The Indonesia-UK MoU on Illegal Logging

Down to Earth No 53-54  August 2002

In April this year the Indonesian and British governments signed an agreement to improve forest law enforcement and to combat illegal logging and the international trade in illegal wood products. What has been the follow-up action so far?

The April MoU commits the Indonesian and UK governments to "work together to reduce, and eventually eliminate, illegal logging and the international trade in illegally logged timber and wood products between the Parties, by rapid development and implementation of the necessary regulatory and policy reforms, including:

1. Identification, by both Governments, of any reform of forest and related legislation and action required to prevent harvesting, export, and trade in illegally logged timber and wood products.
2. Support by both Governments for the development, testing and implementation of systems for the verification of legal compliance based on independently verified chain-of-custody tracking and identification systems, in due course to be applied throughout Indonesia.
3. The provision of technical and financial capacity-building assistance by the UK to support the design and implementation of these systems of compliance verification and the necessary accompanying legal and administrative reforms.
4. Support by both Governments for the involvement of civil society in the effort to curb illegal logging and trade and particularly in monitoring the implementation of compliance verification.
5. The joint development of systems for the timely collection and exchange of data on timber trade and wood product between the two Governments.
6. The joint development of effective collaboration between enforcement agencies and network in the two countries, aiming to provide mutual assistance in the application of Indonesian law and UK law
7. Encouragement by both Governments for action by industry to reduce and eventually eliminate the volume of illegal timber and wood products transported and sold, including sourcing only timber and wood products identified as legal through the compliance verification systems referred to above, or through other, equally effective, means of identification."

In the preamble, the MoU also refers to the "commitment to involve stakeholders, including local communities, in decision-making in the forestry sector, thereby promoting transparency and ensuring greater equity."

A statement issued in April by Indonesian NGOs and the indigenous peoples' alliance, AMAN, welcomed the MoU, but urged both governments to broaden and strengthen their co-operation to work for just and sustainable forest management. "We do not believe that the matters considered in this MoU are a sufficient mechanism to bring about legal and fair forest management in Indonesia." Specifically, the NGOs and AMAN argued for action to tackle over-capacity in the timber industry, security of tenurial rights in indigenous peoples' forest areas, forest governance and the role of the UK government as investor and consumer. On this last point, the statement urged the two governments to acknowledge the contribution of international investment to the pressure on natural forests, especially through investment in the industrial sectors of oil palm, timber plantations and the pulp and paper industry. It proposed that the UK government should commit to adopting high environmental and social standards when buying timber and wood products from Indonesia. "These standards should be raised further and cover not only the problem of the legality, but also the sustainability of forest resources."

A statement by UK-based NGOs pointed to the UK's special responsibility as a major importer and consumer of illegal timber and wood products. It supported Indonesian calls for action on forest law enforcement and illegal logging to take place within the context of the broader reforms needed to address the underlying causes of deforestation. The NGOs pointed out that tackling over-capacity, recognising secure tenure for indigenous forest-dwellers and local communities to their forest areas; and eradicating corrupt practices are already included in the list of actions attached to the 2001 ministerial meeting on forest governance (FLEG) and urged Indonesia and Britain to give priority to these issues in their action plan.

So far, it is not clear how far the focus will be broadened to include these priorities. Concerns have been raised that the agreement may be used to reinforce the existing forest management practices, rather than to create opportunities for wider reform to give local peoples a decisive voice. There are concerns too, that conservative elements within Indonesia's forestry ministry will oppose genuine participation by civil society groups in follow-up action.

What is illegal?

Currently, the state's claim over practically all forest lands still leaves no room for indigenous ownership of forests. Since the start of the logging boom in the 1970s, forest-dwelling communities have seen their lands handed over to companies, their forests stripped and their livelihoods systematically destroyed. In recent years, the advantages of community-based natural resource management regimes have become more widely recognised. Stronger alliances between indigenous peoples and environmental organisations have also led to increased pressure on the Indonesian government and its creditor countries - like Britain - to put land rights reform on their agenda. This has led to some progress in legal reform - or at least an official acknowledgement that the problem needs to be addressed. Last year, a decree was passed by Indonesia's highest legislative body, the MPR, which notes that the current laws on land and natural resources are weak and contradictory and that reforms are necessary (see DTE 52).

In this more fluid legal context, drafting an action plan to tackle illegal logging is problematic because there is no clarity or agreement on a definition of "illegal". Government officials may state that the term means whatever violates the rules for the HPH system - the timber concession system which underpins the country's vast, destructive and now deeply indebted timber business. But many adat communities would argue that their customary rights predate Indonesian laws (and, in many cases, the Indonesian state), and so, in their terms, logging concessions established in their areas without their consent are illegal.

Another definition of "illegal logging" resulting from a 2000 workshop organised by the Indonesian NGO, Telapak, is "forestry operations which have not been permitted and which are destructive."

The issue is further complicated by the fact that much forest land has not been formally delineated and gazetted as required by law. As recently as 1999 nearly one third of 'state forest' lands were not definitively under the legal jurisdiction of the Forestry Department (see DTE's Forests, Peoples & Rights quoting Fay and Sirait 1999).

Even if the "legal/illegal issue" was clear, action against log smuggling and illegal logging would depend on Indonesia's courts which are notoriously weak and corrupt. A complete overhaul of Indonesia's judicial system is sorely needed, but this will not take place overnight. The involvement of companies owned by MPR member Rasyid in illegal logging in Tanjung Puting National Park (Central Kalimantan) is an example of the difficulties in tackling local timber barons whose power has expanded since regional autonomy.

Action plan

DFID, the UK government department responsible for carrying the MoU forward, and Indonesia's forestry department have agreed on the need to reach agreement with major stakeholder groups on a working definition of legality. They plan to hold a series of discussions with stakeholder groups to try to work this out during the next two months.

A series of consultations is also planned to collect views about the practicability of tracking timber and verifying whether or not companies are operating legally or not. The plan is to identify 3 districts with contrasting forests and law enforcement characteristics and conduct interviews with stakeholders groups - including district heads (Bupatis), parliamentarians, forestry service officials, law enforcement agencies (police/customs/military/navy), community representatives, and the forestry industry.

Civil society groups in the UK and Indonesia were not consulted about the MoU and there have only been limited consultations on the Action Plan since. It seems that both governments want to drive this illegal logging initiative through as quickly as possible, so they are "seen to be doing something" while disregarding its underlying flaws.

Indonesia to sign illegal logging MoU with China

Following on from the agreement with the UK, forestry minister Prakosa announced in July that an MoU on illegal logging would be signed with China that month.

China is believed to have become a major importer of illegal logs from Indonesia since its domestic logging industry was shut down. It has used imports to feed a fast-growing plywood industry, which now undercuts Indonesian plywood on international markets. The Indonesian timber industry has complained that the Chinese operators are able to produce ply at lower prices precisely because they buy cheap illegal timber from Indonesia. According to one estimate, illegal logs sold to Malaysia and China reached 300,000 cubic meters per year. In the past China imported around 1.1 million cubic metres of Indonesian plywood per year.

(Asia Pulse/Antara 4/Jul/02; Jakarta Post 17/Apr/02)

Action against illegal logging

Tackling illegal logging has been a high priority since Indonesia's creditor countries grouped in the CGI issued an eight point action plan in 2000, with illegal logging at the top of the list (see Forests People and Rights ). While successive ministers have committed their governments to action, the results have failed to have a significant impact. Prakosa's record has been better than his predecessors as far as taking affirmative legal action at central government level is concerned. He links illegal logging to the international trade and has pushed through an export moratorium (see below). He is also considering a selective ban on logging in natural forests and moves towards restructuring the HPH system in favour of small-scale forestry operations.

In June the government made another show of its seriousness about illegal logging by inviting Greenpeace to help fight illegal logging. Environment minister Nabiel Makarim said Greenpeace would be asked to "monitor" the problem. He also said he hoped that importing nations like the US, Britain and Canada would close their markets to products made from illegal timber.

As part of an interim CGI meeting which took place in June, donors issued a statement on forest management which welcomed several recent initiatives by the Indonesian ministry of forestry. These included support for Japan's proposed Asia Forest Partnership; hosting the inaugural meetings in May of the Regional Task Force and Advisory Group (called for in the Bali Declaration on Forest Law and Governance - FLEG) and the tripartite agreement with the Indonesian Police and Navy. However, they expressed concern that progress in controlling illegal logging was too slow.

In July Makarim announced that an "untouchable" team of law enforcers would be established to handle crimes that damaged the environment, especially those involving illegal logging. The team will comprise 12 judges, 12 prosecutors and 12 police personnel and will have the authority to investigate all jurisdictions in the country, according to the minister. 
(Laksamana.net 29/May/02; Jakarta Post 6/Jul/02)

Indonesia's illegal logging industry is estimated to be worth around US$5 billion per year.

Log export ban made permanent, Malaysia imposes import ban

Malaysia has imposed a total ban on the import of logs from Indonesia - a move welcomed by Prakosa as it supports Indonesia's 6 month ban on log and wood chips exports imposed in October last year, now extended to a permanent ban since June 8th. Malaysia is reported to have announced the ban in June as a result of international pressure.

According to unofficial sources, the authorities continue to turn a blind eye to illegally felled logs which continue to stream across the Indonesia-Malaysia border in East and West Kalimantan.

Announcing Indonesia's permanent export ban - also in June, Prakosa said around 5,000 hectares (12,300 acres) of the country's lush forests had been lost to illegal logging every day for the past five years. A permanent ban has taken months to implement, possibly due to objections from Indonesia's main creditor, the IMF. The export ban goes against Indonesia's loan agreement with the IMF, which called for the reduction of barriers to log exports. (Reuters, June 25)

There is resistance to the export moratorium from West Papua where a pro-industry governor appears to be determined to accommodate the needs of investors. Prakosa has asked Papua Governor J.P Solossa, to revoke a decision allowing the export of Merbau logs, which conflicts with the central government ban. The decision was passed because Merbau logs have no buyers on the domestic market. Prakosa argued that if this exception to the general ban was made then other regions would demand the same treatment. Solossa has also lobbied for the lifting of a ban on open-pit mining in protected forests on Gag Island, to allow a nickel mining project by Australian company BHP to go ahead (Asia Pulse/Antara 4/Jul/02).

There are some indications that Prakosa may go further than an export ban. In July the English language daily, Jakarta Post, ran a report on industry reactions to a proposed logging moratorium in natural forests, stating that a new forest regulation (PP 34/2002) issued on June 8th (see below) authorised the ministry to impose this. In May, President Megawati had called for a temporary logging moratorium to give the forests a chance to "take a breath", but observers say this may have been posturing in advance of the Bali PrepCom and CGI meetings. (Jakarta Post 1/Jul/02 & 13/May/02)

Indonesia's leading environmental organisation, WALHI, has been calling for a logging moratorium since 2000 (see Forests, People and Rights p29).

New regulation returns control to Jakarta

The regulation (PP 34/2002) on Forest Organisation and Planning of Forest Management, Forest Utilisation and Use of Forest Lands, concerns the organisation of forest management in Indonesia and sets out the authority of forestry minister, governors and district heads in decision-making over forests. In a statement issued in July, the FKKM network, (Communication Forum for People's Forestry) rejected the new regulation, arguing that it went against the spirit of regional autonomy and would be resisted by local governments. FKKM said the regulation did nothing to address the situation of local peoples and brought the potential for major conflicts. It opened the way for exploitation of forest products and mining in protected forests, which violated principles of sustainable forest management (see also mining section). FKKM also stated that the regulation conflicts with the MPR decree issued in November 2001 and violates a 1998 on good governance, because the drafting process was not transparent or participative. FKKM warned that, since local regulations issued by district and provincial governments had higher legal authority than ministerial decrees (based on MPR Decree II/2000), this would lead to overlapping forest policies between forestry ministry and regional governments.

Regional autonomy rules, introduced in January 2001, provided for the transfer of authority to Indonesia's Kabupaten (districts) and, to a lesser extent, provincial administrations to issue logging licences. This has proven to have negative as well as positive consequences. In some areas logging is out of control as illegal logging syndicates involving security officers and local government officials are permitted to strip the forests of all commercial timber. The situation is particularly grave in Kalimantan. Some district heads have issued hundreds of small-scale logging licences which overlap with the centrally issued HPH licences, throwing forest management into disarray. Earlier this year Prakosa attempted to reverse a decree issued by his predecessor, which permitted district governments to issue logging permits. Some local authorities have indicated that they plan to ignore Jakarta's attempts to regain control.

(For more background, see Forests People and Rights).