Forestry sector reform and distributional change of natural resource rent in Indonesia uri icon

abstract

  • After the collapse of the centralized Soeharto regime, deforestation caused by overlogging accelerated. To tackle this problem, an IMF/World Bank-led forestry sectorreform program adopted a market-friendly approach involving the resumption of roundwood exports and raising of the resource rent fee, with the aim to stop rentaccumulation by plywood companies, which had enjoyed a supply of round wood atprivileged prices. The Indonesian government, for its part, decentralized the forestconcession management system to provide incentives for local governments andcommunities to carry out sustainable forest management. However, neither policyreform worked effectively. The round wood export ban was reimposed and the forestmanagement system centralized again with cooperation from a newly funded industryled institution. In the midst of the confusion surrounding the policy reversal, the gapbetween the price of round wood in international and domestic markets failed tocontract, although rent allocations to plywood industries were reduced during 19982003. The rents were not collected properly by the government, but accumulatedunexpectedly in the hands of players in the black market for round wood

publication date

  • 2005