THE POLITICS OF EXTINCTION
Executive Summary  
Introduction  
A Future Without Forests?  
The Orangutan Crisis  
The Timber Barons  
  • Summary
    		•  
  • The History
    		•  
  • Habitat Destruction
    		•  
  • Plywood Pirates
    		•  
  • FM - The Inefficiencies
    		•  
  • FM - The Illegalities
  • The Paper Problem
    		•  
  • Example: PT TEL
    		•  
  • Example: Barito Pacific
    		•  
  • Example: Sinar Mas
    		•  
  • Example: APRIL
    		•  
  • An Uncertain Future
    		•  
    Palm Oil  
    The Timber Barons - Forest Management - The Illegalities


    "It's not a secret that timber companies tend to be deceitful" - Former Indonesian Forestry Minister.

    Illegal and corrupt practices are rife within the Indonesian timber sector. The Ministry of Forestry's own figures showed that 84% of timber concession holders failed to meet logging rules between 1992 and 1993. An assistant to the Environment Minister claimed that timber mills actually process 50 million m3 annually - at that time, this figure represented 15 million m3 more than the official government quota of that time. If these figures are correct then it can be extrapolated that roughly 500 000 hectares of forest are illegally cut per year. Even those within the timber industry have admitted that losses to government revenue amount to around US$3.5 billion per year and that the low prices of finished products such as furniture in the wood markets of Singapore, the USA, Japan and Europe clearly indicated timber smuggling and an evasion of export duties in Indonesia.

    Illegally harvested timber is used both domestically and for export. The Forestry Minister said in February 1996 that 70% of the timber coming into Jakarta was illegal. A crackdown resulted in the detaining of 83 timber ships. In 1994, it was reported that despite the withdrawal of all logging concessions on the island of Siberut, illegal logging continued. It was alleged that Carya Pharmin Pulau Siberut (PT CPPS) shipped illegally cut timber to Padang in Sumatra where, along with timber from Irian Jaya and Kalimantan, it was processed into plywood for export to the UK, France, the Netherlands, Germany and Hong Kong. Japanese companies have allegedly purchased illegally-cut logs from Kalimantan, moving them across the border into Malaysian Borneo.

    Under pressure from the World Bank, the government announced a 10% increase in the forestry fee but timber businessmen in South Sumatra said that the collection system was so weak that they would continue with "the accepted bribing system". Illegal logging has taken place in a number of protected areas. For example, it was recently reported that 400 illegal loggers and a plywood mill were discovered in Tanjung Puting National Park on Kalimantan and driven out by the military.

    The cost to the government comes from the avoidance of export duties, forestry fees and reforestation fees. This serves to further undermine the relevant authorities whose responsibility it is to control timber operations and prevent timber smuggling. Funding and capacity to deal with the current situation are lacking. The former Forestry Minister said that co-operation between forestry officials and the military has been poor in some areas due to "deviations by officials". The Ministry of Forestry (MoF) has been given little capacity to ensure that regulations governing cutting or royalty payments are adhered to, and penalties levied for infractions. Nationwide, it is reported that there is only one MoF staff for every 127 100 hectares of forest, while in East Kalimantan, where logging activities are heaviest, the ratio falls to one per 314 000 hectares. Vast concessions - which average 100 000 hectares but can be six times as large - located in isolated regions with poor road communication hamper adequate monitoring of timber practices.

    Methods of Illegal Logging in Indonesia:
    • Logging outside of concession boundaries and in protected areas.

    • Logging without authorisation and obtaining concessions by corrupt and illegal means (bribery and coercion).

    • Over-cutting and removing under or over-sized trees.

    • High-grading (targeting the most commercially attractive species).

    • Re-harvesting before end of rotation cycle.

    • Under-declaration of timber harvested, tax avoidance and fraud.

    • Under-grading, under-measuring, under-valuing and mis-classification of species.

    • Transfer pricing (a mechanism by which companies purposefully buy or sell goods at prices far above or below the market price to disguise the transfer of profits off-shore, thereby avoiding tax in the country of operation). According to one corporation, 19 out of 20 timber companies in southern Sumatra manipulate their export documents to evade taxes.


    The problem is exacerbated by the role of the military in logging. For example, convoys of military trucks have been reported carrying illegally-cut logs to Sabah. "Local officials who do site inspections are either vulnerable to collusion with the loggers or feel powerless to deal with the politically well-connected concessionaires. On top of that, illegal logging, with the support of local security officials, is rampant."

    Despite the formation in 1995 of special Integrated Forestry Security Teams (TPHT) these have been chronically underfunded and underequipped. Even where seizures or detention of logging barges are made, it is often of no consequence. In 1996, 15 log barges impounded by the authorities "disappeared" in two separate incidents and local officials in Kalimantan said (anonymously) that the industry had strong connections with Jakarta. A previous Head of Tanjung Puting was allegedly involved in illegal logging - earlier seizures of logs have disappeared without trace.

    Early in 1998, the Director General of Forest Protection and Nature Preservation was reported as saying, "It's a pity that several wood processing firms are also involved by buying illegal timber because its price is cheaper than legally cut timber". In South Sumatra 62 000 unclaimed logs and 45 illegal sawmills were reportedly discovered in a week. Between 1994 and 1997, the authorities have confiscated 364 000 m3 of illegally felled wood and uncovered 1526 cases of illegal logging. However, despite evidence, it is difficult for the authorities to prove that some big forest companies are involved in illegal cutting. Even where such suspicions can be proven, the penalties do not serve as a deterrent and pale in comparison to the lucrative gains to be made from illegal activities. In 1991, Indonesia's biggest timber company, Barito Pacific was fined around US$4 million for logging outside a concession area in East Kalimantan. However, the company simply refused to pay the fine and the matter was dropped.

    A forestry official in Jakarta reported that timber theft from the forests is on the increase and that the forest police are unable to cope.

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