Jakarta loses $12.5b in timber royalties

A labourer unloads timber from Kalimantan province from a phinisi, a traditional Indonesian ship, at Sunda Kelapa port in Jakarta in this Sep 8, 2014, file photo
A labourer unloads timber from Kalimantan province from a phinisi, a traditional Indonesian ship, at Sunda Kelapa port in Jakarta in this Sep 8, 2014, file photoPHOTO: REUTERS

JAKARTA • Unreported forest clearing cost Indonesia up to US$9 billion (S$12.5 billion) between 2003 and last year in lost timber royalties - about three times the royalties it actually received, an investigation by the country's main anti-graft agency has shown.

An eight-month investigation by the country's Corruption Eradication Commission (KPK) estimated the value of the lost timber at up to US$81 billion, with the cleared land often used for growing crops or mining.

A copy of its report, seen by Reuters yesterday and due to be handed to government ministers, will put further pressure on President Joko Widodo, who has been criticised by green groups and other South-east Asian nations on his country's forestry policy and for failing to stop the annual haze problem from forest-burning.

"Where does the money go - it goes to the corrupters," Mr Dian Patria, group head of corruption prevention for natural resources at the KPK, told Reuters.

"It could be US$9 billion, it could be more, because these are quite conservative figures. This is not only a corruption issue, it's also about the long-term environmental impact."

Home to the world's third largest tropical forests and a major palm oil and pulp and paper producer, Indonesia will be in the spotlight at the United Nations climate change conference in Paris in December.

Unregulated land clearing has long been a problem in the country, which lost 1.5 million hectares of tree cover last year, up from 1.1 million hectares in 2013.

The KPK report cited ineffective law enforcement, inaccurate production data and auditing by timber plantations, a lack of transparency on royalties data within government ministries, and poor coordination between central and regional governments as causes for the lost timber revenue.

Over the 12 years to 2014, Indonesia earned just US$3.2 billion from timber royalties, said the report, which comes as Mr Joko's government battles sluggish economic growth.

Late last month, Indonesia announced that it would borrow US$4.2 billion from international agencies to cover a widening budget deficit.

The report, which did not name any companies or individuals, highlighted rising timber prices and land clearing for the rapid expansion of palm oil and pulp and paper production, as well as mining.

The KPK will hand its report to the forestry and finance ministries and the country's audit agency, and will monitor the development of action plans to correct problem areas, Mr Patria said. If no action is taken within 12 months, KPK could hand its findings to its corruption investigations arm, he added.

REUTERS

A version of this article appeared in the print edition of The Sunday Times on October 11, 2015, with the headline 'Jakarta loses $12.5b in timber royalties'. Print Edition | Subscribe