Encouraging Transparency of Forestry State Revenue

The forestry sector is an extractive industry with very high revenue loss in Indonesia. The findings of the Supreme Audit Agency (BPK) RI in 2010 claimed that the state loss due to illegal logging is Rp 83 billion per day or Rp 30.3 trillion per year. As much as 70-80% of log production in Indonesia is estimated to come from illegal timber.3 Meanwhile, the formal forestry sector contribution to Gross Domestic Product (GDP) is not more than the range of 1% or US$ 1.8 billion per year over the last decade, according to the Central Statistics Agency (BPS) in 2012. The following analysis focuses on state revenues from timber harvesting. Largest share of Non-Tax State Revenue (PNBP) is derived from the Forest Resource Rent Provision (PSDH), the Reforestation Fund (DR), and Forest Utilization Permit Fee (IIUPH) levy, which are then distributed to the producing region. Three issues to be observed in this policy brief are: (1) the forestry sector revenue stream, (2) loss of forestry sector revenue, (3) the mechanism of transparency in the forestry sector

Transparansi Penerimaan Negara Sektor Kehutanan

Sektor kehutanan merupakan sektor industri ekstraktif dengan revenue loss yang sangat tinggi di Indonesia. Temuan Badan Pemeriksa Keuangan (BPK) RI tahun 2010 menyatakan kerugian negara akibat pembalakan liar sebesar Rp 83 milyar per hari atau Rp 30,3 triliun per tahun. Sebesar 70-80% produksi kayu bulat di Indonesia diestimasi datang dari kayu ilegal sementara sumbangan formal sektor kehutanan terhadap Produk Domestik Bruto (PDB) tidak lebih dari kisaran 1% atau US$ 1,8 milyar per tahunnya selama dasawarsa terakhir, berdasarkan data Badan Pusat Statistik (BPS) tahun 2012. Analisis berikut difokuskan pada penerimaan negara dari hasil hutan kayu. Pangsa terbesar PNBP sektor kehutanan berasal dari pungutan Provisi Sumber Daya Hutan (PSDH), Dana Reboisasi (DR), dan Iuran Izin Usaha Pemanfaatan Hutan (IIUPH), yang kemudian dibagihasilkan ke daerah penghasil. Tiga isu akan dilihat dalam catatan kebijakan ini, yaitu: (1) aliran penerimaan sektor kehutanan; (2) kehilangan penerimaan sektor kehutanan; (3) mekanisme transparansi di sektor kehutanan

Menggagas Mekanisme Pembagian Manfaat (Benefit Sharing Mechanism) Terpadu untuk Konservasi Hutan Adat di Bungo, Jambi

Setelah putusan Mahkamah Konstitusi (MK) nomor 35/20121, hutan adat yang selama ini berada dalam kawasan hutan negara telah berganti status dari hutan negara ke hutan hak. Konsekuensi logis atas pengakuan ini adalah memastikan bahwa masyarakat adat memperoleh manfaat yang sepantasnya atas upaya mereka menjaga hutan selama ini. Di sini kehadiran Negara diharapkan agar biaya tak lagi ditanggung masyarakat adat sendiri dan manfaat yang dihasilkan dari konservasi hutan adat dapat pula dibagi ke masyarakat adat (baca: benefit sharing mechanism/BSM). Namun, usulan-usulan mekanisme pembagian manfaat yang ada saat ini, terutama yang menggunakan pendekatan keuangan publik (public finance), baik di aras teoretis dan terlebih lagi di aras usulan praktis, cenderung salah kaprah, belum mencerminkan kondisi dan konteks kelembagaan di tanah air, serta bertentangan dengan aspirasi masyarakat adat. Merujuk pada kondisi di atas, maka penting untuk merancang mekanisme pembagian manfaat bagi masyarakat adat yang sepadan dengan prinsip keuangan publik dan desentralisasi fiskal dalam pengelolaan rente sumber daya alam, serta kelembagaan dan tata kelola dalam konteks sistem sosial-ekologis kehutanan. Pada kajian ini, instrumen pendanaan untuk konservasi hutan adat akan difokuskan pada DBH kehutanan dan pertambangan. DBH dipilih untuk saat ini dengan pertimbangan diskresi pemerintah daerah dalam penggunaannya sehingga sebagian dapat didorong agar memenuhi aspirasi masyarakat adat. Kabupaten yang dipilih untuk merancang dan mengoperasionalkan mekanisme pembagian manfaat bagi konservasi hutan adat ini adalah Kabupaten Bungo, Provinsi Jambi

Emerging threats from deforestation and forest fragmentation in the Wallacea centre of endemism

The Wallacea biogeographic region of Sulawesi, the Moluccas and Lesser Sunda, is globally renowned for exceptional endemism, but is currently emerging as a development frontier in Indonesia. We assessed patterns and drivers of forest loss and fragmentation across the region, and used dynamic deforestation models to project future deforestation to 2053. Up to 10,231 km2 was deforested between 2000 and 2018, and a further 49,570 km2 is expected to be lost by 2053, with annual deforestation rates ranging between 0.09% and 2.17% in different sub-regions (average: 1.23%). Key Biodiversity Areas (priority sites for endemic and threatened biodiversity) are particularly vulnerable to deforestation if they are small, coastal and unprotected. Sub-regional variation in deforestation patterns and drivers must be acknowledged if conservation interventions are to be targeted and effective. We provide a valuable baseline from which to monitor Wallacea’s new development course, as Indonesia undergoes profound policy changes that will provide both challenges and opportunities for environmental governance and conservation

Safeguarding Imperiled Biodiversity and Evolutionary Processes in the Wallacea Center of Endemism

Wallacea—the meeting point between the Asian and Australian fauna—is one of the world's largest centers of endemism. Twenty-three million years of complex geological history have given rise to a living laboratory for the study of evolution and biodiversity, highly vulnerable to anthropogenic pressures. In the present article, we review the historic and contemporary processes shaping Wallacea's biodiversity and explore ways to conserve its unique ecosystems. Although remoteness has spared many Wallacean islands from the severe overexploitation that characterizes many tropical regions, industrial-scale expansion of agriculture, mining, aquaculture and fisheries is damaging terrestrial and aquatic ecosystems, denuding endemics from communities, and threatening a long-term legacy of impoverished human populations. An impending biodiversity catastrophe demands collaborative actions to improve community-based management, minimize environmental impacts, monitor threatened species, and reduce wildlife trade. Securing a positive future for Wallacea's imperiled ecosystems requires a fundamental shift away from managing marine and terrestrial realms independently

Safeguarding Imperiled Biodiversity and Evolutionary Processes in the Wallacea Center of Endemism

Wallacea—the meeting point between the Asian and Australian fauna—is one of the world's largest centers of endemism. Twenty-three million years of complex geological history have given rise to a living laboratory for the study of evolution and biodiversity, highly vulnerable to anthropogenic pressures. In the present article, we review the historic and contemporary processes shaping Wallacea's biodiversity and explore ways to conserve its unique ecosystems. Although remoteness has spared many Wallacean islands from the severe overexploitation that characterizes many tropical regions, industrial-scale expansion of agriculture, mining, aquaculture and fisheries is damaging terrestrial and aquatic ecosystems, denuding endemics from communities, and threatening a long-term legacy of impoverished human populations. An impending biodiversity catastrophe demands collaborative actions to improve community-based management, minimize environmental impacts, monitor threatened species, and reduce wildlife trade. Securing a positive future for Wallacea's imperiled ecosystems requires a fundamental shift away from managing marine and terrestrial realms independently

Ecological Fiscal Transfers in Indonesia

Environmental positive externalities from public provision, such as the benefits yielded from the public measure of nature conservation, are often not internalized. Potential sub-optimal public service provision can be expected from such a condition, leading to inefficiency, if the benefits at a greater territorial scale are not acknowledged. This holds particularly true for intergovernmental fiscal relations in a decentralizing multi-tiered governmental system. Moreover, in developing countries the fiscal capacities to perform measures of ecological public functions are limited with their fiscal needs for these functions often appearing to outweigh their fiscal capacities. Research at the interface of the economic theory of fiscal federalism, the sustainability concept, and policies related to conservation and the environment is relatively new. Furthermore, in the literature on environmental federalism the emphasis tends to be comparatively less on the benefits of positive environmental externalities. The essential contribution of this study is an extension of this research field that is still in its infancy by applying the specific case of Indonesia as the context, on account of this tropical country‟s ecological significance as well as its recent developments during the fiscal decentralization process. The overall aim of this study is to assess the possibilities of ecological fiscal transfers as a set of instruments in the public sector to internalize environmental externalities. To this end, the study traces the development as well as the current state of intergovernmental fiscal transfers in Indonesia in terms of ecological purposes. On the basis of this knowledge, the study offers new policy perspectives by proposing a number of policy options for ecological fiscal transfers in the context of the functioning fiscal transfer system and institutions between the national and the subnational (province and local) governments as well as among jurisdictions at the same governmental level. The incorporation of an explicit ecological indicator into general-purpose transfers is the first option. The second option is derived from a revenue-sharing arrangement. In this arrangement, two sub-options are proposed: first, shared revenues from taxes are distributed on the basis of the ecological indicator and, second, shared revenues from natural resources are earmarked for environmental purposes. Finally, the third option suggests an extension of existing specific-purpose transfers for the environment. The potential and limitations of the respective options are addressed. Additionally, a short treatment is given to the discourse on the possible mobilization of fiscal resources in the context of tropical deforestation and global climate change. The research concentrates mainly on the first option, namely the incorporation of an ecological indicator into the structure of general-purpose transfer allocation. In order to substantiate an explicit ecological dimension in the transfer, it extends the present area-based approach by introducing a protected area indicator while maintaining the remaining socio-economic indicators in the fiscal need calculation. The parameter values of area-related indicators are adjusted and subject to the properties of the existing formula. The simulation at the provincial level yields the following results. First, more provinces lose rather than gain from the introduced ecological fiscal transfer when compared to the fiscal transfer that they received in the reference fiscal year. Second, on average the winning provinces obtain a higher level of transfer from the introduction of an ecological indicator in the fiscal need calculation. The extent of the average decreases for the losing provinces, however, it is lower compared to the extent of the average gain by their winning counterparts. In terms of spatial configurations of the general-purpose transfer with an ecological indicator, provinces in Papua would benefit most from the new fiscal regime whereas provinces in Java and Sulawesi, with a few exceptions, would suffer a transfer reduction. Kalimantan and Sumatera show a mixed pattern of winning and losing provinces. The analysis on the equalization effects of the general-purpose transfers makes the following important contributions. It suggests that, first, the transfers are equalizing and, second, the introduction of the protected area indicator into the structure of these transfers plays a significant role in the equalizing effect, particularly in the presence of provinces with a very high fiscal capacity and when the area variable is also controlled. All of these new insights are imperative in the design of fiscal policy which intends to integrate explicit ecological aspects into the instruments of intergovernmental fiscal transfers. Since a formula-based fiscal transfer distribution is intrinsically zero-sum, the aforementioned configuration of winning and losing jurisdictions is conceivable. Among other future perspectives, it is the task of further research to explore ecological fiscal transfer instruments and associated measures that on the one hand seek to induce the losing provinces to join their winning counterparts and, on the other hand, are still subject to the requirements of the rational fiscal transfer mechanism

Ecological Fiscal Transfers in Indonesia

Environmental positive externalities from public provision, such as the benefits yielded from the public measure of nature conservation, are often not internalized. Potential sub-optimal public service provision can be expected from such a condition, leading to inefficiency, if the benefits at a greater territorial scale are not acknowledged. This holds particularly true for intergovernmental fiscal relations in a decentralizing multi-tiered governmental system. Moreover, in developing countries the fiscal capacities to perform measures of ecological public functions are limited with their fiscal needs for these functions often appearing to outweigh their fiscal capacities. Research at the interface of the economic theory of fiscal federalism, the sustainability concept, and policies related to conservation and the environment is relatively new. Furthermore, in the literature on environmental federalism the emphasis tends to be comparatively less on the benefits of positive environmental externalities. The essential contribution of this study is an extension of this research field that is still in its infancy by applying the specific case of Indonesia as the context, on account of this tropical country‟s ecological significance as well as its recent developments during the fiscal decentralization process. The overall aim of this study is to assess the possibilities of ecological fiscal transfers as a set of instruments in the public sector to internalize environmental externalities. To this end, the study traces the development as well as the current state of intergovernmental fiscal transfers in Indonesia in terms of ecological purposes. On the basis of this knowledge, the study offers new policy perspectives by proposing a number of policy options for ecological fiscal transfers in the context of the functioning fiscal transfer system and institutions between the national and the subnational (province and local) governments as well as among jurisdictions at the same governmental level. The incorporation of an explicit ecological indicator into general-purpose transfers is the first option. The second option is derived from a revenue-sharing arrangement. In this arrangement, two sub-options are proposed: first, shared revenues from taxes are distributed on the basis of the ecological indicator and, second, shared revenues from natural resources are earmarked for environmental purposes. Finally, the third option suggests an extension of existing specific-purpose transfers for the environment. The potential and limitations of the respective options are addressed. Additionally, a short treatment is given to the discourse on the possible mobilization of fiscal resources in the context of tropical deforestation and global climate change. The research concentrates mainly on the first option, namely the incorporation of an ecological indicator into the structure of general-purpose transfer allocation. In order to substantiate an explicit ecological dimension in the transfer, it extends the present area-based approach by introducing a protected area indicator while maintaining the remaining socio-economic indicators in the fiscal need calculation. The parameter values of area-related indicators are adjusted and subject to the properties of the existing formula. The simulation at the provincial level yields the following results. First, more provinces lose rather than gain from the introduced ecological fiscal transfer when compared to the fiscal transfer that they received in the reference fiscal year. Second, on average the winning provinces obtain a higher level of transfer from the introduction of an ecological indicator in the fiscal need calculation. The extent of the average decreases for the losing provinces, however, it is lower compared to the extent of the average gain by their winning counterparts. In terms of spatial configurations of the general-purpose transfer with an ecological indicator, provinces in Papua would benefit most from the new fiscal regime whereas provinces in Java and Sulawesi, with a few exceptions, would suffer a transfer reduction. Kalimantan and Sumatera show a mixed pattern of winning and losing provinces. The analysis on the equalization effects of the general-purpose transfers makes the following important contributions. It suggests that, first, the transfers are equalizing and, second, the introduction of the protected area indicator into the structure of these transfers plays a significant role in the equalizing effect, particularly in the presence of provinces with a very high fiscal capacity and when the area variable is also controlled. All of these new insights are imperative in the design of fiscal policy which intends to integrate explicit ecological aspects into the instruments of intergovernmental fiscal transfers. Since a formula-based fiscal transfer distribution is intrinsically zero-sum, the aforementioned configuration of winning and losing jurisdictions is conceivable. Among other future perspectives, it is the task of further research to explore ecological fiscal transfer instruments and associated measures that on the one hand seek to induce the losing provinces to join their winning counterparts and, on the other hand, are still subject to the requirements of the rational fiscal transfer mechanism