UK government support for forestry reform in Indonesia

What was achieved by MFP?

MFP was designed and implemented in a climate of huge political change in Indonesia following the downfall of the Suharto regime in 1998.

In the new political environment many new CSOs were formed promoting different progressive causes linked to the use of forests.

Greater responsibility for forest regulation was also devolved to provincial and district governments.

DFID’s partnership with a range of stakeholders at the national, provincial and district levels resulted in significant improvements in the regulatory environment.

MFP helped build the evidence and the political support behind the issue of Ministerial Decrees which for the first time permitted local and indigenous people, rather than private companies, to manage forest land and plantations.

As a pilot for the new regulations, 57 community groups in three provinces were leased almost 9,000 hectares of forest land.

Indonesia’s forestry minister has since committed to place 500,000 hectares of forest under the management of local villages. A target has also been set to create more than 5 million hectares of community managed plantation by 2015.

• A wide range of concrete measures improved forest management and the lives of communities that depend on the forest for their livelihoods.  Examples of the programmes impact include:
  On the island of Sumatra, MFP support led to ratification of equivalent local regulations for community forest management, cessation of illegal logging in a 70,000ha concession belonging to PT Gunung Raya Utama in Nias, and improved law enforcement.
• In Kalimantan, a decree was passed reforming export quotas for cultivated rattan and encouraging its cultivation by rural people as a sustainable alternative to illegal logging.  In Ketapang District traditional community rights over forest were established by mapping and district level regulations.
• In the autonomous region of Papua, the provincial parliament has passed a decree upholding customary rights in the province’s forests. This includes processes for rights recognition and new joint management structures with customary land owners.
• In Sulawesi, a cooperative in Kendari district was awarded a Forest Stewardship Council certificate – the first for community forestry in Indonesia. This resulted in better markets for teak growers supplying the Javanese wood industry.  Various District level decrees were also approved in Sulawesi establishing community rights to manage their forest and protecting mangroves.
• A grant to the Environmental Investigation Agency (EIA) and its local counterpart, Telapak, helped train local NGOs to record and report illegal logging and pressure the government to take action. They documented the multimillion-dollar smuggling of valuable logs from Papua province to China. A major enforcement exercise resulted, effectively choking off the trade and prosecuting the officials involved.
• EIA’s work, funded by MFP, also exposed smuggling via Malaysia of Indonesian ramin timber (a species protected under CITES - the Convention on International Trade in Endangered Species). This led to Malaysian action and effective termination of the trade.
• Indonesian government audits of the plywood industry by a team engaged by MFP demonstrated that 80% of its log intake could not be identified as legal. When this was made known to UK plywood buyers, the trade was halved, almost overnight. It resulted in the UK Timber Trade Federation launching a system of auditing suppliers and helping them source legal supplies, an initiative which has now been expanded to cover other tropical countries and more European trade associations.
• The UK-Indonesia Memorandum of Understanding (MoU) on illegal logging, signed by Ministers of each country in 2002, helped underpin the current negotiations aimed at a timber trade agreement between Indonesia and the EU. When this becomes operational the EU will only accept Indonesian timber products that have been independently verified as legally produced. Under the MoU, the UK helped forge national agreement on a definition of legally-produced timber and the development of systems to track timber from forest to export.
• The MoU also funded a NGO-government coalition to tackle illegal logging in West Kalimantan. The coalition provided information that led to the jailing of illegal loggers, including senior police and forestry officials and the subsequent effective clamp down on the illegal cross-border trade in timber with Malaysia.
• MFP also funded research by the Center for International Forestry Research (CIFOR) to examine how financial legislation could target the profits of illegal logging. As a direct result Indonesia’s Anti-Money Laundering legislation includes illegal logging as a “predicate crime” and empowers the authorities to appropriate the property of those involved.
• As part of MFP’s exit strategy, the programme supported the establishment of Community Foundations in four island regions with the capacity to raise funds, and sustain support to community forestry initiatives and civil-society advocacy at local level.  Successful initiatives supported by these foundations include the first licensed village forests in Sumatra, and micro-credit networks for forest farmers across East Java.

Fiduciary Controls:

MFP sought to support change at the local level by providing targeted support, including financial support, to help these organisations to fulfil their roles in forest governance effectively.

Large numbers of local organisations applied for grants from MFP. Their applications were thoroughly evaluated and selection made on a number of criteria, including their ability to monitor and account for expenditure.

This could not all be done centrally in a country the size of Indonesia, so Community Foundations were established at regional level and trained how to perform this role.

To ensure that the programme remained focused and that funds were being used in the most effective way, strong budgetary controls were implemented centrally and by the Community Foundations, and both internal monitoring and regular external reviews were carried out.

Grant recipients were required to provide annual audited statements as part of their financial reporting and an independent auditor reviewed every grantee at least once in the grant period.

What support does the UK currently provide?

To continue the cooperation started under the MoU on Illegal Logging, DFID agreed further funding of £5 million in 2007.

In this new phase of work, DFID is providing specialist support to facilitate the conclusion of the timber trade agreement with the EU and to oversee capacity building in cooperation with the European Commission.

This is helping to develop a national timber legality assurance system that will form the basis of the timber trade agreement with the EU: a trade worth over 1 billion euros per annum to Indonesia.

It includes auditing of all timber operations against the agreed definition of legality, tracking the timber from forest through various stages of processing, licensing of exports, and independent oversight.

Indonesia intends to apply the system to all its exports not only those to Europe. 
National legislation was passed in June 2009 which describes the system and full implementation will begin in September 2010.

Under the MoU, civil society is developing a role as independent monitors of the whole system, enshrining in law what they have been doing to date through market campaigns and advocacy.

In the future

In recognition of the importance of Indonesia to global ambitions to tackle climate change, a new five-year partnership between the UK and Indonesia on climate change has been agreed.

Through this partnership, DFID will support Indonesia’s plans to reduce its carbon emissions from deforestation and peatlands, promote green growth, help create employment and protect the poorest and most vulnerable people in Indonesia from the impact of climate change.

In 2009 President Yudhoyono committed Indonesia to reduce its carbon emissions by 26% by 2020 and by up to 41% with international support.

Our joint programme will focus on helping Indonesia to achieve the more ambitious target.

DFID funds spent under the partnership between 2010 and 2012 will form part of the UK’s contribution to Fast Start, the funding which will be made available to help developing countries take early action on climate change.

DFID’s partnership with Indonesia will focus on:

• Providing areas like Papua and Kalimantan - where there is the greatest threat to forest loss - with land use planning and economic advice so that their forests and peatlands can be managed sustainably. 
• Supporting the development of legislation and financial incentives which encourage the private sector to use already degraded land for new oil palm plantations, rather than clearing standing forest. 
  Developing viable and sustainable forest and land-use plans that will attract global carbon financing through the REDD initiative.
• Supporting civil society organisations, universities and community groups so that a wide range of informed voices can help to influence decision-making on climate change action.
• Helping Indonesians to plan for the effects of climate change that are happening now and will continue, regardless of what we do today. This will enhance the resilience of people to the impact of climate change and ensure the sustainability of Indonesia’s low carbon growth.
  

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