Subject:  Indonesia's Development, Rainforests and Biodiversity

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Indonesia: Development, Degraded Rainforests & Decreasing Global Biological=
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Diversity
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Forest Networking a Project of Ecological Enterprises
     http://forests.org/

1/20/97
OVERVIEW, SOURCE & COMMENTARY by EE
The following _AntePodium_ electronic journal article takes a detailed=20
look at the rainforest and biodiversity decline occurring in Indonesia. =20
The importance of biodiversity and implications of its decline are=20
presented.  This article is networked upon the request of the author, Herb=
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Thompson.
g.b.

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RELAYED TEXT STARTS HERE:

AntePodium

An Antipodean electronic journal of world affairs published by the
Department of Politics at Victoria University of Wellington
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Indonesia: Development, Degraded Rainforests and Decreasing Global
Biological Diversity

Herb Thompson

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Research for this paper was made possible by a grant from the Asia Research
Centre, Murdoch University. Special thanks to Sara Kindon for pertinent and
helpful criticisms of an earlier version of this article.

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INTRODUCTION

Tropical deforestation is a significant factor in the loss of global
biological diversity. Solow, et.al. [1993: 60] define biodiversity as:

"the totality of genes, species and ecosystems in a region. Genetic=20
diversity refers to the variation of genes within species. Species=20
diversity refers to the variety of species within a region. Ecosystem=20
diversity refers to the variety of systems of living things in relationship=
=20
with their environment, within a region".

In these terms, Indonesia is one of the most biologically diverse nations
on earth; and therefore, the negative global economic and ethical
consequences of continued logging of tropical hardwoods in Indonesia must
be examined. This article explores the specific relationship between
tropical deforestation in Indonesia and the decline in biodiversity. The
Government of Indonesia has put the national prerogative of economic growth
above more global concerns which, in itself, is not surprising. However,
the manner in which the decision has been carried out is of concern. The
primary evidence producing this concern is that the wood products industry
is provided with subsidised incentives which undervalue tropical
rainforests.

The first part of the article describes the rapid rate of tropical
rainforest destruction with particular reference to Southeast Asia and the
Pacific. The context is established showing that complex non-linear
ecological structures of hydrological, climatic, geochemical and biological
importance are being lost, in most cases, forever. This is then followed by
a formulation of the global socio-scientific problem of biodiversity
decline. To conserve all present forms of life is impossible. Natural
processes such as climatic change, shifts in sea level, mountain building,
volcanic activity all influence the distribution and abundance of life
forms. The growth of human populations and their desire for rising living
standards speed up these natural processes, affecting the profusion of
biogeographical life. The problem however, is put forward by Myers [1988:
28] as "the opening stages of an extinction spasm...for which the virtually
exclusive cause is Homo sapiens".

The specific case of Indonesia is then explored. In this particular
country, one would expect that decision-makers are making the difficult
economic and ecological decisions to carry forward the development process.
However, just the opposite appears to be true. Both government agencies and
private enterprise in Indonesia are carrying out inefficient and wasteful
practices of wood production with little regard for the issues raised
above. While some ecological sacrifice is generated by a developmental
process, in Indonesia the sacrifice of biological diversity is being
carried out with little, if any, overall economic return. Therefore, before
any discussion is possible regarding the normative aspects of the
economic-ecological confrontation, simple cost-benefit inefficiencies must
be overcome.

In the conclusion, practical measures are recommended to reduce the waste
of tropical rainforests, and thereby the decrease in biodiversity. When
that occurs, realistic debate may begin as to the spectrum of choices
between national development and global environmental protection.

DEFORESTATION - A NATIONAL BENEFIT OR GLOBAL LOSS?

Resource Control
As control over resources becomes a dominant issue in the struggle for
national and human survival, disagreements and differences in approaches,
priorities and philosophies emerge within and between nations. While
governments pursue national strategies of development, opposition may be
generated within the nation, the region, or on a world scale [Tadem, 1990].
Tropical rainforests have been treated as a renewable resource for the past
three decades in most of the world. There has been little, if any,
recognition until recently that rainforests are much more than the trees of
which they are made. They involve complex non-linear ecological structures
which have hydrological, climatic, geochemical and biological effects
whenever a Diptocarpaceae is felled. Ecologically, there is nothing
sustainable about logging a rainforest. First, no tropical rainforest will
rejuvenate in exactly the same manner in which it presently exists. Second,
any biodiversity loss caused by rainforest degradation is lost forever.
Yet, the pursuit of development is confronted by ecological facts that have
only recently been brought to the bargaining table at a global level.

Each year worldwide some 100,000 square kilometres of pristine rainforest
is burnt to the ground to create farmland. A further 50,000 square
kilometres is logged to extract timber of high commercial value. Secondary
damage is generated by logging activity such as road construction, use of
heavy equipment, fires and the incursion of migratory swidden farmers onto
logged land. In fact, less than one-tenth of one per cent of the world's
rainforest is presently under any form of sustainable management [Brown and
Press, 1992:21; Anderson, 1989].

Destruction of natural forest in tropical countries was a familiar
phenomenon to forestry professionals as long ago as the 1920s and 1930s.
However, in the 1970s (the Second Development Decade) even the
non-professionals became alarmed about the dwindling amount of tropical
forest [World Bank, 1989:19].

Of further concern is the fragmentation of the standing forests. McCloskey
[1993] has found that only 33 per cent of the world's existing tropical
rainforests were found in large wilderness blocks (400,000 hectares or
more). Two-thirds of the world's forests are fragmented and especially
vulnerable. Fragmentation means that roads or other avenues of approaches
such as by motor boats and barges on rivers, allow forces of change to
encircle the remaining stands. Not only do loggers and squatters gain
easier access, but the very fact of being smaller reduces the niches for
species diversity, and breaks up ecological landscapes. The picture in
Southeast Asia and Oceania is the worst of all. Only 12 per cent (22
million hectares) of the remaining tropical rainforests in this area are
found in large wilderness blocks.

Southeast Asia and Oceania
Nearly two-thirds of the world's tropical rainforests are found in
Southeast Asia. The Philippines, Malaysia and Indonesia have utilised a
significant proportion of these rainforests to initiate development,
capture foreign exchange, and create jobs, through the felling and export
of hardwoods [Poffenberger, 1990: 20]. Over the past decade, these three
nations have accounted for two-thirds of worldwide exports of hardwood logs
and products. The Philippine Diptocarpaceae forests have been largely
depleted, and as much as one per cent of the tropical rainforest in
Malaysia and Indonesia are being cut each year [Contreras, 1991; Thompson,
1993a; Thompson, 1993b; and World Bank, 1993a]. See Table 1 below:

                                  TABLE 1
           TROPICAL FOREST RESOURCES: STATUS AND CHANGES (000 HA)
                                        Area Deforested      % of Area
                 Land Area Forest Area     Annually,         deforested
                                           1981-1990          annually
 Main ecological
     regions
   [Lowlands]
     Tropical
    rainforest    912,000    655,500         4,900              0.75
 Moist deciduous
      forest     1,464,100   626,400         7,300              1.17
  Dry deciduous
      forest      720,500    212,900         2,100              0.99
 Very dry forest  547,700    39,500           200               0.51
     Desert       523,800     2,500           100               4.00
    [Uplands]
     Hill and
  montane forest  650,500    178,100         2,300              1.29
     [Total]     4,815,600  1,714,900        16,900             0.99
    [Reigons]
     Africa      2,243,300   600,100         5,000              0.83
      Asia        896,600    274,900         16,900             1.31
 Latin America &
    Caribbean    1,675,700   839,900         8,300              0.99
     [Total]     4,815,600  1,714,900        16,900             0.99
     Selected
    countries
 [Latin America]
     Brazil       845,651    347,000         3,200              0.92
      Peru        128,000    73,000           300               0.41
     Bolivia      109,439    55,500            60               0.11
    Venezuela      88,205    42,000           150               0.36
    Colombia      103,870    41,400           350               0.85
     Guyana        19,685    19,300            3                0.02
     Surinam       15,600    15,200            3                0.02
     Ecuador       27,684    12,300            60               0.49
    [Africa]
      Zaire       226,760    103,800          200               0.19
      Congo        34,150    21,100            22               0.10
      Gabon        25,767    20,300            15               0.07
    Cameroon       46,540    17,100            80               0.47
     C.A.R.        62,298     3,600            5                0.14
    Eq.Guinea      2,805      1,200            3                0.25
     [Asia]
    Indonesia     181,157    108,600         1,315              1.21
    Malaysia       32,855    18,400           255               1.39
   Philippines     29,817     6,500           110               1.69
SOURCE: [Burgess, 1993]

In the early 1970s the Food and Agriculture Organisation (FAO) estimated
the rate of deforestation in Indonesia at about 300,000 hectares per year;
in 1981 at 600,000 hectares per year, and most recently one million
hectares per year. The data are relatively weak, but World Bank estimates
confirm FAO calculations [World Bank, 1990: 20]. The private short-term
financial gains that can accrue to the exploitation of the country's forest
resources have given rise to a number of serious issues affecting both the
sector's future and societal choice. In addition to the quantitative
economic benefits such as providing foreign exchange, forests also provide
ecological benefits such as protecting critical watersheds, preventing soil
erosion, stabilising downstream river flows, sequestering carbon and
providing a global arboretum for biological diversity. Often, using
resources for economic purposes reduces their ecological value and use.

One factor more than any other seems to determine the pattern of regrowth
of tropical forests: the amount of sunlight allowed through the forest's
evergreen canopy. While the tiniest hole caused by a falling branch may be
enough to trigger the growth of a climax seedling from the forest floor, if
the seedling receives too much sun, it will rapidly whither and turn into
potential kindling. The threat this kindling provides is given evidence by
the great fire of 1982/83 in East Kalimantan, Indonesia which alone
destroyed 40,000 square kilometres [Brown and Press, 1992: 22]. Sufficient
evidence exists to suggest that the fire would have not been at all as
severe had not logging activity opened up the canopy. Even with "selective
cutting", a seemingly innocuous term, as much as 70 per cent of the trees
may be damaged or destroyed in the process of extracting only 10 per cent.

In June 1978 a "Strategy Conference" was held in Washington by the
Department of State and US Agency for International Development on Tropical
Deforestation. It was concluded that:

"Tropical forests are disappearing at a rapid and alarming rate...human=20
needs and quality-of-life objectives are critically dependent upon proper=20
stewardship of tropical ecosystems...exponential population growth coupled=
=20
with a lack of alternative economic development opportunities is the
basic cause of loss of tropical forest cover..." [Jacobs, 1988:8-9].

To estimate the loss of tropical forest, differences in reliability
notwithstanding, two studies were solicited [Lanly and Clement, 1979; and
Myers, 1980], both of which justified the concern.

Although public awareness of the need to save rainforests has never been
greater [Pearse, 1992:3], and money has flowed freely from international
organisations during the past decade, little has been accomplished [Lanly,
et.al. 1991]. Following scathing independent reviews of the FAOs Tropical
Forestry Action Plan in 1990, and ensuing criticisms from environmentalists
and its own executive board, the World Bank announced plans in 1991 for a
new proactive policy to preserve tropical forests. Since then the Bank has
begun to place more emphasis on supporting programs that involve
institutional development, forest protection measures, and
income-generating projects not dependent on forest resources, which have as
their primary objective the preservation of tropical moist forests [World
Bank, 1991:20; World Bank, 1995a].

In implementing this strategy, the Bank pays special attention to the 20
countries (accounting for 85 per cent of tropical moist forests) whose
forests are seriously threatened by encroachment and destruction. Serious
pressures have since been exerted against a number of nations such as Papua
New Guinea, Solomon Islands and Indonesia. This has made little difference
to the policy-makers in Indonesia; in fact, quite the reverse as the
Government has reacted strongly against "outside interference".

In June, 1995, the specialist Forestry Officer in the Environment Division
at the office in Jakarta returned to Washington. The World Bank's "Country
Memorandum Report, 1995" in which the Forestry Officer played a major
productive role was also embargoed "most likely permanently". Anecdotal
evidence gathered by the author suggests that Government officials were
most displeased with the strong "green" attitudes of both World Bank
official policy and the Forestry Officer in particular. One of the issues
of most concern to the environmental and forestry officers in the World
Bank in Jakarta involved the negative global externalities of declining
biodiversity.

LOSS OF BIOLOGICAL DIVERSITY - A GLOBAL PROBLEM

The loss of biological diversity is one of the most important
socio-scientific problems requiring understanding and resolution at
present. The importance of biodiversity arises not just from its role in
delivering direct use, and non-use, values but in its role as the means of
assuring the resilience of the ecological systems on which human activity
depends [Barbier, et.al., 1994: 17; Perrings, et.al., 1995: 3-4; Norton,
1986]. The economic problem of biodiversity decline arises due to a
'social' loss based on the fact that the private return to conservation is
less than the return to some other use of land, assuming all inputs and
outputs are valued 'correctly in the market'. Ecologically it is difficult
to resist the intuitive view that a vast part of biodiversity loss is
non-optimal by almost any criterion [Pearce and Perrings, 1995:31].

The case of the spotted owl in the Western United States (Strix
occidentalis) has become symbolic of both the concern as well as the
potential conflict which percolates below the surface. While there is no
way to measure the absolute amount of species loss each year, Wilson
[1992:268] optimistically estimates that the loss is approximately 74
species per day, verifying Myer's concern, stated above, that we are in the
midst of one of the great extinction spasms of geological history!

One of the few agreements made at the United Nations Conference on
Environment and Development in Rio, 1992 concerned the preservation of
biodiversity. The ensuing 'Convention on Biological Diversity' provides an
overall framework for international action to protect species and their
habitats. Countries ratifying the convention are required to identify and
monitor their biological resources and to produce plans for conserving
them, including the establishment of protected areas.

Article 20 of the Convention states that developed country parties should
provide "new and additional financial resources" towards the implementation
of the Convention. Since then, meetings of the Conference signatories (133
countries represented) have taken place in the Bahamas in December, 1994,
and Jakarta in November, 1995. So far, the only unanimous substantive
agreement is that the 29th of December of each year should be declared the
International Day for Biological Diversity [Pearce, 1994: 5; and The
Jakarta Post, 1995: 2].

Delegates from developing countries have demanded that industrialised
countries contribute more towards the funding of conservation efforts and
delegates from developed countries have responded to the effect that "aid
fatigue" has set in and further funds were not to be forthcoming. One of
the difficulties of course, is that the economic benefits of deforestation
are seen to occur at the national level, whereas the negative externalities
of declining biodiversity are global. On the other hand, so-called "aid
fatigue" is likely to increase in developed countries, particularly when it
is difficult to quantify the value of biodiversity loss. Convincing voters
in industrial nations of the value of preserving invertebrates, for
example, is extremely difficult during the present era when down-sizing of
the state through budget-balancing, deficit-slashing and tax reduction has
become a dominant ideological proposition. So far the Global Environmental
Facility (GEF) is the only source from which countries can request funds
for various biodiversity projects. The facility's funds now stand at about
2 billion USD for 1994-97. This is too little, its procedures are too slow
in meeting requests for various projects, and many financial contributions
pledged to the GEF have not been paid.

Following the Amazon Basin, Indonesia, with 144 million hectares of forest
land, has the world's second largest tropical forest area. Aside from being
the source of timber and wood products which have been Indonesia's second
major export, tropical forests are also a source of medicinal plants,
resins, and dyes, and a host of other non-wood products.

In addition, and more difficult to measure economically, the Indonesian
rain forests are biologically rich, with more than 10,000 species of trees,
500 species of mammals of which 200 are endemic, and 1,500 species of birds
of which 430 are endemic, all of which play a vital role in regulating the
ecosystem [Parkinson, 1993: 4]. The nation has the world's longest list of
species threatened with extinction including: 126 birds, 63 mammals and 21
reptiles. Some of the more well known include the Javan and Sumatran
rhinoceros, Asian elephant, Sumatran tiger, clouded leopard, orangutan, and
Sulawesi macaque. Two birds, the Javan Wattled Lapwing and Caerulean
Paradise Flycatcher have become extinct in the past decade [Ministry of
Forestry, 1991: 38-39] and the Bali Starling is seriously endangered. One
study revealed that just 10 hectares of rainforest in Borneo contained some
700 tree species, the total number of species found in all of North America
[Kramer, et.al., 1995: 14]. In sum, Indonesia is classified as being part
of Malaysia, one of, if not the most, biological diverse regions on the
planet, as well as one of the most threatened ecologically [Whitten, 1987:
25, 50-51; World Bank, 1990:21; and Maijer, 1981].

Recent studies brought to our attention by Cleary and Eaton [1992:136] give
some indication of the magnitude of biodiversity on the outer islands, as
well as its potential importance. A study of three villages on the Apo
Kayan plateau of East Kalimantan (which exists right in the heart of some
of the most intensive logging activity in the world) identified 213
different plant species that the local Kenyah people use for medical
purposes [Leaman, et.al., 1990]; and in another small village in Central
Kalimantan, over 100 species were reported to have medicinal value [Riswan
et.al., 1990]. Finally, in a study of Iban longhouses in the Pantu area of
western Borneo a total of 142 different plant species were found to be used
by this community. Of these, 60 species were used for handicrafts, such as
the manufacture of mats, baskets, hats, dyes, and weaving material. A
further 46 species were used for construction, 47 for food, 22 for
medicines, and 10 for fish and dart poisons [Pearce, et.al, 1987].

Few species of vertebrate are lost entirely when a rainforest is logged,
though the local populations of some may collapse. While large herbivores
such as elephants and deer may thrive on the new growth of pioneer
vegetation following logging, the species that fare least well are those
with highly specific food needs such as birds. Primates, including
orangutans on Borneo, are particularly vulnerable. While logging cannot be
singled out as the only cause of reductions in, or threats to animal
populations, commercial logging has been the first activity responsible for
widespread tropical forest conversion in the outer islands such as
Kalimantan. It is logging which opens the way for more extensive shifting
cultivation and for the accelerated resettlement programs [Hafild, 1994:5].

At present, Indonesian forest management policy delineates biological
diversity conservation from forest utilisation. Biological conservation
practice is concentrated only in nature reserves, wildlife sanctuaries and
in some national parks. Restrictions on annual allowable logging are based
on estimated growth and physical limitations such as steep slopes, and
regeneration rates prior to the next harvest. Considerations such as
wildlife food sources, nesting sites, migration routes or mating seasons of
wildlife are not taken into account. The protected areas themselves are not
immune from disturbance. Many nature reserves and national parks are
threatened by illegal or semi-illegal logging, landless farmers, and fire.
For instance, extensive areas of Leuser National Park in northern Sumatra
and Tanjung Puting in Kalimantan are illegally logged even today [Hafild,
1994:59-61].

Because most species are not monitored it is very difficult to detect which
ones are likely to disappear when tropical forest destruction occurs. In
fact, no species inventory within any single tropical ecosystem exists in
Indonesia. This knowledge gap between tropical forest ecosystems and
biological diversity leaves us with only intangibles when attempting to
prescribe a formula to address the problem [Pearl, 1992].

INDONESIA - TURNING ECOLOGICAL REGIMES INTO WOOD

Translating a commitment to sustainable forestry, evident in the
Constitution and Government regulations [Warren and Elston, 1993], into
practical reality is frustrated by the country's acute population pressures
in certain areas, the size and geographical dispersion of its forests, the
need to search for additional agricultural land, the continuing quest for
increased output and non-oil productive options, the desire to raise
income, and the need to reduce poverty [Parkinson, 1993:vi]. Given the
national requirements for foreign exchange, industrial growth, employment
generation and regional development, government agents have chosen to
provide incentives for the development of wood-based industries more
rapidly than international experts and representatives of conservationist
organisations would prefer. The often declared objectives of the Indonesian
Government are generally twofold: to reduce the country's reliance on the
oil sector as a source of foreign exchange and government revenues, and to
stimulate job creation [US Department of State, 1992:3]. For quite some
time, wood manufacturing has been the second-largest source of foreign
exchange earnings after oil and natural gas, and is seen as a significant
generator of employment.

In Indonesia, large scale timber harvesting began in the late 1960s.
Initially, the bulk of concessions were awarded to foreign companies which
have since been replaced by locally owned entities. Most concessions are
owned by (or at least have strong corporate linkages to) wood processing
companies (primarily plywood manufacturers). Although around 580
concessions exist in Indonesia, more than 30 per cent of the resource area
is under effective control of 20 companies and five or six corporate groups
dominate the sector [World Bank, 1993a: 33].

Logging operations in production forest concessions should be managed in a
sustainable manner through implementation of the Indonesian Selective
Cutting System. However, the required pre-logging inventories and
post-logging residual stand inventories are not conducted properly or
reported truthfully; there is over-cutting within annual cutting plans, and
cutting outside approved boundaries is frequent; re-logging at more
frequent intervals than the 35-year required cycle is not uncommon; and
control and supervision by the Ministry of Forestry has been ineffective.
Further, the current royalty level of about 15 USD per cubic metre greatly
undervalues the resource, which could be worth as much as 90 USD per cubic
metre based on the international market price of comparable quality logs.
Low domestic prices for logs, in turn have led to inefficiencies in both
the logging and wood processing industries and a lack of market
diversification. Poor logging practices waste an estimated eight million
cubic metres annually, including damage to the remaining trees, while the
lower technical efficiency of Indonesian plywood mills wastes another three
million cubic metres. Together, this amounts to a third of the total annual
harvest [World Bank, 1994: 53-56].

This rampantly excessive exploitation of the rainforests has been made
possible during the past two decades due to a mixture of market and policy
failures [Thiele, 1994]. Controls on forestry products are by far the most
important category of failure-inducing restrictions. By 1978-80 Indonesia
had become the world's largest exporter of tropical hardwood logs (20
million cubic metres in 1980) [Hasan 1991:11]. This along with oil and gas
exports increased the neo-mercantilist concern on the part of the
Indonesian Government. Exporting raw materials and importing finished
manufactures is never perceived as a road to long-term development. In
1975, the Government had initiated a programme aimed at the gradual
reduction of log exports which culminated in a complete ban in 1985.
Although the aim of the programme according to Robison [1990:105] was to
develop self-sufficiency with mutually reinforcing backwards and forward
linkages, a subsidiary aim was to increase the value-added component of
gross national product. Restrictions on the export of raw logs forced
producers into sawnwood and plywood processing. A sharp drop in the value
of log exports was followed by a slow climb in the value of plywood
exports, which by 1983/84 was worth 579 million USD out of a total value of
1,484 million USD for all manufactured exports.

In 1989, high export taxes (250-1,000 USD per cubic metre) were applied to
sawn timber in an effort to drive raw materials into the secondary
processing sector (woodworking, moldings, furniture) where value added was
expected to be higher. In general however, the main beneficiary of this
policy has been the plywood cartels which have been provided with a supply
of cheap logs. In 1992, the ban on log exports was replaced with export
taxes, in superficial recognition of the pressure from world trade
agreements. The impact on resource allocation from the change-over from
controls to taxes is negligible because the taxes are high enough to
replicate the protection provided by the ban. It remains the case that only
processed products can be exported. Because of the exorbitant taxes,
domestic log prices are considerably below international levels. For
illustrative purposes, prices for Meranti logs exported from Sabah (along
with Sarawak the largest exporter of tropical logs in the world) have
averaged around 160 USD per cubic metre since 1986 with recent prices over
300 USD per cubic metre; domestic prices of equivalent logs in Indonesia
currently average around 90 USD per cubic metre. Even this price may
overestimate what most plywood mill operations pay, since the majority are
affiliated with logging concessions and consequently obtain their logs at
cost - approximately 67 USD per cubic metre inclusive of government
royalties (currently 22 USD per cubic metre) [World Bank, 1993b:67].

An over-expansion of production capacity in wood-based commodities has
occurred because the return on investment is high due to the excessively
low administered price of the log input. As of 1990, there were 2,843
plywood and sawnwood mills which required a total log input of 54.9 million
cubic metres per year. The existing maximum supply capacity of production
forests is only 31 million cubic metres per year. Thus, there is an excess
demand of at least 23.9 million cubic metres as a result of
over-investment. Further, the ownership of forest concessions, log trading,
and wood-processing is highly concentrated in the hands of a few timber
magnates. As such, these business groups behave like quasi-cartels and
practice collusive behavior such as price fixing and intra-firm pricing,
which further depresses the real value of natural logs.

Most timber concessions have a duration of 20 years when the minimum
harvesting cycle is 35, providing no incentive to reforest. Concessions are
allocated arbitrarily by a small circle of forestry officials, to a small
number of concessionaires, for a small concession fee, all of which invites
corruption. Overly generous incentives and subsidies have been given to the
plywood and sawnwood industries by restricting log prices to a level far
below their market scarcity values. Extremely low forest fees have
permitted high economic rents to be captured by the private sector. The
anomaly is that much of the excess rent is absorbed in inefficiencies in
logging and processing [World Bank, 1993a:xii]. Regulations are not
enforced and penalties not levied for over-cutting, high-grading, or
illegal entry to contiguous lands due to the inadequate number of forestry
staff in the field [Hargono 1991:13]. Many concessionaires also do nothing
to protect their holdings from encroachment and fire once they are logged
[Parkinson, 1993:13]. While it is not possible to quantify what proportion
of forest operations have created significant adverse impacts on local
communities, it is apparent, from the very extensive amount of case study
and anecdotal material available, that such impacts are widespread and
serious [World Bank, 1993a:50].

Field work initiated by the author of this paper and others in Kalimantan
[See Poffenberger and McGean, 1994] indicate that the environmental costs
of timber operations have been heavy and unfairly borne by the local,
forest-dependent communities along the Mahakam River. The availability of
rattan, gum, and other important economic non-timber forest products has
declined sharply in logged-over areas. Wild animal populations have
diminished. One of the largest forest fires in Indonesia's history occurred
in 1982-83 as a result of logging and residue and drought which has
reshaped the landscape. Companies have consistently refused to consult with
the local communities before beginning timber operations on communal lands.
Finally, in an attempt to move local communities away from logging areas,
the indigenous Dayak people's time-tested, long-term fallow and rotational
swidden strategies are being prevented by government extension agents,
being replaced by demonstration projects noted for their failure. All of
this micro-level ecological degradation has led to Kalimantan being
identified as one of the major fourteen deforestation zones or 'tropical
hotspots' in the world by the Joint Research Centre of the European
Commission and National Aeronautical and Space Agency of the United States
[Myers 1993: 11].

The World Bank has observed that poor logging practices, combined with
inefficiencies in the wood processing industries, waste timber resources
equivalent to a third of the harvest. Including estimates of illegal
logging, the rate of timber extraction from Indonesia's natural forests
exceeds the assumed rate of regeneration, calling into question the
log-term supply of logs for domestic production [World Bank, 1994: xvi]. In
1995 the World Bank was even bolder: "At current rates of exploitation and
with today's inefficient logging and industry practices, suppliers of
commercially sized logs will come into short supply by the year 2010 or
earlier" [World Bank, 1995b: xiv].

Along with these inefficiencies in output, the liquidation of natural
forest for timber results in irreversible losses. This includes the
destruction of what was formerly a perpetual stream of income from nonwood
forest products for millions of people, typically cultural minorities for
whom tropical forests have been a traditional abode. Cash income is lost,
as well as materials for shelter and food in the form of meat, nuts,
fruits, and fibres. The tangible, immediate costs to, generally, poor
forest dwellers extend well beyond these losses including costs attendant
upon increased erosion, greater difficulties in river transportation,
forest fires and flooding that follows in the wake of deforestation.
Employment gains for poor unskilled labourers in logging and timber
processing are extremely limited. And very substantial economic rents have
been destroyed by commercial undertakings in natural forests; and rents
that were not destroyed, given government policies, accrued to the wealthy
rather than the poor .

On straight-forward efficiency grounds therefore, the forestry sector in
Indonesia leaves much to be desired. On equity grounds forestry policies
have proven to be regressive both in practice and effect. Normally, the
more difficult values identifiable in tropical rainforests are never
included in economic analyses because of their non-quantifiable and in some
cases intangible nature. Biodiversity is one such value.

CONCLUSION

Tropical rainforest is commonly recognised as one of the most ancient and
stable ecosystems on Earth. While even virgin, or primary, rainforest
suffers much natural disturbance by, for example, cyclones, landslides,
volcanic activity and drought, the present rate of disturbance by logging
activity in Indonesia is excessive.

>From a policy perspective, three characteristics of biological diversity
are critical: its public good nature, the existence of thresholds in
ecological systems, and uncertainty about those thresholds and the wider
values of biodiversity. Not one of these characteristics can meaningfully
be incorporated into a cost-benefit analysis. If economists are to be
relevant from a policy perspective on this issue, then they must begin to
approach the problem ecologically. In the meantime, economists have
something to offer in a minimal fashion. Simple policy changes can be made,
economically, to stop wasting the timber that is presently standing in
Indonesian rainforests. Before the real debate can begin between those who
wish to preserve global heritage and those who see economic growth as
mandatory, agreement must first take place regarding the abolition of
present inefficiencies and inequities in the Indonesian forestry sector
[Tobey, 1996: 25-28]. Some simple changes at each level to negate the
negative externalities generated by tropical rainforest logging include the
following actions. Until, at the very least, these changes occur, a debate
centred on economic and ecological criteria remains fatuous.

At the local level, more attention must be given to consultation with local
communities, with a specific allocation of forest royalty proceeds provided
directly to them for local developmental needs.

At the national level export bans and taxes on logs must end since they
simply provide an incentive to use what is, in fact, a scarce resource
(tropical timber) as if it were plentiful. Further, the subsidies and
protection are presently limited to a few cartels and some of the
wealthiest cronies of the New Order regime, with little benefit to the
indigenous poor. These increase inequities, both in the industry and in the
country.

At the regional level, incorporating both Japanese and Oceanic consumers,
an "ecolabelling" process could easily be instituted, possibly through
APEC. This process would provide for the inspection of all logging
operations and regenerating areas, permitting importation of only that wood
produced according to what is on paper, the most stringent environmental
protection laws and regulations of Indonesia.

At the international level, the Global Environmental Facility must come to
grips with the fact that most of the world's biological heritage exists in
poor nations. Given the positive benefits of protecting this heritage and
taking the precautionary principle seriously, it is essential for all those
nations who pledged funds to the GEF in Rio in 1992 to pay up. If the loss
of biodiversity is a global problem then it must be solved by global
contributions. This is a responsible ecological position. In the meantime,
representatives of the Indonesian Government and wood products cartels must
begin to take a responsible economic position.

Biological diversity is to the planet what the genome is to the individual
human. Erwin Schr"dinger once described a complex molecule as the container
of the code-script for life [Bowman, 1994: 59]. Analogously, biodiversity
is a code-script for Earth, and more rapidly than is at all necessary, it
is being erased.

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