622; Fax: +62 (251) 622100E-mail: [email protected] Web site: http://www.cifor.cgiar.org

iii

Contents

List of abbreviations iv

Acknowledgements vi

Executive Summary vii

1. Introduction 1

2. Objectivesandmethods 3

3. TheborderzoneinKalimantan 5

4. TimbertradeacrosstheborderinEastKalimantan 10

4.1 Yamaker’stale:newfaces,oldhabits 11

4.2 StrayRoads 13

4.3 Turningtopalmoil 15

4.4 TimbertradeoutofNunukan:thenandnow 16

5. TimbertradeacrosstheborderinWestKalimantan 19

5.1 Truckingandfloatingthetimber 20

5.2 Timbergangsters? 21

6. Howsignificantiscross-bordertimbersmuggling withinthecontextofillegallogginginIndonesia? 25

7. Prioritizinggovernmentpoliciesagainstillegal logginginIndonesia 29

References 31

Appendix:TheborderzoneofKalimantan 35

iv

List of abbreviations

ABK AgrosilvaBetaKartikaAPHI Asosiasi Pengusaha Hutan Indonesia (Indonesian Forest

ConcessionairesAssociation)APKINDO Asosiasi Panel Kayu Indonesia (Indonesian Wood Panel

Association)BATS TawauBarterTradeAssociationBRIK Badan Revitalisasi Industri Kehutanan (BodyforRevitalization

ofForestIndustries)BTZ BarterTradeZoneCIFOR CenterforInternationalForestryResearchEIA EnvironmentalInvestigationAgencyETPIK Eksportir Terdaftar Produk Industri Kehutanan (Registering

BodyfortheExportersofTimberProducts)FLE ForestLawEnforcementFMU ForestManagementUnit,MalaysiaFTZ FreeTradeZoneHP Hutan Produksi (ProductionForest)HPH Hak Pengusahaan Hutan (ForestTimberConcession)HPT Hutan Produksi Terbatas (LimitedProductionForest)HTI Hutan Tanaman Industri (IndustrialTimberPlantation)Inkopad Induk Koperasi Angkatan Darat (Indonesian Army’s business

cooperative)IPK Ijin Pemanfaatan Kayu (Landconversionpermit)MoF MinistryofForestryMR MalaysianRinggit

v

MTC MalaysianTimberCouncilNGO Non-GovernmentalOrganizationNTFPs Non-TimberForestProductsOHL Operasi Hutan Lestari (OperationforSustainableForest)PLB Pos Lintas Batas (BorderCrossing)SKSHH Surat Keterangan Sahnya Hasil Hutan (Timber legality

certificate)STDC SarawakTimberDevelopmentCooperationSTIA SabahTimberIndustryAssociationTNC TheNatureConservancyYamaker YayasanMajuKerja

vi

Acknowledgements

Theauthorswould like to thankCristinaEghenterofWWF-Indonesia forprovidingvaluablecommentsonanearlierdraftofthispaper.Wewouldalsolike to thankTNCfor itsfinancial supportoffieldresearch inKalimantanon which this paper is based. The successful collection of necessary datawould never have been possible without the commitment and enthusiasmoftheprojectpartners(NGOsTitian,BIOMAandOtonomiCenter)whosecontributionswegratefullyacknowledge.TNCandWWFstaffinWestandEastKalimantanalsoassistedtheprojectatmanydifferentjuncturesandwewouldliketothankthemaccordingly.Theanalysisandwrite-upstagesofthispaperweregreatlyfacilitatedbyCIFORcolleaguesAgungPrasetyo,AhmadDarmawanandAmbarLiano.Weowethemagreatdealofgratitude.However,theauthorsaloneareresponsibleforanyerrorsthatmayremaininthestudy.

vii

Executive Summary

Overthelastfewyears,illegallogginghasbeenatthecenterofpolicydebatesaboutthecurrentstateandfutureprospectsofIndonesia’sforestrysector.Toasignificantextent,thepolicydialoguesaswellaspublicunderstandingoftheillegal loggingproblemhavebeen influencedby the timber establishment’sview that clandestine timber smuggling is responsible for illegal loggingactivitiesinthecountry.Echoingthissentiment,theIndonesiangovernmenthas been at odds with neighboring countries Malaysia and Singapore overtheirperceivedlackofcooperationinstemmingtheillegalflowofIndonesiantimberacross theborderand thushelping to rein in illegal logging.At thesametime,timbersmugglinghasbecomethefocusofforestlawenforcementoperationsinIndonesia.

Thispaper scrutinizes the assumption that timber smuggling is at the coreoftheillegalloggingprobleminIndonesia.TakingtheborderzonebetweenIndonesiaandMalaysiaontheislandofBorneo(Kalimantan)asasampleunitofanalysisandcomplementingitwithdatafromotherpartsofIndonesia,thepaper shows the intensityof timber smugglingwas relativelyhighbetween2000and2003,buthas sincedeclinedbyover70%.Despite thisdecline,illegallogginginIndonesiastillcontinuesatarateofapproximately40millionm3peryear.ItseemsclearthattimbersmugglingisnottheprimarydriverofillegallogginginIndonesia.Instead,thecoreoftheproblemistheextractionoftimberbyIndonesianforestconcessionholders,plantationdevelopers,roadconstructioncompaniesandotherventuresthatabusecompanypermitsandviolateprevailingforestryregulations.

viii | Timber Smuggling in Indonesia

The current timber trade system, controlled by the government regulatingbodies BRIK and ETPIK, stresses the administrative and documentarycomplianceofforestrybusinessesinIndonesia.However,thisisnotenoughbecause these requirements are relatively easy to manipulate and theirenforcement is lax. There is anurgentneed for a timber legality standardthatwouldbemoredifficulttomanipulate,simplertoenforceandeasiertoevaluate–e.g.thestandarddevelopedcollaborativelybyLEI,TNCandotherparties. This will require a lot of political will, commitment and sustainedeffortfromarangeofgovernmentagenciestoendorsethelegalitystandard,developtheimplementationframework,providepublicpolicyincentivesandremove disincentives, allow third party independent verification of legality,andperhapsmostimportantlydevelopacomprehensiveplantobalancethesupplyanddemandfortimberinIndonesia.Whilethisisalottohopefor,itseemstobetheonlywaytomakemeaningfulandlastingprogressontheillegalloggingissueinIndonesia.

�

1. Introduction

Over the last few years, illegal logging and illegal timber trading havedominateddebatesonthecurrentstateandthefutureofIndonesianforestry.IllegalloggingandtheillegaltimbertradehavebeenassociatedwitharangeofnegativeimpactsonIndonesia’senvironment,economyandsociety.Bothactivities are major contributors to deforestation and forest degradation inIndonesia(Gatra,7November2003;PikiranRakyat,22September2003).Theyalsoresultinasignificantlossofnationaltaxrevenue,estimatedatUS$600million�annually(AsiaPulse,�8June2003;MediaIndonesia,�8June2003).Finally, the illicitwealthgeneratedfromillegal timber isasourceofsocialconflictaswellaswidespreadcorruption.

ThedeclineofIndonesiaasamajorproducerandexporterofplywoodandsawntimberisoftenblamedontimbersmuggling.AplethoraofsuchactivitiesistakingplaceinIndonesia’skeyforestedregionsofKalimantan,SumatraandPapua–andtheyaremostoftenpointedoutasthecauseoftheforestrysector’sstrugglesandofillegalloggingasawhole.ThisistheviewofIndonesia’smaintimberproducerandexporterassociationssuchasAPHI(Asosiasi Pengusaha Hutan Indonesia - Association of Indonesian Forest Concession Holders)and APKINDO (Asosiasi Panel Kayu Indonesia – Indonesian Wood PanelAssociation)–aviewregularlycommunicatedatnationalandinternationalforums(JakartaPost,20February200�).

�ForestCrimeasaConstraintonDevelopmentbyMarkBaird,WorldBankCountryDirectorforIndonesia,�3September200�

� | Timber Smuggling in Indonesia

While the Indonesian Ministry of Forestry (MoF) officially holds a morecomplex view of illegal logging and the illegal timber trade anchored onstructural imbalancebetweentheavailable supplyandeffectivedemandfortimber, on numerous occasions MoF has echoed APHI and APKINDO’ssentimentsaboutthecausesandimplicationsoftheillegalloggingcrisis.MoFhascriticizedanumberoftimberimportingcountries,particularlyMalaysiaandChina,foracceptingwhatitcallsstolentimberfromIndonesiaandgivingan unfair advantage to wood-working industries in both countries (JakartaPost,�5October2003).MoFhasalsobeencomplainingaboutinternationaltimbersmugglingringsoperatinginIndonesia’sborderregions,andaboutthelackoftransparencyinmajorregionaltimbertradehubssuchasSingaporeandPeninsularMalaysia(AsiaPulse,�5October2003).Forestlawenforcement(FLE)measuresdeployed in Indonesiahaveoften reflected the assumptionthat the illegal timber trade is externally fundedand it is akeypartof theillegalloggingprobleminvulnerableborderandtransitregions(Kompas,28October2003;PontianakPost,�9June2003).

�

2. Objectives and methods

SinceFLEmeasuresdeployedinIndonesiatoreduceillegalloggingbyzeroinginontheillegaltimbertradeinvolvesubstantialfinancialandhumanresourcesaswellassocialandpoliticalcosts,itisimportanttoexaminetheclaimsbeingmadeabouttheimportanceoftacklingtimbersmugglingincombatingtheillegalloggingprobleminIndonesia.Indoingso,thispaperaimstoinformthe ongoing debates among government institutions, the private sector,donors, NGOs and research organizations about the relationship betweentimbersmugglingandillegallogginginIndonesia.ItalsoseekstohighlighttheadjustmentsneededinIndonesiangovernmentforestpolicy-makingaimedatcombatingillegallogging.

Thepaperfocusesonthefollowingkeyquestions:· WhatistheextentoftimbersmugglinginIndonesia?· IstimbersmugglingresponsibleforillegallogginginIndonesia?· Whatspecificfactorsdrivetimbersmuggling?· Are current FLE policies to curb timber smuggling and illegal logging

appropriate?

ThesampleunitofanalysisforthispaperistheborderzonebetweenIndonesiaand Malaysia on the island of Borneo. Field work has been carried out inseveral locations along the entire length of the border in the provinces ofEast andWestKalimantan aswell as in theMalaysian states of Sabah andSarawak.Thefieldresearchandsubsequentanalysiswerestructuredaroundthefollowingmethodologicalsteps:


· Reviewofavailablepublishedandunpublishedsourcesonthecross-border timber trade, plantation establishment and infrastructuredevelopment

· Analysisofavailabletimbertradedocumentation· AnalysisofremotesensingimageryoftheborderzoneinKalimantan· Aerialsurveyoftheborderlinetoassesscross-borderroadintrusions

andthepotentialforoverlandtimbertraffic· Investigationofasampleoftimbertrafficpointsalongtheborder· Collaborationandexchangeofinformationwithpartnersengagedin

similaranalysesinotherpartsofIndonesia

�

3. The border zone in Kalimantan

TheborderlinedividingIndonesia’sKalimantanandtheMalaysianstatesofSarawakandSabahontheislandofBorneoisanimaginarylinefirstdrawnandagreeduponbytheBritishandDutchcolonialpowersinthe�9thcentury.Thetotallengthofthelandborderis�,840km,asubstantialpartofitpassingthroughsomeofthemostinaccessiblepartsoftheisland(MoF2005).Theindigenousgroups(Dayak,Melayu)splitbythislinehaveuntilfairlyrecentlyignoreditalltogether,movingfreelyalonghundredsoffootpathsconnectingthevillagesonbothsidesofthedivide.Oncetribalwarfareceasedattheendofthe�9thcentury,themovementofpeopleacrosstheborderwaslargelyfortradeandbarterpurposes.

In the �920s and �930s, the Dutch administration began to play closerattentiontothebordertownofNunukanwhenemergedasmajorentrypointforopiumsmuggledillegallyfromTawauontheBritishside.Thesmugglingwas carried out within the framework of the barter trade that was alreadylivelywellbeforetheSecondWorldWar.Afterthewar,itintensifiedfurtherashundredsofnativevessels,knownaskumpitboats,crossedtheborderbackand forth bringing raw materials to Sabah and “smuggling manufacturedarticlesbackhome”(Lee�976:5).Whileinthe�960sand�970sthelistofpopularIndonesianitemsfeaturedrawmaterialssuchasrubberanddriedfishinexchangeforconsumergoods,sincethe�990sthemostcommonlysoughtafterIndonesiancommoditieshavebeentimber,dieselfuel,wildlife,NTFPs(non-timberforestproducts)andcontractlabor.Inreturn,productsbroughtbacktoIndonesiaincludeelectronics,chemicals,clothesandarangeofotherconsumergoods.However,theoriginalbartertradesystem,setupintheearly�900s to exchangean item for an item,doesnot functionanymore; ithas


beenafully-fledgedcash-basedmarketsystemsinceatleastthe�960s.InWestKalimantan,asimilarsystemoftradeexistedbetweentheSambasareaandtheportofSemataninSarawak.Inthe�990s,itcameundertheframeworkoftheFreeTradeZone(FTZ)establishedintheborderbeltoftheMalaysianstateofSarawak(e.g.Tirtosudarmo2002)2.

TheIndonesiangovernmentofficiallydefinestheborderzoneinKalimantanas the area within the districts (kabupaten) contiguous to the internationalborderline.Followingsuchdefinition,theKalimantanborderzonecomprises3 kabupaten in East Kalimantan (Nunukan, Malinau, Kutai Barat) and 5kabupaten in West Kalimantan (Sambas, Bengkayang, Sanggau, Sintang,KapuasHulu)withatotalareaof7.2millionhectares.Thisvastareaisverysparsely populated. In 2005, the total population of Kalimantan’s borderzonewasestimatedatabout260,000people.Sinceasubstantialpartofthispopulationinhabitsvillagesandsmalltownsnearthemaincommunicationarteries(rivers),alargeportionoftheborderregioninKalimantaniseffectivelyuninhabited.

Nearly60%ofthelandarea,orjustover4millionhectares,intheborderzoneisforested.Intermsofbio-physicalcharacteristics,theareaencompassestheupperpartsofallmajorriversystemsinBorneo–e.g.Sebuku-Sembakung,Kayan, Mahakam, Barito, Kapuas, Rajang, Baram. As a result, the forestcover comprises mostly sub-montane and montane forest. Reflecting thecritical importanceof this region for the ecologyof allmajor river systemsinKalimantan, timber extraction in theborder zone is limited and a largeportionoftheforestestateisprotectedasnationalparksornaturereserves.Asof2005,4existingnationalparkscoveredabout2.4millionhectares,whileanother7conservationareaswereunderconsideration.

SettingasidepartsoftheheadwaterregionsinthecentralpartsofKalimantannear theborderwithMalaysia forconservationpurposes isa relativelynewphenomenonthatdatesbackonlytotheearly�990s.Thesecurityapproachthat allocatedall accessible areas to the IndonesianArmedForcespre-datestheenvironmentalpolicy-makingbynearlythreedecades.Intheearly�960s,the military was given full control of all productive forest areas near the

2 Press Release: Indonesian Timber Passing Through Malaysia’s Free Trade Zone (FTZ), (MTC) Malaysian Timber Council 14 May 2004

Krystof Obidzinski , Agus Andrianto and Chandra Wijaya | �

borderwithSarawakandSabah,Malaysia,forpoliticalandsecurityreasons.In �967, this arrangement was formalized when the Ministry of Forestry(MoF) granted a company called PT. Yamaker (an Indonesian militarycooperativecalledYayasanMajuKerja)forestconcessionslicenses(HPH,Hak Pengusahaan Hutan)extendingover�millionhectaresalongtheborderwithMalaysia–843,500hectaresinWestKalimantanand265,000hectaresinEastKalimantan.

Whiledominant,Yamakerhasbynomeansbeentheonlyplayerinvolvedinmanagingtheforestfortimberintheborderzone.AnumberofotherHPHconcessionshavebeenactiveaswell(Table�).Itisinterestingtonotethatanumberoftheseconcessionsaremilitaryownedorcontrolled(e.g.PT.GiriEkawana,PT.DutaRendraMulya).

Table �. Active HPH licenses in Kalimantan’s border zone as of �00�No. Company Location District Area (ha)1. PT.Anuraga S.Engkatat,S.Sey Sanggau 51,0002. PT.KusumaPerkasa

I.T.S.Sekayam,S.Landak

Sanggau,LandakBengkayang

80,000

3. PT.BenuaIndah S.EmbalohHulu,S.Sunuk

KapuasHulu 51,300

4. PT.LanjakDerasJayaRaya

S.Embaloh,S.Kapuas

KapuasHulu 45,740

5. PT.TawangMeranti S.Ketungau,S.Tawang

KapuasHulu 49,200

6. PT.GiriEkawana - Malinau 110,0007. PT.DutaRendra

MulyaS.- Malinau,Kutai

Barat215,000

Source:MoF(2005)

Theforestareaslatedforconversiontootherusesintheborderzoneisverysmall as it amounts to only 23,000 hectares (MoF 2005). It is thereforedifficulttounderstandhowactiveandplannedplantationestatesintheareacancoverhundredsofthousandsofhectares(Table2).ItispossiblethatthePT.FinantaraIntigaHTI(establishedtofeedtheplannedpulpandpapermillinWestKalimantan)extendsoveradjacentforestconversionareasbeyondtheborderzone.


Table �. HTI concessions in Kalimantan’s border zoneNo. Company District Area (ha) Status1. PT. Finantara Intiga Sanggau, Sintang 299,700 Active2. PT. Lahan Sukses Sanggau 14,460 Not Active3. PT. Mayang Adiwinata Sanggau 8,060 Not Active

Source:MoF(2005)

Other planned plantation development projects, such as oil palm, clearlyindicatethatproductiveforestareasaretobeconvertedtocreatethenecessaryspace for plantation estates (Table 3). While the areas involved are small,theyhave recentlybeenusedas aprecedent topropose a�-million-hectareoilpalmmegaprojectalongtheborderinKalimantan(e.g.MediaIndonesia,30 June 2005;WWF Indonesia, 2006;Wakker 2006). Once the Ministryof Agriculture (MoA) announced the project plan in 2005, it faced strongcriticismfromNGOs,researchorganizationsanddonoragencies.Tocontainthe fallout, the government agencies in charge have been modifying theproject,whichwillalmostcertainlybedownsized.Itisclear,however,thatitwillbeimplemented.

Table �. Oil palm concessions in Kalimantan’s border zoneNo. Company Permit Area (ha)1. PT.RentangNusaGemilang Persetujuanpencadangan

MenhutNo.1123/Menhut-II/92tanggal16-12-1992

7,200

2. PT.YamakerSawitSari PersetujuanpencadanganMenhutNo.281/Menhut-II/98tanggal26-2-1998

13,000

3. PT.PlantanaRazindo SKPelepasanMenhutNo.899/Kpts-II/99tanggal14-10-1999

30,551

4. PT.SatrindoJayaAgroPalma(formerlyYamakerSatrindoJaya)

SKPelepasanMenhutNo.174/Kpts-II/2000tanggal29-6-2000

17,464

5. PT.UsahaMalindoJaya(formerlyYamakerMalindoJaya)

SKPelepasanMenhutNo.175/Kpts-II/2000tanggal29-6-2000

18,132

Total 86,447Source:MoF(2005)

Krystof Obidzinski , Agus Andrianto and Chandra Wijaya | �

Historically,plantationdevelopmentinIndonesia,whetherHTIoroilpalm,hasbeencarriedoutwith strong relianceonmigrant labor,primarily fromJava.TheplansforHTIandoilpalmprojectsintheborderzoneofKalimantanenvisionsimilarlyextensiveemploymentoftransmigrants(Table4).Asofnow,however,onlyonetransmigrationprojecthasbeencompleted,while4otherprojectsawaitrealization.

Table �. Transmigration projects in Kalimantan’s border zoneNo. Location District Area

(ha)Permit Planned

number of families

Realization

1. SeluasPisang

Sambas 1,400 476Tahun19967Oktober1996

250 -

2. Seluas Sambas 2,200 240Tahun198512Agustus1985

500 -

3. Berjokong Sambas 4,750 241Tahun198512Agustus1985

1,500 -

4. SungaiDangin

Sanggau 3,700 153Tahun19863Juni1986

500 478

5. DuaPetunggu

Sambas 7,660 342Tahun198612Agustus1985

750 -

Source: MoF (2005)

The border zone in Kalimantan – summary:· Totallandarea7.2millionhectares;4millionhectaresofforest· Population260,000;largeareasuninhabited· Longhistoryofcross-borderinteractions,trade· 2.4millionhectaresofprotectedareas· Untilrecently,over�millionhectaresofforestunderHPHconcessions

controlledbythemilitary· Over300,000hectaresofHTIplantations· Vastoilpalmplantationsplanned to spurdevelopmentand improve

security

�0

4. Timber trade across the border in East Kalimantan

In2000and200�,foranumberofreasonstheIndonesiangovernmentturnedincreasinglymoreattentiontotheborderzoneinKalimantan.Onthepoliticalfront, Indonesia faced a difficult territorial dispute with Malaysia over theislandsofSipadanandLigitan–adisputetheIndonesiansideeventuallylost(The International Court of Justice 2002; Jakarta Post, January 20, 2004).ThegovernmentinJakartawasalsostrugglingatthetimetomanageawaveofdecentralizationexuberancesweepingacrossthecountry.IntheborderlandsofEastKalimantan,thiswavemeant,amongotherthings,practicallyunrestrictedflowoftimberforexport(Muhtadi�999).Therehasalsobeenanincreaseindrugtraffickingaswellasinthetradeofweapons,ammunitionandexplosives(HRW2006).

It is estimated that in 200� and 2002, East Kalimantan supplied up to 2millionm3oftimbertotheMalaysianstateofSabah–nearlyallofitillegally(Smith et al. 2003, Tacconi et al., 2004). MoF estimated that large-scalesea-based smuggling (barges, container ships) through the port ofTarakanaccounted for up to �.2 million m3 of timber smuggled annually (RadarTarakan,28September2004).Small-scalesea-basedsmuggling(rafts,woodenvessels)supplied330,000m3peryear.Theremainingvolumeoftimber(about500,000 m3) was delivered to Sabah overland. The overland timber trafficbenefitedgreatlyfromthecompletionoftheSerudong-Kalabakan-LongPasiaroad that runs for over �00 km along the border with Indonesia, in someplaceslessthan500metersfromtheinternationalborderline.Fromthatmajorroad,dozensofdirttracks(jalan tikus)wereconstructedintotheex-YamakerforestconcessionareainEastKalimantan(Muhtadi�999)

Krystof Obidzinski , Agus Andrianto and Chandra Wijaya | ��

While2millionm3of timber smuggled fromEastKalimantan is indeed alargevolume,itneverbecamethelifelineforSabah’swoodworkingindustryasthemassmediainIndonesiaoftenliketoproclaim.Eveninthepeakyearsofsmuggling,timberfromEastKalimantansuppliedrawmaterialforlessthan�4percentoftheinstalledwood-processingcapacityinSabahwhichtotals�5millionm3perannum.

4.1 Yamaker’s tale: new faces, old habitsDespite PT.Yamaker holding one of the earliest and most extensive HPHconcessions inEastKalimantanand in Indonesia as awhole, the companyneverdevelopedacomprehensiveplanforsystematicmanagementoftheareaitwasofficiallyinchargeof.Fromthelate�960suntilthecancellationofitslicensein�999,Yamaker’spositionwasthatofapermitholderthatacceptedsolicited and unsolicited bids for logging operations from various timbercontractors.

ThescantattentionYamakerpaidtoitsforestconcessionsturnedthemintoahotbedofmismanagementandirregularities.Thereareindicationsthatinthelate�960s,Yamakerconcession-holders,possessing little forestryexperienceandnooperationalcapital,hadalreadybeenorientedtowardsarrangementsforcross-bordertimbertradeandinvestment.Localgovernmentreportsfromthemid�980sdescribeheavyboat trafficbetweenYamaker’s concession inEastKalimantanandMalaysia(KanwilDirjenPerhubunganLaut,�987).In�987,forinstance,atleast�50boatsadaypliedtheNunukan-TawauborderareabetweenIndonesiaandMalaysiawithoutproperdocumentation.

Alongsidethesmall-scaletraffic,large-scaleillegaloperationsweregoingonaswell.AnindicationofYamaker’slargescaletimbersmugglingcametolightforthefirsttimein�997.InJanuaryofthatyear,theMalaysianpressreportedonatimbersmugglingcaseinvolvingaTawaubasedcompanySyarikatRaspandSdn. Bhd. and “a major forest concessionaire from the Indonesian side ofthe border.” Syarikat Raspand Sdn. Bhd. was caught ferrying over 3,000undocumentedlogsfromEastKalimantan(Bangkuai�997).Itsoonbecameknown that this was only about one-seventh of the total amount that hadalreadybeenshippedillegallytoShinkoKaiunCo.,Ltd.atimberimportingcompanyinJapan(Bingkasan�997;New Straits Times�997a,b).

�� | Timber Smuggling in Indonesia

WhileYamakersurvivedthefalloutfromthiscase, itcoulddolittletohaltthecriticismandpublicpressureaftertheresignationofPresidentSuhartoin�998.In�999,allYamakerforestconcessionareaswerecanceledandhandedover to PT. Perum Perhutani. However, PT. Perhutani’s strength had beenthemanagementofteakforestsinJava,nottropicalrainforestconcessionsinKalimantan.Thecompany’s limitedmanagerialcapacitywas furthererodedby pressure from the military for production sharing arrangements. WhilePerhutanistruggledtodrawupaplantomanagetheex-Yamakerconcessionareas, ex-Yamakerplayers and theirMalaysian counterpartsused thepowervacuumforactivitiesoftheirown.ASabah-basedcompanySalehaSdn.Bhd.constructed several roads cutting up to �0 km into Indonesian territory,extracting vast amounts of timber as it moved along, and shipping it toKalabakanlogyards(e.g.Huttche2000).

PT. Perhutani never produced a comprehensive management plan for theforestareasinKalimantanitwasentrustedwith.Instead,in2002itproposedanumberofplantationprojectsfordevelopmentinthearea–allstartingwiththeclearingofforestareasofficiallydeemeddegradedbeyondrecovery.Inthesameyear,amilitarybackedcompanyPT.AgrosilvaBetaKartika(ABK)andamilitarycooperative(Inkopad)inNunukanweregiventhegreenlighttoturnapartoftheex-YamakerconcessionareainEastKalimantanintoaoilpalmplantation. Predictably, ABK and Inkopad hired a Malaysian counterpartfrom Sabah –Tunghup Sdn. Bhd. – to carry out land clearing (OtonomiCenter,Nunukan–pers.comm.).AsinthecaseofSalehaSdn.Bhd.,TunghupconstructeddozensofdirtroadsfromSabahintotheex-Yamakerconcessionarea,extractingvastamountsoftimberforexporttoMalaysia.However,oncethe IPK land conversion permit (IPK, Izin Pemanfaatan Kayu) expired in2003,allthreeventurepartnersdisappeared.

Simultaneously with the operations of ABK-Inkopad-Tunghup, the Riau-basedSuryaDumaigroupalsobecameinvolved inoilpalmprojects intheex-Yamakerarea (Tempo,2July2006).SuryaDumaiwas less interested inoverlandtimbertraffic,insteadrelyingonriverandsearoutesforlogtransportuntiltheendofitsoperationsinlate2003.Inlate2002,oneofSuryaDumai’ssubsidiarieswascaughtillegallyshippingbargesoflogstoTawau.Althoughthe subsidiary and theparent company evaded any legal repercussions, the


disputeovertheirIPKpermitsprovedmoredifficulttoneutralize.In2003,itwasrevealedthatSuryaDumai’sIPKlandconversionpermits,coveringover400,000 ha of the ex-Yamaker HPH concession, had been issued illegally(Kompas,22October2005).ThecaseimplicatedtopgovernmentofficialsintheprovinceofEastKalimantan,includingtheGovernorandtheHeadoftheProvincialForestryBureau.

TheideaofoilpalmplantationsalongtheborderwithSabahwasbrieflyrevivedin2004bytheprovincialgovernmentasawaytosolvetheunemploymentproblemcausedbythousandsofillegalIndonesianworkersbeingexpelledfromMalaysiatothebordertownofNunukan(Tempo,4February2005).Withinthiscontext,developmentandsecurityconcernswerealsokeyconsiderations.Perhapsbecausepreviousoilpalmfiascoswerestillfreshinthepublicmemory,thisnewplanmetwidespreadpubliccriticism.

4.2 Stray Roads While the oil palm plans in the border zone were put off indefinitely, theconstructionof roadsproceededbriskly. Inmostdistricts, decentralization-baseddevelopmentplansenvisionedtheconstructionofaroadnetworkthatwouldeventuallyconnecteverysub-district(kecamatan).Theeasiestwaytoaccomplishthisplanwasthroughcontractsallowingthecontractorstoextracttimberascompensationduringtheroadbuildingprocess.SinceinmostborderkecamatanthenearestcompetentroadbuilderswereinMalaysia,cross-borderroadconstructionarrangementssoonbecameanestablishedpattern.

While the construction of roads may be economically justifiable, neitherdistrictsnorprovincesactuallypossesstheauthoritytoapproveroadprojectsthat cross international borderlines. It has also been shown time and timeagainthatroadconstructionofthiskindisascamthatallowsconstructioncompaniestologvastareasofforestinexchangeforadirttrackbarelypassableduringthedryseason,letalonetherainyseason.Thedifferencebetweenthehigh cost absorbed by the districts from uncontrolled logging and the fewbenefitsgainedfromgettingaroadlinkisenormous.

In East Kalimantan there have been 3 such cases of cross-border roadconstruction(oneisstillongoing).In2004-2005,districtofficialsrepresenting


Lumbis Subdistrict in the district of Nunukan made an agreement with alogging company in Long Pasia in Sabah to construct a road that wouldalleviate the isolation of the kecamatan. The Malaysian companies CahayaMatahari andSariwantoSdn.Bhd.promptlybeganconstructionof a�00-km-longroad.Innotime,theroadstartedto“branchout”tovariousnearbyvillages – Labang, Panas andTao Lumbis. As the destruction of the forestalongtheroadbeltbecameobvious,villagecrowdsconfrontedthecompaniesdemanding compensation. Cahaya Matahari and Sariwanto Sdn. Bhd.promptlyevacuatedtoSabah,leavingsomeoftheirmachinerybehind.

Duringthesameperiod(2004-2005)andthroughsimilarsubdistrict/districtbasedarrangements,aroadwasconstructedbetweenthevillageofLongBawaninKerayanSubdistrictandBa’kalalaninSarawak.Thedirttrackthatwasputinplacesupportsnotrafficatall;thebulkofconsumergoodsarestillferriedintoLongBawanbyair.

TheonlyroadbuildingprojectstillongoinginEastKalimantan’sborderzoneisinApoKayanwhereaMalaysianfirmTapakMegahhasconstructeda40-km-longroadlinkingLongNawangontheIndonesiansidetoaforestconcessionroadnetworkinSarawak.TheroadconstructionistoproceedbeyondLongNawang.

AmongthemostcommonwaysforIndonesianandMalaysianborderbusinesscircles to extract timber illegally has been to quietly construct roads intoIndonesianterritoryandshiptimberbacktotheMalaysianside(KaltimPost,3September2003). In2002, theWWFoffice inTarakancame forthwitha report thatSarawakbased loggingcompaniesSamlingPlywood-Miri andBaramRiverClubhadbuiltroads illegally intoKayanMentarangNationalPark(KaltimPost,7November2002).

ACIFOR2005surveyconfirmedtheseintrusions.Theanalysisof2003satelliteimagery for the border area in East Kalimantan showed at least 56 pointsalongtheinternationalborderlinewhereroadsfromtheMalaysianstatesofSabahandSarawakintrudedintoIndonesianterritory.Thebreakdownwasasfollows:•43roadspenetratingtheex-YamakerHPHarea•�roadconnectingLumbiswithLongPasia


•�roadconnectingLongBawanwithBa’kalalan•2 roads from the Malaysian forest concession Samling Plywood-Miri

intruding(about2km)intoKayanMentarangNationalPark•�roadfromtheMalaysianforestconcessionJebadiSdn.Bhd. intruding

(about�km)intoKayanMentarangNationalPark•6roadsfromtheMalaysianside(concessionownershipunclearbutappears

tobeJebadiaswell)intruding(about�km)intoKayanMentarangNationalPark

•2roadsfromtheMalaysianforestconcessionCuriahSdn.Bhd.intrudingintotheApoKayanarea–LongNawang

Aflightovertheborderareain2005revealedthatalloftheseroadswerestillclearly visible. It seemed certain that all roads in the ex-Yamaker area hadbeenoutofuseforquitesometime.ThesamewasthecasewithLumbisandLongBawan.Ontheotherhand,theremaining9roadintrusionsintoKayanMentarangandApoKayanstillappearedfresh.

WithasmallnumberofroadintrusionsfromSarawakstillpossiblyinuse,itisneverthelessclearthatland-basedtimbertraffickingfromEastKalimantanisnotparticularlysignificant.SincetheoveralllengthofroadintrusionintoKayanMentarangamountstoapproximately��kmandastimberextractionisunlikelytobepossiblebeyond200metersfromtheroadduetotheroughterrain, thetotalvolumeof timberthatcouldhavebeenharvested isabout�00,000 m3. The intrusions into Apo Kayan are more difficult to estimatebut are likely to be even less significant because parts of the area containgrassland.

4.3 Turning to palm oilWhileitiscommonknowledgethatplantationprojectsandroaddevelopmentintheborderzonehave,forthemostpart,beenfrontsforillegalloggingandtimbersmugglingtoMalaysia,plansforsimilarenterprisescontinuetoabound.Ideashavebeenfloated,forinstance,toconstructa“northernartery”highwayspanningtheentirelengthoftheborderinEastandWestKalimantan(Wakker2006).Thereisalsothe�-million-hectaremegaoilpalmprojectproposalthatenvisagestheconversionofswathesoftheforestalongtheborderline(MediaIndonesia,30June2005;WWFIndonesia,2006).Theofficiallydeclaredmain


purposeoftheprojectistostimulatedevelopmentandstrengthensecurityintheborderzone.FollowingcriticismfromNGOs,researchorganizationsandinternationaldonoragencies,theoriginalprojectscenariohasbeenreplacedbyamoremodestplanproposingtheestablishmentofseveralsmalltomedium-sizedoilpalmplantations.It isstillnotclearwherewithintheborderzoneenoughnon-forestlandwillbefoundfortheseplantations,asrequiredbytheprevailingforestryregulations.Ineithercase,itseemslikelythattheoriginaloilpalmplantationapplicants,withcloseconnectionstoYamaker,willplayamajorrole(seeTable3).

Amongthespin-offideasfromthemegaoilpalmplantationprojecthasbeentheproposalbythedistrictofMalinautoconverta3-km-widebeltalongitsborderswithMalaysiaintoplantationstospurdevelopmentandstrengthensecurity(WartaWanarisetMalinau2004).Notleastbecausesuchaproposalwould clear parts of Kayan Mentarang National Park (a world heritagebiodiversitysite),theplanhasbeencriticizedand,forthetimebeingatleast,shelved.

4.4 Timber trade out of Nunukan: then and nowIn 2005, the only continuously ongoing timber smuggling activity in EastKalimantanwascenteredintheNunukanareaandinvolvedillicitextractionand transport of squared logs toTawau, Sabah.Timber trade of this kindiscarriedoutwithintheframeworkofabartertradethatdatesbacktothecolonialperiod. In�993,barter tradebetweenEastKalimantanandSabahwasformalizedwiththecreationofTawauBarterTradeAssociation(BATS).BATSisanorganizationthathandleswhatisineffectthecash-basedtradeofrawmaterials fromIndonesia forMalaysianconsumergoods,but in recentyearsithashadastrongfocusontimber.Thereareabout40timber-processingplantsinTawauthatrequireatleast�millionm3ofrawmaterialannually.

ThetimbertradefromNunukanhashistoricallybeenfocusedonsea-basedtransportthroughtheNunukanStraitoraroundtheIslandofSebatiktotheMalaysianportofTawau.TheroutearoundSebatikIslandistheonepreferredbyroundwoodexporterswhooperateduntilthere-impositionofalogexportbanbytheIndonesiangovernmentin2002.Thisrouteisalsousedbysquarelog/sawntimbersmugglersfromcentralandsouthernpartsofEastKalimantan.


Intheaftermathofthelogexportban, logsmugglingcontinuedalongthisroute,butonmuchdiminishedscale.Themodusoperandiof roundwoodsmugglingreportedlyinvolvessmallbargesorlograftsbeingtowedfromthecoasttolargebargesorcontainershipsanchorednearinternationalwatersanddestinedforChina,IndiaandJapan(Kompas,20November2004).Sourcesinthefieldindicate,however,thattheseactivitieshavebeenrelativelyrareastheyrequirethecollaborationoftop-levelofficials.Consequently,smugglingof this kind is unlikely to be significant in terms of the volume of timberchanginghands.

The Nunukan Strait route is preferred by timber traders who hire loggingteamsintheSebuku-Sembakungareatoproducesquarelogs.BATSofficialsinTawaustatethatupuntil2003,eachmonthabout�80timberboats(eachwithaloadof40-60m3foramonthlytotalofupto��,000m3)arrivedfromNunukan.Inaddition,numerousotherboats(fromotherpartsofKalimantanandSulawesi)madeportcallsandraftsofsquarelogswerehauledinaswell.

In2005,thetradeinsquarelogsthroughtheNunukanStraitwasstillineffectbutinamuchdiminishedform.Thelatestresearchshowstherearestillabout50loggingteamsspreadacrosstheKalimantanmainlandfacingtheislandofNunukan.Theirproductionoutputstillreaches4,000m3permonth.However,increasingly uncertain passage and less interest amongTawau based buyersduetoincreasedpublic,bilateralandinternationalscrutiny,placeconsiderablelimitations on the trade. The small volumes traded are just not worth theriskfortheTawauindustryoperativeswhoareinclinedtoobtainmorerawmaterials from Sarawak, Papua New Guinea and elsewhere. It would havebeenadifferentstoryifNunukandistricthadawelldevelopedroadnetworkintheproximityoftheborder–asisthecaseinWestKalimantan.Allinall,thecurrentcross-bordertimbertrafficinEastKalimantan’sborderzoneisafractionofwhatitusedtobe.Whilein200�-2002theprovincesuppliedupto2millionm3oftimbertoSabah,thevolumesoftimbersmuggledacrosstheborderin2005areestimatedatabout200,000m3.


Timber trade across the border in East Kalimantan – summary:·Timbersmugglingatitspeakin2000-2002,upto2millionm3annually

–largescalesea-basedsmuggling(�.2millionm3),small-scalesea-basedsmuggling(330,000m3),land-basedsmuggling(500,000m3)

·Networksofillegalroads(jalan tikus)constructedacrosstheborder·Evenatitspeak,smuggledtimberfromEastKalimantansuppliedless

than�4%oftherawmaterialneededbySabah’swoodworkingsector·Forest management policy along the Indonesian side of the border

never firmly established.To-and-fro on HPH concessions, Perhutanimanagement,IPKlandclearing,oilpalmdevelopment.

·Virtually all infrastructure development (roads, oil palm) aimed attimberextractionforshort-termgain

·FLEinIndonesiaandtheinternationalpressureonMalaysiaresultedinadrasticreductionoftimbersmugglingfromEastKalimantantoSabah.In2005,timbersmugglingwasdowntoabout200,000m3

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5. Timber trade across the border in West Kalimantan

IncomparisontoEastKalimantan,WestKalimantanhasamuchmoreintensehistory of cross-border interactions with the Malaysian state of Sarawak,particularlyoverland.Oneof the largestethnicgroups inWestKalimantanistheIban,alsoadominantindigenouscommunityinSarawak.Asaresult,thetrafficofgoodsandpeoplebetweenthecommunitiesonbothsidesoftheborderhasalwaysbeenintense,anditcontinuestobethecasetoday.Thereareatleast50knownfootpathsconnectingnativecommunitiesonbothsidesoftheborder,alongwhichthetrafficisentirelyunregulated(PontianakPost,7August2004).

Theuncontrolled trafficof thiskindwasnotaproblemwithin thecontextoftraditionalsubsistence-basedeconomies.However,thishaschangedwiththeprogressofmodernization,lifestylechangesandincreasingintegrationofWestKalimantan’sborder zone into theworldmarket.Such intensificationwas facilitated, inpart,by favorablegeographical and transport conditions.PracticallytheentireborderbeltinWestKalimantanisaccessiblethroughtheKapuasRiveranditsmanynavigabletributaries.Bythelate�990s,asubstantialroadnetworkwasinplacetoo(e.g.KartodihardjoandSimangunsong2004).

Theimprovedaccesstotheborderspurredaboomintrade.Whilethiswasthedesiredandexpectedoutcomeofinfrastructuredevelopment,whatdistrictandprovincialofficialsdidnotanticipatewasthatthevastmajorityofthistradewouldbeuncontrolledor illegal.Since rawmaterials andnatural resourcesfetchhigherpricesinMalaysia,theybecamethekeytradeditemsregardless

�0 | Timber Smuggling in Indonesia

oftheregulations.Dieselfuel,wildlife,fish,chickens,illegalworkers,drugs,firearms, ammunition– all these and more are standard border contrabanditems (Pontianak Post, 30 July 2004, 27 November 2003, �5 November2003).

5.1 Trucking and floating the timberTimberwasnotfarbehind.AsinEastKalimantan,thetimbertradeexplodedhereafter�998.TheexpansionofillegaltimbertradinginWestKalimantanappearstohavebeengreatlyfacilitatedbythedevelopmentofnewcross-borderroadsandtheirminimalcontrol(e.g.Lawrenceet al.2003).

EntikongandBadauaretwopointsinWestKalimantanalongtheborderwithSarawakthatexemplifyhowtheconstructionofroadsandthelackofeffectivecontrolshaveledtotheescalationintimbertraffic.JustafewyearsafterthefeederroadsfromthemainPontianak-PutussibauarteryreachedEntikongandBadauandlinkedbothtownswiththeneighboringurbanareasinSarawak,hundredsoftimber-loadedtruckspliedtheroutesdaily.Itisestimatedthatin2004,about200truckstransportedtimberfromWestKalimantantoSarawakthroughthebordercrossingatEntikong,anequivalentof�,000m3perday,up to 30,000 m3 per month, or 360,000 m3 per year (Pontianak Post, 6December2004).AsimilarintensityoftrucktrafficwasobservedinEntikongin2005(Kompas,2�March2005,5March2005).BadauinKapuasHuluusedtobefaraheadofEntikongintermsofthevolumesoftimbertraded.In2003upto500trucks(mostofthemtrontonvehiclescapableofferrying20-30m3oftimbereach)pliedtheroutetotheMalaysiantownofLubokAntuinSarawak.In2004,thetrafficwasreportedlydownto200regular-sizedtrucks(PontianakPost,28July2004).ThismeansthevolumeoftimberleavingWestKalimantanthroughBadauisupto360,000m3peryear.

The illegal timber traffic in West Kalimantan is not limited to land-basedoperations,althoughlandtransportisthedominantmeansofshippingtimberacrosstheborder.Riverandseatransportalsoplayasignificantroleincross-border timber trading. Just as in East Kalimantan the main destination oftimber-ferryingboats toSabah is theport ofTawau. InWestKalimantan’sneighboringstateofSarawaktheequivalentistheportofSematan.In2004,thetimbertrafficinthisportwasreportedtobefarmoreintensiveincomparisonwithTawau(RadarTarakan,28September2004).Itisestimatedthatupto


500,000m3oftimberisshippedtherefromthehinterlandofWestKalimantan,firstdowntheKapuasRiverandthenalongthecoast(EIA/Telapak200�).

Overall,in2005thevolumeofillegaltimbertradedinWestKalimantanreachedapproximately�.2millionm3.Thisfigurehasbeenacauseforconcernforlocalgovernmentofficials,NGOsandnationaldevelopmentandforestpolicymakersalike.Themostcommonresponsehasbeentoblameagents/financiersfromMalaysiaforfuelingthetimbersmuggling.Theuncontrollabilityofthetimbertrade prompted numerous forest law enforcement (FLE) operations in theborder region. The situation also generated proposals for a range of mega-projectsolutions.

5.2 Timber gangsters?ItistruethatMalaysiantimberbuyersareastronginfluenceinWestKalimantan’sborder zone.On the Sarawak side of the border, there is a free trade zone(FTZ)thatallowsfortheimportandexportofgoodswithfewregulations.The area also hosts a substantial timber processing capacity. Naturally, theMalaysiansawmilloperatorsseektherawmaterialsthatgivethemthelargestprofitmargin;andsuchrawmaterialcomesfromWestKalimantan.

The import of sawn timber and square logs from West Kalimantan is notcarried out by Malaysians alone. In fact, timber traffic to Sarawak wouldneverbepossiblewithout the involvementof thousandsofpeople inWestKalimantanfromvillages,tologgers,district/provincialofficialsandsecurityofficers(PontianakPost,�9June2003).InBengkayangDistrict,timbertruckscrosstheborderunhinderedafterpayingIDR�00-200,000pershipmenttothe security personnel at the checkpoint. Similarly, in Sambas and KapuasHuludistricts,timbertruckspaysimilaramountsat3borderposts(police,armyandcustoms)onthewaytoSarawak.

Iftheabovepaymentsmaybeseenasillegalbribes,atleastonedistrictinWestKalimantan,KapuasHulu,decidedtointroducelegislationthatwouldenableittoimposeataxontimberbeingshippedfromitsterritory.Thetaxwentintoeffectand,atleastuntil2004,KapuasHulucollectedIDR50,000fromeachtruck crossing into Sarawak at Badau (Dermawan 2004, Kompas, 24 June2004).ThetimberenteringSarawakfromWestKalimantanthroughallkey


entrypoints(Sematan,Biawak,Serikin,TebeduandLubukAntu)isboughtbyHarwoodSdn.Bhd.,acompanyappointedbySarawakTimberDevelopmentCorporation(STDC),themainregulatoroftheforestrysectorinSarawak,topoolandprocessalltimberintheFTZ.Animporttaxof�0Ringgitperm3isleviedonthetimber,whichcansubsequentlybedistributedtoanylocationin Malaysia. While originally virtually no Indonesian documentation wasrequiredforprocessingimportedtimberinSarawak’sFTZ,duetoincreasinginternationalscrutiny,in2005HarwoodSdn.Bhd.begantorequireSKSHH(Surat Keterangan Sahnya Hasil Hutan)legalitycertificates.In addition to land and water-based timber traffic, there have also beeninstancesofcross-borderintrusionsbytheMalaysiantimberconcessionaries.The2003satelliteimageryindicatestherewere8�pointsalongtheborderinWestKalimantanwhereroadsfromadjacentloggingconcessionsinSarawakentered Indonesian territory. There were 5 roads intruding into BetungKerihunNationalPark;twofromHakHoldingsSdn.Bhd.andthreefromPasinSdn.Bhd.OtherroadsalongtheborderoriginatedfromtheconcessionsofSabalSawmillSdn.Bhd.,JangkarTimber,SyarikatJayaKayuAsalSarawakSdn.Bhd.,LunduSawmillSdn.Bhd.,BTSF,LanabandSanyanLumberSdn.Bhd.NGOsinWestKalimantanreportthattheseintrusionsdidnotcontinuein2005(KAIL–pers.comm.).

MuchofthetimbershippedfromWestKalimantantoSarawakcomesfromconservationareasornationalparks.WestKalimantanhoststwoconservationareasofglobalsignificance:DanauSentarumNationalPark(�32,000hectares)and Betung Kerihun National Park (800,000 hectares). Both parks havesustainedsignificantdamageduetoillegalloggingandtheillegaltimbertrade.Itisestimatedthatbetween2000and2003,forinstance,atleast200,000m3oftimberwasextractedillegallyfromBetungKerihunNationalPark(Kompas,8July2003).

5.3 Groping for solutionsBoth local (district,provincial) aswell as centralgovernmentauthorities inIndonesiahavebeenatalossastohowtoaddresstheillegalloggingandillegaltimber trade problems in West Kalimantan. Since both activities involvethousandsofrurallivelihoods,theauthoritieshavetriedacombinationofFLE


measures anddevelopment incentives tobring the situationunder control.Therecurrentkeyproblems,however,arealackofclearobjectivesandpoorimplementation.

AsinEastKalimantan,since2000thesecurityapparatusinWestKalimantanhas launched a series of FLE operations codenamed Wanalaga and OHL(Operasi Hutan Lestari,OperationforSustainableForest).Theimpactoftheseoperationshasnotbeenclearandisatopicofcontinuingdebate(PontianakPost,9June2005).Wanalagainparticularhascomeunderfireforallegedlysinglingoutruralcommunitiesratherthanhuntingdown“thebrainsbehindillegal logging and timber smuggling”. Wanalaga officers have also beencriticized for receiving money from sawmills and timber traders in WestKalimantan in exchange for their exclusion from investigation (PontianakPost,28July2004).ThePoliceCommandofWestKalimantantriedtodealwiththeseissuesbyintensifyingFLEoperations,launchingairsurveillanceoftheborderandparticipatinginOHLforestlawenforcementinitiativesstartedin2004(PontianakPost,6August2004).

Ontheeconomicfront,thereareseveralconflictingdevelopmentinitiativesbeing proposed, which makes it difficult to predict their implications andfutureoutcomes.Ontheonehand,thereisapushtolegalizetheillegalcross-bordertraffic.ThefirststepinthatdirectionwasturningEntikongandBadauinto official border crossing posts (PLB, Pos Lintas Batas). The provincialgovernmenthas also set up aCoordinating Body forBorderDevelopment(Badan Koordinasi Pengelolaan Border) tasked with establishing borderdevelopmentcentersinselectlocations.Itisunclearwhatthefocusofsuchdevelopmentcentersissupposedtobe.Atonepoint,theideawastodevelopalocalwood-workingindustry.Thereisalsoanongoingefforttopromotetheestablishmentofastringofoilpalmplantationsintheborderzone(Kompas,23December2005).Incongruously,in2003,aparallelgovernment-sponsoredinitiativewaslaunchedtoencouragethedistrictsthathostDanauSentarumandBetungKerihunnationalparksinWestKalimantantobecomeconservationoriented(KartodihardjoandPutro2004).


Timber trade across the border in West Kalimantan – summary:· Longhistoryofcross-bordertrade· The emergence of timber traffic facilitated by the development of a

networkofroads· In2004,land-basedillegaltimbertrafficreached720,000m3through

theEntikongandBadaubordercrossings· Sea-basedtrafficdelivered500,000m3toSarawakthesameyear· Illegalcross-bordertimbertrafficiscondonedbylocalauthorities,who

obtaintaxrevenuefromitfordistrictbudgets,nottomentionfundsforprivateenrichment

· LiberaltraderegulationsinSarawak,Malaysia,particularlyintheFreeTrade Zone (FTZ), create an unlimited market for undocumentedtimberfromIndonesia

· Illegalcross-borderroadsintrudeintoIndonesianterritory· FLEoperations on the Indonesian side extensive, but their integrity

compromisedandimpactlimited· TheinternationalmediapressureispushingSTDCtotightencontrols

inSarawak’sFTZ

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6. How significant is cross-border timber smuggling within the context of illegal logging in Indonesia?

It is a commonly accepted view that over the last several years, timbersmugglinghasresultedinvastvolumesoftimberbeingstolenfromIndonesia,causingseriouseconomiclossesandextensiveenvironmentaldamage.Timbersmugglinghasalsobeenpresentedasthemaincauseofillegallogging.In2003,Indonesia’sMoFreportedthatupto�0millionm3oftimberwassmuggledoutof the country annually (Dephut2003).Papuaalonewas estimated tosupplyupto600,000m3permonthfor illegalexport,primarily toChina.AccordingtoMoF,in2003Papuasuppliedbetween6and7millionm3oftimber for illegal trade, while the remainder (approximately 3 million m3)camefromKalimantanandSumatra.Ayearlater,EIA/TelapakreportedthatPapua’scontributiontotimbersmugglingdroppedto300,000m3permonth(EIA/Telapak2005).

Following the extensive FLE crackdown on timber smuggling in Papua inearly 2005 – a crackdown brought about by MoF 2003 and EIA/Telapak2005reports– illegal timbershipmentsfromPapuahavevirtuallystopped.InKalimantan,whilein2002cross-bordertimbersmugglingreachedabout4millionm3annually,asaresultofFLEandinternationalpressurein2005the smuggling dropped to around �.5 million m3. Partner reports fromSumatra indicate thecurrent levelof timber smuggling fromthe islandarein thevicinityof�millionm3annually.Asa result,over the last2-3yearstheoverallmagnitudeof timber smuggling fromIndonesiaappears tohavedeclineddramaticallyfrom�0millionm3tolessthan3millionm3–adeclineofover70%.ThecombinedeffectofFLEoperations,internationalscrutinyandpublicaswellasmarketpressureappearstohaveledtothisremarkableturnaround.


While indeed successful, the progress in curbing the illegal timber tradehasbeenachievedinwhat isarguablytheareaof leastconcern.Evenwhentimber smuggling was at its peak in the early 2000s – reportedly reachingupto�0millionm3–itwasstilllessthanaquarteroftheoverallvolumeoftimberextractedillegallybyIndonesiantimberconcessionariesfordomesticconsumption,processingandexport(MFP2006).Remarkably,withtimbersmugglingdownby70%,recentlyMoFhasstatedthat illegalextractionoftimberinIndonesiacontinuesessentiallyunchanged,hoveringataround40millionm3oftimberperannum(BisnisIndonesia,6July2006).

While it is evident that illegal extraction, processing and trade of timberwithinIndonesiaaremuchmoreurgentproblems(volume-wise)thantimbersmuggling,italsoapparentthatcompleteeliminationoftimbersmugglinginIndonesiawillbedifficulttoachieveduetowell-entrenchedincentivesagainstlegaltimbertradepractices.Theseareasfollows:• TimberexportpermitsarecontrolledbygovernmentbodiessuchasETPIK

(RegisteringBodyfortheExportersofTimberProducts)andBRIK(BodyforRevitalizationofForestIndustries)thatareheirstoAPKINDO

• Stiflingbureaucraticredtape:thereareatleast�3distinctstepstofollowandamassofdocumentationtosortoutfortimberexportofanysizetoproceed

• Exportproceduresinvolvehightransactioncosts• Theproceduresareorientedtowardslargecompanies• Smallandmediumtimberoperatorsunwillingtogothroughthem• Weakinter-institutionalcollaboration(forestry,police,customs,navyetc)

forsurveillanceandlawenforcement• Limited Indonesian-Malaysian bilateral collaboration (forestry, police,

customs,navyetc.)• Limitedcapacitytomonitortheborderzoneregularlybeyondtheareas

readilyaccessiblebyroadorwatertransportation

FortimbertradersunwillingtofacethecomplexityoftheIndonesiantimberexportsystem,streamlinedbordertraderegulationsinMalaysiaofferamuchsimpleralternative.GovernmentpoliciesinMalaysiathatfacilitatetheimportofIndonesiantimberincludethefollowing:


• Overriding mandate/objective of Malaysian border controls (especiallyCustoms)toencouragetradeandminimizemarketcontrols

• FTZ(FreeTradeZone)regulationsalongtheSarawak-Kalimantanborderthatrequireminimaldocumentationforimportedtimber

• BTZ(BarterTradeZone)regulations intheportofTawauthat imposeminimaldocumentationonimportedtimber

• Limited understanding of, and capacity to verify trade documentsoriginatingfromtheIndonesianside

• Limitedcapacitytomonitortheborderzoneregularlybeyondtheareasreadily accessible by road or water transportation. Most active loggingconcessions in Malaysia operate within kilometers (in some cases onlyhundredsofmeters)oftheborderwithIndonesia.Asloggingroadsrarelylinkupwiththepublicroadnetwork,monitoringoftheseremotesitesisdifficult.

LimitingtheillegaltimbertradefromIndonesiafurtherwouldrequirestepsbeyondFLEsuchasreview,reformandsynchronizationofforestry,andtradeand development policies between Indonesia and Malaysia, particularly intheborder zone.Whilediscussions are ongoingbetween the two countriesaboutmakingprogressonatleastafewkeyissues(security,labor,roads),itisunlikelythattheseprocesseswillhaveanimmediateimpactonlimitingtheillegaltimbertradefromIndonesia.


How significant is cross-border timber smuggling within the context of illegal logging in Indonesia? – summary:·AccordingtoMoF,in2003timbersmugglingfromIndonesiareached

�0millionm3annually–including6-7millionm3fromPapuaand3-4millionfromKalimantanandSumatra

·By2005-2006,timbersmugglingdroppedby70%tolessthan3millionm3

·Forest law enforcement operations, international scrutiny and publicas well as market pressure appear to have led to this remarkableturnaround

· Illegal logging continues at a rateof at least40millionm3 annually.Timbersmuggling,however, isof least significancewithintheoverallframeworkoftheillegalloggingprobleminIndonesia

·Somesmugglingwillcontinuedespitepreventivemeasuresinplacedueto administrative disincentives for legal timber trading in Indonesia(particularlyforsmallandmedium-sizedcompanies)andduetolenienttraderegulationsintheborderregionsinMalaysia

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7. Prioritizing government policies against illegal logging in Indonesia

The main problem facing Indonesian forestry is not market distortions,environmental damage or lost tax revenue caused by timber smugglers atremotebordercrossings.Rather,itistheillegalloggingbyIndonesianforestconcessionaries, plantationdevelopers, road construction activities etc. thatescapes thechecksof theForestryService,passes through itsadministrativesystemandenterstradethroughtheIndonesianexportsystemunderETPIKandBRIK(MFP2006).Thisistheprimaryavenuefortradeinillegalwoodproducts from Indonesia. A 2004 study by CIFOR andTNC shows howtheseprocessesworkinBerauandEastKutaidistricts,EastKalimantan,wherenearlyhalfofharvestedandprocessedtimberwasnotproperlyreportedandtaxesduewerenotcollected,yetthetimberenteredtheofficialtradesystem(Obidzinski2005).

The current timber trade system under ETPIK and BRIK and the way itlooselylinksupwithforestryadministrationandon-the-groundsupervisionof forestryoperations inIndonesiahas seriousweaknesses thatenable tradeinvastquantitiesoftimberthatistechnicallyillegal.WhilethegovernmentholdsthatbothETPIKandBRIKimposesufficientlegalityrequirementsthatstressadministrativeanddocumentarycomplianceby forestrybusinesses inIndonesia,theserequirementsaresimplynotenough.Thisisbecausetheyarerelativelyeasytomanipulateandtheirenforcementislax.

Thereisagreatneedforastrictertimberlegalitystandard(e.g.thestandarddevelopedcollaborativelybyLEI,TNCandotherparties)thatwouldbeclearer,

�0 | Timber Smuggling in Indonesia

simplertoenforceandeasiertoevaluate.SuchastandardwouldofferhopeforarealandlastingsolutiontotheillegalloggingprobleminIndonesia,butwouldrequireanumberofcourageousstepsonthepartofMoF,including:· EndorsingthelegalitystandardastheonlyproxyforlegalityinIndonesia· Developinganimplementationframeworktoenableconcessionstoachieve

thelegalitystandardinasetperiodoftime· Providingpublicpolicyincentivesforcompaniestocomply(e.g.removal

ofdisincentivesthatencourageillegalpractices)· Enforcing mandatory legality verification checks by independent third

parties· ReductionoftheroleoftheForestServiceinmonitoring(e.g.limitedto

monitoringviaremotesensing)becauseitisadisincentiveforachievementoflegalityduetothehighcosts

· Development and implementation of key tools to control, monitorandevaluatetimbersupplyanddemand

The above steps require a lot of political will and sustained effort from arangeofgovernmentagencies.Extensiveandeffectivecollaborationbetweentheprivate sector andnon-government stakeholders (NGOs, communities,research institutionsanddonors)will alsobenecessary.While it is a lot tohopefor,itseemstobetheonlywaytomakemeaningfulandlastingprogressontheillegalloggingissueinIndonesia.

��

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App

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Kal

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tan

The Center for International Forestry Research (CIFOR) is a leading international forestry

research organisation established in 1993 in response to global concerns about the social,

environmental, and economic consequences of forest loss and degradation. CIFOR is

dedicated to developing policies and technologies for sustainable use and management

of forests, and for enhancing the well-being of people in developing countries who rely

on tropical forests for their livelihoods. CIFOR is one of the 15 centres supported by the

Consultative Group on International Agricultural Research (CGIAR). With headquarters

in Bogor, Indonesia, CIFOR has regional offices in Brazil, Burkina Faso, Cameroon and

Zimbabwe, and it works in over 30 other countries around the world.

Donors

CIFOR receives its major funding from governments, international development

organizations, private foundations and regional organizations. In 2005, CIFOR received

financial support from Australia, Asian Development Bank (ADB), Belgium, Brazil,

Canada, China, Centre de coopération internationale en recherche agronomique pour

le développement (CIRAD), Cordaid, Conservation International Foundation (CIF),

European Commission, Finland, Food and Agriculture Organization of the United

Nations (FAO), Ford Foundation, France, German Agency for Technical Cooperation (GTZ),

German Federal Ministry for Economic Cooperation and Development (BMZ), Indonesia,

International Development Research Centre (IDRC), International Fund for Agricultural

Development (IFAD), International Tropical Timber Organization (ITTO), Israel, Italy, The

World Conservation Union (IUCN), Japan, Korea, Netherlands, Norway, Netherlands

Development Organization, Overseas Development Institute (ODI), Peruvian Secretariat

for International Cooperation (RSCI), Philippines, Spain, Sweden, Swedish University of

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Foundation, Tropenbos International, United States, United Kingdom, United Nations

Environment Programme (UNEP), World Bank, World Resources Institute (WRI) and World

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