Problem overview:
Awareness and visions: Industrial Plantation Forest (IPF) is a government programme, which is intended to sustain the forest development employing rebonization practices.
Policies and measures: The government issued Dana Reboisasi, or DR as incentive for private companies to participate in IPF. However, such incentives have been misused.
Background in summary:
Rebonization of forest resources through industrial plantation: Since 1990 a concept of Industrial Plantation Forest (IPF) has been introduced under Government Regulation No.7/1990. The Government of Indonesia (GOI), through Ministry of Forestry, encourages the rebonization with incentives to private timber companies, which are interested in developing IPF.
Requirement for supporting regulations: A few years after, operational activities had been developed, but needed favorable supports, such as: additional regulations to get a permit for user rights of IPF.
Requesting for rebonization fund: The IPF shows some progress during the implementation phase. However, the concept has been used and misused. Companies, which carry out forestry businesses, can formulate a proposal requesting for rebonization funds (Dana Reboisasi, or DR) to utilize and develop IPF. Once the proposal has been accepted by the Ministry of Forestry, the company can have access to DR.
Purposefully misusing the fund: Unfortunately, most frequently the companies do not use the funds solely for developing IPF, instead the money has been utilized for other activities, which are not related to the proposal. In fact, when the IPF was unsuccessful, the company would file a report as a failure to develop the IPF. The truth is, the fund has been used for other illegal activities.
Deceitful actions by companies to avoid returning fund credits: In extreme cases, several local and regional NGOs found that the company intentionally burnt the area of IPF (and blaming on the local community living around the area). The "accident" of the burnt IPF may be able to avoid the compulsory return credit for DR to the GOI.
Lack of cooperation from government enterprises: Another issue arises when the GOI, through the Directorate General for Land Reboization and Rehabilitation, requests for government enterprises to be involved with the programme, and none of them were interested. Questions arise of whether the government enterprises were actually attempting to avoid the programme.
Ineffectiveness and non-transparency of the system: Several independent units or NGOs conducted some studies and found the system was not transparent, especially in the proposal acceptance procedure. Needless to say, companies would rather prefer to apply for credit bank than DR, hence, demonstrating ineffectiveness of incentive system.
Reformation of IPF: Later on, the Government of Indonesia declared a reformation, and the IPF programme has been improving, in terms of procedural mechanism for programme application, since.
See document in full
Good practice rating:
(1 for the best, 5 for the lowest score) |
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Sustainability
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Efficiency
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| 4 |
 Improvement in either the environment of economic condition with no harm to the other. |
4 |
Cost efficient. |
| 4 |
Sustainable over time (not one-off) |
Process |
| Adaptability |
- |
Participation of the community |
| 2 |
Location adaptability (can the project be done in other places?) |
2 |
Participation of resource owners/users |
| 3 |
Socio-cultural adaptability. |
3 |
Partnerships between various actors (Governments, NGO, Academia, Private) |
| 3 |
Level of development adaptability. |
- |
Degree of coordination and cooperation between government departments. |
| 3 |
Style of government adaptability. |
- |
Ability to attract political interest/support |
| 2 |
Degree of decentralization adaptability. |
3 |
Procedures for feedback and review. |
Comments on this example:
The involvement of the private sector in activities relating to natural resources requires a more systematic and gradual approach. The companies are more concerned in obtaining the benefits in a short period, whereas the state has long tem interests on a national point of view. Experiences have shown that incentives are not required by the private sector, as they would get involved only if, the operation was financially viable.
Adequate monitoring mechanisms should be in place to steer the programme to the right direction. Once the forest area is leased to the private sector and the actual value is recovered by the state, the private company will have the right to take care of the rest. The lease agreement must make it mandatory for the company to reforest the area as well.
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Sustainability of the project:
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Awareness and visions: This example portrays good intention for conservation but twisted dissatisfactory consequences because the lack of morality. Consequentially, the ideally sustainable concept of IPF turned out to be ineffective, cost-inefficient and ironically, unsustainable. Fortunately, immoral actions can be eliminated by increase in transparency of the system and perhaps heavy monitoring.
In terms of Improvement in either the environment or economic condition with no harm to the other and Sustainability over time (not one-off) , this example would receive a very low rating because there was either an improvement in the environment or the economic condition. The government was unable to detect the acts of deceitfulness by private companies, resulting in no increase in forest area but decrease in Rebonization Fund.
On the other hand, if private companies have been utilizing the fund honestly, the IPF system would be a very sustainable system because it encourages plantation while maintaining economic benefits for foresters.
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Adaptability of the project to other situations:
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Style of Government adaptability: Since the IPF program is being implemented at a project level, the style of government adaptability has minimal effect on the success of the program.
| Process of decision making and implementation: |
Policies and measures:
First view point: The economic instrument used in the Industrial Plantation Forest programme (IPF) aims to encourage private companies to plant more trees by giving money incentives through the governments so called Rebonization Fund. However, the programme turned out to be a failure when the government could not predict that the companies would be using the IPF fund as an opportunity to act in a dishonest manner. Apparently, the IPF project is facing a moral hazard problem where economic incentives have been misused.
However, looking from the private sectors point of view, we are all aware that the private sectors business objective is to make immediate return. Hence, to them, what has been done may not be thought of as dishonest act, but a way of making profit as quickest and simplest as possible.
Nonetheless, from the standpoint of effectiveness, providing subsidies (in this case funding) as an incentive to plant more trees should be the most effective way to encourage companies, as if they were receiving a reward for doing a good act. But measures to discourage acts of moral hazard should be set up also. For example, improving the proposal approval process by making it more thorough and transparent, making the monitoring processes more stringent and/or find stronger measures for punishment.
Second view point: The involvement of the private sector in activities relating to natural resources requires a more systematic and gradual approach. The companies are more concerned in obtaining the benefits in a short period, whereas the state has long tem interests on a national point of view. Experiences have shown that incentives are not required by the private sector, as they would get involved only if, the operation was financially viable.
Adequate monitoring mechanisms should be in place to steer the programme to the right direction. Once the forest area is leased to the private sector and the actual value is recovered by the state, the private company will have the right to take care of the rest. The lease agreement must make it mandatory for the company to reforest the area as well.
Cost efficient: Regarding the immoral practices and misuse of Rebonization Fund, it is inevitable to conclude that the IPF system if cost-inefficient, hence, the rating 4. Only if the act of misconduct could be eliminated then the cost efficiency should improve.
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Documentation: |
Literatureor other written project review references
Reforestation and Industrial Plantation Forest
Ministry of Forestry, Indonesia
Website http://www.dnet.net.id/forestry/page7.htm
Progress on Industrial Plantation Forest Establishment in Indonesia
Progress on Industrial Plantation Forest Establishment in Indonesia During 1989/1990-1994/1995.
Website http://www.dnet.net.id/forestry/apdx2.htm
Rousyikin, Herry, 1997. "Information on Industrial Forest Plantation Policy and Progress in Indonesia", Paper from XI World Forestry Congress, Volume 3, Topic 12, Turkey 13-22 October 1997.
This paper can be viewed at FAO Website http://www.fao.org/montes/foda/wforcong/PUBLI/
V3/T12E/TOP
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Source of Information: |
Directorate General of Land Reboization and Rehabilitation
Ministry of Forestry and Plantation
Manggala Wana Bakti Bldg., 12th Fl.
Jl. Gatot Subroto
Jakarta Pusat
Phone: (62-21) 5704 501-04
Fax: (62-21) 5737 092
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Contacts: |
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Submitted by: |
Raldi H. Koestoer
Regional and Environmental Scientist
Indonesian Institute of Sciences
Jakarta, Indonesia
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Reference: |
Department Kehutanan, Agend
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