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Illegal Forestry Activities

in Berau and East Kutai Districts,


East Kalimantan:
Impacts on Economy, Environment and Society

Krystof Obidzinski and Agus Andrianto

Forest Governance Program


Center for International Forestry Research (CIFOR)

April 2005
© 2005 by CIFOR
All rights reserved.

Photos by Agus Andrianto and Krystof Obidzinski

Published by
Center for International Forestry Research

Center for International Forestry Research


Jl. CIFOR, Situ Gede, Sindang Barang,
Bogor Barat 16680, Indonesia
Tel.: +62 (251) 622622; Fax: +62 (251) 622100
E-mail: cifor@cgiar.org
Web site: http://www.cifor.cgiar.org

i
TABLE OF CONTENTS

List of Tables, Figures, and Maps iv

Glossary vii

Acknowledgements x

Executive Summary xi

1. INTRODUCTION 1

2. OBJECTIVES 2

3. METHODOLOGY 3

4. STRUCTURE OF THE REPORT 4

5. OVERVIEW OF THE FORESTRY SECTOR IN EAST KALIMANTAN 5

6. ILLEGAL FOREST ACTIVITIES IN BERAU DISTRICT, EAST KALIMANTAN 7


6.1. Overview of the forestry sector in Berau District 8
6.2. Illegalities associated with extractive forestry operations 8
6.2.1. HPH 8
6.2.2. Small-scale logging permits – IPKTM, IPK 24
6.2.3. HTI 29
6.2.4. Small-scale logging teams 32
6.3. Illegalities associated with wood-processing industries 34
6.3.1. Sawn timber and moulding 35
6.3.2. Timber kiosks 39
6.3.3. Ship-building 41
6.3.4. Pulp and paper production 42

7. ILLEGAL FORESTRY ACTIVITIES IN THE NORTHERN PART OF EAST KUTAI


DISTRICT 44
7.1. Overview of the forestry sector in East Kutai District 44
7.2. Illegalities associated with extractive forestry operations
in the northern part of East Kutai District 44

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7.2.1. HPH 45
7.2.2. IPK 48
7.2.3. Small-scale logging teams 51
7.3. Illegalities associated with wood-processing industries in the northern part of
East Kutai 53
7.3.1. Sawmills and moulding 53

8. SUMMARY AND ANALYSIS 59


8.1. Impact of illegal forest activities on district economy 59
8.2. Impact of illegal forest activities on livelihoods in Berau and East Kutai 70
8.3. Impact of illegal logging on environment in both districts 77
8.4. Factors facilitating illegal forest activities in Berau and East Kutai and how to
mitigate them 80

REFERENCES 83

APPENDICES 88

iii
LIST OF TABLES, FIGURES, AND MAPS

List of Tables

Table 1. Forest Area by Forest Land Use Type by Sub-District,


as of 2001 8
Table 2. HPH and IPK roundwood production in Berau, 2001-2003 9
Table 3. Province-level IPK logging permits in Berau, 2002-2004 9
Table 4. HPH and IPK log production in Berau in 2003 12
Table 5. HPH and IPK log production in Berau until May, 2004 13
Table 6. HPH operations in Berau, an in-depth look 14
Table 7. IPKTM issued by Bupati Berau in the period 2000-2001 24
Table 8. IPK Wood Utilization Permit-Holders in Kabupaten Berau,
as of 1997 25
Table 9. Plantation ventures seeking IPK permits in 1999 26
Table 10. Provincial IPK logging permits in Berau, 2002-2004 27
Table 11. HTI natural forest log production in Berau, 2003 30
Table 12. HTI natural forest log production in Berau in the first half of 2004 30
Table 13. Small-scale logging teams in Berau District, 2004 32
Table 14. Sawn timber and moulding production in Berau in 2003 36
Table 15. Sawn timber and moulding production in Berau as of May 2004 36
Table 16. Sawn timber and moulding mills in Berau, 2004 39
Table 17. Timber kiosks in Berau District, 2004 40
Table 18. Ship-building in Berau, 2004 42
Table 19. Log production in East Kutai, 2001-2002 45
Table 20. Log production in East Kutai in 2003 46
Table 21. Reported transport of HPH logs in East Kutai in 2003 47
Table 22. Provincial IPK permits in East Kutai active in 2004 48
Table 23. IPK permits issued by East Kutai District (Bupati), 2001-2004 49
Table 24. Reported transport of IPK logs in East Kutai in 2003 50
Table 25. A sample of small-scale logging teams near Muara Wahau,
East Kutai, 2004 52

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Table 26. The official record of sawn timber and moulding mills in East
Kutai in 2004 54
Table 27. Sawn timber production in East Kutai, 2003 55
Table 28. A sample of 15 sawmills operating in Muara Wahau,
East Kutai, 2004 56
Table 29. Timber shipments by boat from Wahau to Samarinda, July 2004 58
Table 30. Passage fee system for sawn timber on the route Wahau-Samarinda 58
Table 31. Production per type of large-scale logging license in Berau, 2003 60
Table 32. Documented HPH/IPK illegal logging cases in Berau, 2000-2004 60
Table 33. Market value and Retribusi Pengelolaan tax losses from
undocumented shipments of sawn timber/moulding in
Berau, 2000-2002 63
Table 34. Revenues gained and lost in Berau’s forestry sector, 2003
(in Rp billion) 67
Table 35. Revenue collection and loss in the forestry sector in East Kutai,
2003 (in Rp billion) 69
Table 36. Employment generated by licensed and unlicensed forestry sector
in East Kutai by category, 2003/2004 73

List of Figures

Figure 1. Discrepancy between the production and shipment of logs


from Berau, 1996-2003 10
Figure 2. Supply of HPH/IPK logs and the production of sawn timber
in Berau, 2003-2004 37
Figure 3. Sawn timber produced and shipped in Berau, 1993-2002 38
Figure 4. HPH-IPK roundwood production in East Kutai, 2001-2003 47
Figure 5. PSDH revenues collected in East Kutai, 2000-2003 65
Figure 6. HPH and IPK employment in Berau, 1999/2000-2003 70
Figure 7. HPH-related employment in Berau, 1999/2000-2003 71
Figure 8. IPK-based employment in Berau, 1999/2000-2003 71
Figure 9. Logging-based employment (HPH, IPK) in East Kutai,
1999/2000-2003 74
Figure 10. HPH-related employment in East Kutai, 1999/2000-2003 75
Figure 11. IPK-related employment in East Kutai, 1999/2000-2003 75
Figure 12. Deforestation in Berau 1997-2000 78

v
List of Maps

Map 1. Administrative map of East Kalimantan Province 86


Map 2. Berau district 87
Map 3. Forest concession companies in Berau and East Kutai 88
Map 4. overlap between forestry and mining operations in Berau 89
Map 5. Talisayan sub-district 90
Map 6. PT Karya Lestari Jaya 91
Map 7. PT Berau Timber 92
Map 8. PT MSK Timber 93
Map 9. PT Taurus 94
Map 10. Berau and the northern part of East Kutai district 95

vi
GLOSSARY

Baplan Kehutanan : Badan Planologi Kehutanan, Forestry Planning Unit


BAPPEDA : Badan Perencanaan Pembangunan Daerah, Regional
Development Planning Agency
BFMP : Berau Forest Management Project
Borongan : Output based job
BPS : Badan Pusat Statistik, Statistics Office
BUMD : Badan Usaha Milik Daerah, District/Province government
enterprise
Bupati : District Head
CDK : Cabang Dinas Kehutanan, formerly District Branch of Forestry
Service
Dana Reboisasi : Dana Reboisasi, Reforestation Fund
DAU : General Allocation Fund
DAK : Special Allocation Fund
Dinas Kehutanan : Province/District Forestry Service
Dinas Pendapatan Daerah : Provincial/District Finance Office
Gaharu : Aloes Wood
HGU : Hak Guna Usaha, Business License
HPH : Hak Pengusahaan Hutan, Commercial Forestry Concession
HPH-TC : Hak Pengusahaan Hutan-Tanaman Campuran, Commercial
Forestry Concession & Mixed Plantation
HPH-TC : Hak Pengusahaan Hutan-Tanaman Coklat, Commercial Forestry
Concession & Cocoa Plantation
HPH-TKS : Hak Pengusahaan Hutan Tanaman Kelapa Sawit, Commercial
Forestry Concession & Oil Palm Plantation
HTI : Hutan Tanaman Industri, Industrial Timber Plantation
Hutan Lindung : Protection Forest
IBRA : Indonesian Bank Restructuring Agency
IPK : Izin Pemanfaatan Kayu, Timber Utilization Permit

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IPKTM : Izin Pemanfaatan Kayu Tanah Milik, Utilization Timber Permit
form Privately Owned Land
IPPK : Izin Pemungutan dan Pemanfaatan Kayu, Permit for Extraction
and Utilization of Timber
Kabupaten : District
Kadishut : Kepala Dinas Kehutanan, Head of Province/District Forestry
Service
Kanwil : Kantor Wilayah, Regional office of a National Government Agency
Kapolsek : Kepala Kepolisian Sektor, Sub-district Police Head
Kawasan hutan : Forest Estate
KBK : Kawasan Budidaya Kehutanan, Forest Estate
KBNK : Kawasan Budidaya Non-Kehutanan, Non-Forest Estate
Kios kayu : Timber Kiosk
KKN : Korupsi, Kolusi dan Nepotisme, Corruption, Collusion and
Nepotism
Kopassus : Komando Pasukan Khusus, Military Special Forces
Koramil : Komando Daerah Militer, Sub-district Military Command
Mandor : Logging team leader
Masyarakat : Local people
MoF : Ministry of Forestry
MTH : Mixed Tropical Hardwoods
IHPH : Iuran Hak Pengusahaan Hutan, Commercial Forestry Concession
tax
NTFP : Non-Timber Forest Product
PAD : Pendapatan Asli Daerah, Regionally Generated Revenues
Pajak Daerah : District Tax
PBB : Pajak Bumi dan Bangunan, Land and Building Tax
Pemkab : Pemerintah Kabupaten,
Perda : Peraturan Daerah, District Regulation
Provisi Pihak Ketiga : Sumbangan Pihak Ketiga
PSDH : Provisi Sumber Daya Hutan, Timber Royalty
PWH : Pembukaan Wilayah Hutan, Opening of forest area
Reformasi : Political transformation in Indonesia after 1998
Retribusi Daerah : District Fees

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RKL : Five Year Forestry Workplan
RKT : Rencana Kerja Tahunan, Annual Forestry Workplan
RP : Retribusi Produksi, Timber Production Fee
RP : Retribusi Pengelolaan, Timber Processing Fee
RTRWK : District Spatial Development Plan
SK : Surat Keputusan, Government Decision
SKSHH : Surat Keterangan Sahnya Hasil Hutan, Letter of Legality for
Forest Products
SPK : Sumbangan Pihak Ketiga, Third Party Contribution
STREK : French-funded Sustainable Forest Management Project in Berau,
1989-1994
Sumbangan Pihak Ketiga : Third Party Contribution (District level tax)
UPTD : Unit Pelaksana Teknis Daerah, Provincial Forestry Service

ix
ACKNOWLEDGEMENTS

This study was funded by The Nature Conservancy. The authors gratefully acknowledge this
support. We are also grateful to TNC staff in East Kalimantan whose assistance during the process
of data collection was indispensable. In particular, we extend our thanks to Pak Junaedi for
extensive help with spatial imagery as well as for useful discussions about forestry problems in
Berau and East Kutai districts. We also extend our appreciation to Mbak Daryatun and Mas Agus
for making available to us TNC field equipment. We would also like to thank Dedi and Bambang of
Yaysan Bestari, Dodi Hernawan of Bioma, Rini Kusumawati, Christoforus Winfried Belle, Wijil
Rahadi, Pak Dimin and Pak Bambang of Jabdan/Muara Wahau – each of whom provided critical
assistance during the field component of the study.

During the authors’ visits to Berau and East Kutai, numerous government officials and forestry
officers made themselves available for interviews and provided important data. We gratefully
acknowledge the assistance of PT Sumalindo Lestari Jaya IV, PT Gunung Gajah Abadi, contacts in
other HPH, IPK, IPPK/IPKTM, woodworking sector enterprises, as well as Forestry (UPTD, Dinas
Kehutanan), Statistics, Trade and Industry, and Customs Offices at the provincial level in
Samarinda as well as in Berau and East Kutai districts.

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EXECUTIVE SUMMARY

This study examines illegal forest activities in Berau and East Kutai Districts in Indonesia’s East
Kalimantan province. By analyzing all types of extractive and processing forestry activities, the
study identifies illegalities associated with these operations and assesses their economic,
social/livelihood and environmental impacts. It also identifies the key driving forces behind illegal
forest activities and proposes corrective measures.

Illegal forestry activities in Berau and East Kutai

The analysis of logging and woodworking in Berau and East Kutai indicates illegalities are
widespread. They occur mainly in the following forms:

1) Logging operations cutting out of block


2) Logging companies pretending to be stagnant while in fact they extract timber
3) Land-clearing (IPK) permits issued for dubious plantation schemes
4) Unlicensed small-scale logging
5) Log/sawn timber production is under-reported and shipping documents are illegally altered
6) Logging and woodworking enterprises in both districts routinely evade taxation
7) Logging as well as woodworking enterprises engage in tax evasion

Economic impact of illegal forestry activities in Berau and East Kutai

The 2003 analysis shows the illegal forestry activities cause large budgetary losses in Berau. In
2003, such losses amounted to over Rp 103 billion. However, this revenue lost is not literally ‘lost’
as a substantial part of it is appropriated by individuals and government institutions in position to do
so.

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BERAU Revenue Revenue lost
collected (Rp (Rp billion)
billion)
HPH/IPK/HTI
PSDH 14.65 12.15
Retribusi Produksi 1.2 0

DR 71 0
IPPK/IPKTM
DR-PSDH 0 29.3a
Retribusi Produksi 10 0

Small-scale logging teams

Informal tax 3.6 0


DR-PSDH 0 65.1
Retribusi Produksi 0 0.8

Sawmills
Retribusi Pengelolaan 0.3 1.89

Informal tax 2.03b 0


Lumber kiosks and ship-building

Informal tax 0.2 0


Pulp and paper

Water tax, PBB 0.4 0

TOTAL 103.38 109.24

Note: a This number has been derived by dividing the official figure of lost DR-PSDH of Rp. 88 billion for the period
2000-2003 by three to obtain a yearly average. b This estimate is based on the information that on average each of 37
sawmills in Berau operates 11 months a year and each has a monthly ‘informal budget’ of Rp 5 million.

Similarly, economic losses resulting from illegal activities in the forestry sector in East Kutai district
are large and they far outweigh the gains. In 2003, the losses amounted to Rp 126 billion, mainly
in lost tax revenue on HPH, IPK and unlicensed small-scale logging. As in Berau, most of the
revenue ‘lost’ is appropriated by well-connected individuals and government institutions in the
district.

xii
EAST KUTAI Revenue collected Revenue lost
(Rp billion) (Rp billion)

HPH/IPK
PSDH 17.1 23.4
DR 46.5a 63.5

Small-scale logging teams

PSDH 0 10.5

DR 0 28.6
Informal tax 2.1 0
Sawmills
Informal tax 3.4 0
TOTAL 69.1 126

Note: a The amount of DR revenue gained is based on the assumption that about 31 percent of the total DR revenue
generated from the production of logs in 2003 was transferred to East Kutai.

Illegal forestry activities in Berau and East Kutai and local livelihoods

While illegal forest activities in Berau and East Kutai are a drain on the finances of the local
government, it must be admitted they generate employment opportunities, particularly for the
unskilled labor force. In 2003, unlicensed forestry operations in Berau generated 4,000 jobs, while
licensed operations created 2,000 jobs.

BERAU Employment in 2003


Licensed logging sector
HPH/IPK 434
HTI 250-300
Unlicensed logging sector
Small-scale logging teams 3,000
Licensed woodworking sector
Kiani Kertas pulp and paper mill 1,410 (70 percent skilled jobs)
Unlicensed woodworking sector
Sawmills, moulding 393
Timber kiosks 124
Ship-building 256
Total licensed forestry sector (logging + 2,094-2,144
woodworking)
Total unlicensed forestry sector (logging + 3,773
woodworking)
Total forestry sector (licensed + unlicensed) 5,867-5,917

Source: CIFOR survey 2004

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The licensed and unlicensed forestry activities also generate significant employment opportunities
in East Kutai. The licensed forestry sector supported 5,500 jobs in the district due to
disproportionately high number of IPK land-clearing jobs that will be available for a very short time
only. The unlicensed forestry activities created 2,500 employment opportunities.

EAST KUTAI Employment


Licensed logging sector
HPH/IPK 5,319a
Unlicensed logging sector
Small-scale logging teams 2,000b
Licensed woodworking sector
Reporting woodworking mills 95
Unlicensed woodworking sector
Other sawmills, moulding 505-605c
Total licensed forestry sector (logging + 5,414
woodworking)
Total unlicensed forestry sector (logging + 2,505-2,605
woodworking)
Total forestry sector (licensed + unlicensed) 7,919-8,019

Source: CIFOR survey 2004. Note: a About 74 percent of these jobs (or 3,953) were generated by IPKs; b This is an
extrapolation from the situation in the Wahau-Kombeng area where 55 logging teams (about 550 loggers) annually
supply 210,000 m3 of logs to 31 local sawmills that produce 105,000 m3 of wood products; b This is an extrapolation
from the situation in the Wahau-Kombeng area, where 31 sawmills employ 171 people and annually produce 105,000
m3 of wood products (production/employment ratio: 615 m3/person/year).

The impact of illegal forest activities in Berau and East Kutai on the environment

Illegal forestry activities in Berau and East Kutai are having an increasingly negative impact on
forest, soil and water resources in both districts. In 2001, the EU’s Berau Forest Management
Project estimated the rate of deforestation in Berau at 1.9 percent, or 42,500 ha per year. This
study estimates that logging, both licensed and unlicensed, in Berau annually affects nearly twice
as much forest. In 2003, the official log production in the district (521,965 m3) was generated from
at least 23,713 ha of forest, whereas small-scale logging teams extracted 350,000-380,000 m3 of
timber from between 35,000 and 38,000 ha of forest. Cumulatively, logging in the district affects
between 58,713 and 61,713 ha of forest (or 2.7-2.8 percent of the total forest cover) annually.

East Kutai is facing far more serious forest degradation and deforestation problems. As of 2002,
there were at least 890,403 ha of degraded forest in the district, 690,000 ha of which was located
in the Production and Limited Production Forest zones and 200,000 ha in conservation areas. The
latter includes the Kutai National Park, which is almost completely destroyed.

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Why do illegalities occur?

By far the most important driving force behind illegal forest activities in Berau and East
Kutai is their economic significance as a source of enormous rents – well over Rp 100 billion
annually in each district. This large pool of money is an important source for personal enrichment,
as well as institutional budgetary augmentation, for various district government institutions, private
companies and communities. This renders forestry a gold mine for rent-seekers, an unbeatable
opportunity for quick enrichment. The logging and woodworking enterprises underreport production
and tamper with timber transportation records because by doing so they minimize tax liabilities and
make windfall profits.

The vast riches available from illegal forest activities in Berau and East Kutai cause competition
and conflict among key players seeking to benefit from them – e.g. District/Province Police,
District/Province UPDT, District Forestry Bureau and other institutions. Constantly maneuvering to
maximize their respective shares, these parties engage in shifting alliances to undermine the
opponent(s) in whichever way possible. The scramble for rents from illegal forest activities
hampers the cooperation between different government institutions in Berau and East Kutai and
fundamentally undermines forest governance in both districts.

What can be done to prevent them?

In order to curtail the illegal forest activities by in Berau and East Kutai, law enforcement measures
alone (such as detection, prevention and suppression) undertaken by the security agencies are
unlikely to be sufficient. This is because the benefits from illegal forestry activities, vast rents in
the form of bribes or windfall corporate profits, far outweigh the risks (applicable legal
sanctions).

In order to narrow the gap between the costs and benefits of illegal forest activities in both districts,
the official detection, prevention and suppression measures need to be complemented by a range
of other initiatives pursued simultaneously:

1) Maintain the spotlight on a difficult, yet critical, issue of restructuring the enormous
overcapacity of Indonesia’s woodworking industries which drives the insatiable demand for
logs
2) Operationalize bilateral agreements between Indonesia and timber importing countries to
eliminate illegal timber trade
3) Generate incentives for Indonesian timber producers to adhere to the legal standard
through tenure security and certification schemes
4) Help synchronize the forestry legal framework and strengthen tenure security for local
communities
5) Support grass-root movements to pressure for greater accountability and
transparency in the district forestry sector.

Making the on-going detection, prevention and suppression operations by the government’s law
enforcement agencies work in tandem with these additional initiatives and the grass-root pressure
would result in a more potent tool with which to limit illegal forest activities in both districts.

xv
1. INTRODUCTION

Indonesia possesses one of the most extensive tropical forests in the world. At present, the forests
cover approximately 100 million hectares (ha) of the country’s land surface. Most of Indonesia’s
forests are found on three large outer islands of Kalimantan (Indonesian part of Borneo), Sumatra
and Papua (western part of New Guinea), with Kalimantan contributing about 30.6 million ha of
forest (Tacconi and Kurniawan 2004). East Kalimantan is one of the most forested Indonesian
provinces on the island of Borneo. The forest in East Kalimantan covers about 60% of the
province, extending from coastal swamps to central mountain ranges (Baplan Kehutanan 2002).

Unfortunately, Indonesia’s valuable tropical forests are being lost at the rate of between 2 and 3.5
million ha per year (Analisa 2003; Asia Pulse 2003; Gatra 2003; Republika 2003; Pikiran Rakyat
2003). The primary causes for this deforestation include forest fires, agricultural conversion and
logging – both legal and illegal. It is estimated by the Indonesian government that over two thirds of
the logging activity in Indonesia is illegal or quasi-legal (Tacconi et al 2004). Illegal logging, the
definition of which encompasses a diverse number of unsustainable logging practices, is
undertaken on a wide range of scales – from licensed capital intensive commercial logging
operations, unlicensed small-scale manual logging, to subsistence farmers clearing lands for
agricultural use.

Illegal logging, undertaken by both licensed and unlicensed forestry operations, not only
devastates Indonesia’s forests but also harms water and soil quality, and reduces available
subsistence foods, medicines and materials traditionally collected in the forests. Illegal logging is
causing serious fast water-run-offs and resultant land-slides and mud-slides which are killing
people and ruining their lands. These practices also harm the economy, with hundreds of millions
of dollars of lost government revenue each year.

1
2. OBJECTIVES

This study aims to construct a clear picture of economic, social and environmental impacts of
illegal logging in Berau and East Kutai Districts to clarify the situation for the relevant stakeholders
(district, province, national), inform the debates in which they are involved and offer feasible
options which could usefully complement the on-going government initiatives seeking to address
the illegal logging problem in the region. Specifically, the goals of this study are to:

1. Document the impacts of illegal forestry activities on the forest, district economy, and
community livelihoods
2. Describe and analyze the factors driving illegal forestry activities in Berau and East Kutai
3. Describe and analyze the obstacles to preventing illegal forestry activities in both districts
4. Identify strategies for overcoming the above obstacles to reducing illegal forestry activities

2
3. METHODOLOGY

In order to understand the economic, environmental and social components of the illegal forestry
activities in Berau and East Kutai, map out the obstacles and identify strategies to help reduce
such activities in both districts, the project has undertaken a comprehensive review of all forestry
operations grouped in two broadly defined categories:

Licensed forestry sector  HPH/IPK/HTI/IPPK-IPKTM/wood-working (pulp and paper). The basic


premise in assessing the extent and nature of illegal forest activities in this segment of the forestry
sector in Berau and East Kutai was to compare the official forestry statistics, permits, plans, maps,
production logs, shipping reports etc with on-the-ground realities of these operations. In practice,
this exercise involved field checks of the current logging activities and interviews with company
employees and forestry sector insiders.

Unlicensed forestry sector  small-scale logging teams/sawn timber-moulding mills/timber


kiosks/ship construction. The study of this segment of the overall forestry sector was based on
district-wide survey of unlicensed logging and processing activities in order to understand their
operational characteristics, participation of the main stakeholders, investment, revenue and benefit
flows. Whenever possible, the comparison of the official forestry data with actual operations was
undertaken as well. The survey and statistical data were augmented with interviews with company
employees and forestry sector insiders.

The surveys of licensed and unlicensed forestry activities were as extensive as possible. Overall,
the coverage is substantial enough (about 50-60 percent sample across both licensed and
unlicensed forestry operations) to ascertain the validity of the information and based on it
conclusions.

3
4. STRUCTURE OF THE REPORT

The body of the study consists of two major parts. The first of these, Section 6, focuses on illegal
forestry activities in Berau District. It opens with an overview of Berau’s forestry sector.
Subsequently, it discusses illegalities associated with extractive forestry operations (various forms
of logging) as well as wood-processing industries in the district.

The second part of the study, Section 7, focuses on illegal forestry activities in the northern part of
East Kutai District. It follows the structure of Section 6 by first presenting a brief overview of the
district’s forestry sector and subsequently discussing illegalities in both extraction and processing
of timber.

These chapters are followed by the summary and analysis section which examines economic,
social and environmental impacts of illegal forest activities in Berau and East Kutai; identifies key
driving forces behind such illegalities; assesses the obstacles to reducing illegal forest activities
and outlines possible ways to strengthen the on-going anti-illegal logging (anti-illegal forest
activities) initiatives in both districts.

4
5. OVERVIEW OF THE FORESTRY SECTOR IN EAST
KALIMANTAN

The province of East Kalimantan is located in the eastern part of the island of Borneo. It is one of
the largest and richest provinces in Indonesia, with an area of 211,400 km2, making it the second
largest province in the country after Papua. Prior to decentralization and regional autonomy, East
Kalimantan was divided into four administrative districts of Kutai, Pasir, Berau, Bulungan and three
townships – Balikpapan, Samarinda and Tarakan. Currently, the province comprises eight
administrative districts and there townships (see Appendix 1). There is talk about turning Bulungan,
Malinau, Nunukan districts and the township of Tarakan into a separate province of North
Kalimantan (Tempo Interaktif 2004). However, it is unclear if and when such plan will materialize.

As of 2003, the population of East Kalimantan province numbered 2.6 million people (BPS 2002).
The province’s population increased by more than 300% over the last 30 years, mainly due to
intensive in-migration caused by growth in natural resource based industries such as timber, oil,
gas and coal mining. The urban areas of Samarinda and Balikpapan as well as adjacent parts of
Kutai Kartanegara district are inhabited by 55% of the province’s population. The rest of the
province’s area, particularly the hinterland, has always been sparsely populated.

In 2002, there were 19.6 million hectares of forest in East Kalimantan, mainly comprised of
Production Forest (4.6 million ha), Limited Production Forest (5.2 million ha) and Conversion
Forest (5.2 million ha) (BPS 2002). The remainder was classified as National Parks and Reserves
(1.8 million ha) and Protection Forest (2.8 million ha). East Kalimantan has for a long time been
one of the most important timber producing provinces in the whole of Indonesia. Between 1970 and
2000, large-scale concessionaries (known as Hak Pengusahaan Hutan, or HPH) extracted about
156 million m3 of logs from the province’s forest (Dinas Kehutanan Kalimantan Timur 2000; BPS
2000). At their peak in 1992, active HPHs totalled 89 companies. As of 1999/2000, there were 83
HPH permits in effect, of which 65 were active and 17 stagnant. The effective HPH permits had 8.8
million ha of forest under licence (Dinas Kehutanan Kalimantan Timur 2000; BPS 2000).

Since then, the number of active, large logging concessionaries in the province has declined,
mainly due to financial problems, social conflicts and difficulties with securing annual work plans
(RKT, Rencana Kerja Tahunan) (Casson and Obidzinski 2002). At the same time, many newly
formed district governments began issuing large numbers of small-scale concession permits
(IPPK/IPKTM or HPHH). In 1999, the official log production in the province totaled 7.2 million m3. In
2001, this fell to around 4.5 million m3. In 2003, the logging quota for East Kalimantan was about
1.6 million m3, while in 2004 it was lowered to 1.4 million m3. As of mid-2004, there were only 30
HPH companies with approved RKT plans active in the province.

East Kalimantan continues to have a fairly significant wood-working sector. According to the
province’s Forestry Office (Dinas Kehutanan), in 2002 there were 27 operating plywood/sawn
timber mills of which 20 were located in the provincial capital, Samarinda, five in Balikpapan and

5
one each in Sangkulirang and Tarakan, giving a total of 4.8 million m3 per year in installed
capacity. There were also 90 officially registered sawmills, with a total installed capacity of 0.7
million m3. However, the real capacity for sawmills is likely to be much higher as only a small
number of them are officially registered. The pulp and paper capacity of the province was relatively
small in 2002, with Kiani Kertas’ mill in Berau capable of producing 525,000 tons of pulp per year.
There were also two wood chip mills, one each in Tarakan and Nunukan, with a combined capacity
of 298,000 tons.

East Kalimantan’s woodworking industries are faced with a serious deficit of the raw material, as
there is a significant discrepancy between the demand for timber and the available supply of logs.
While the installed capacity of woodworking industries in the province has been relatively stable
over the last several years at around 6 million m3 per year, the supply of logs has been falling
steadily. Even if the industry operated at half of the capacity, it would still face a deficit of logs that
in 2002/2003, for instance, reached between 4 and 5 million m3. Illegal logging is filling this gap. In
2000, illegal logging in East Kalimantan was estimated at between 2.5 and 5 million m3 per annum
(Obidzinski and Palmer 2002). This figure includes logs that were illegally exported (Smith et al
2003).

While the forestry sector is still considered important within the framework of East Kalimantan’s
economy, its significance has been declining. This has been the case since the mid-1980s when
natural gas and oil became the main contributors to the province’s economy. In 2002, oil and gas
generated about 60 percent of the export value in East Kalimantan. The remaining 40 percent were
generated by coal (and other mineral) mining as well as forestry, with coal mining showing
particularly strong growth in the 1990s.

6
6. ILLEGAL FOREST ACTIVITIES IN BERAU DISTRICT, EAST
KALIMANTAN

Berau is one of eight districts (kabupaten) comprising the province of East Kalimantan. Covering a
land area of 24,000 square kilometers, the district is located in the northwestern part of East
Kalimantan and now borders kabupaten Bulungan, East Kutai and Malinau (Kompas 2001).

Most of Berau territory lies in an extensive hinterland of the Segah and Kelay Rivers that provide
crucial communication arteries throughout the district by linking interior with the coast1. The interior
is dominated by hills and mountain ranges that rise to over 2000 meters above sea level in the
extreme western part of the district. According to official government data, about 80 percent of the
district’s area, or 2.2 million hectares, is covered with forest (BPS Berau 1998:96; Pemkab Berau
1999:14). In the east, Berau faces the Celebes Sea (see Appendix 2). The coastline is of
considerable length and diversity, as dozens of islands and reefs (best known among them is
Pulau Derawan) are scattered along the shore (Pemkab Berau 1990)

Tanjung Redeb is the capital of the Berau district. Together with two adjacent towns of Gunung
Tabur and Sambaliung, it forms a larger urban area of about 50,000 people. The overall population
of the district in 2000 was estimated at nearly 120,000 (Kompas 2001). If compared to the total of
about 50,000 in the mid 1980s, it is clear that the population of Berau experienced tremendous
growth over the last twenty years (BPS Berau 1998:20).

Although transmigration to Berau began as early as 1981, no more than 17-18,000 people have
arrived (primarily from West and Central Java) and settled permanently (Noor 1996:108; BPS
Berau 1998:37-38). Until the late 1980s, the majority of the population was local Malays and
Buginese pursuing subsistence agriculture (wet and dry rice) as well as trade. A small minority was
comprised of town-based Chinese traders, native Dayaks (Segai, Kenyah and Punan) inhabiting
villages in the hinterland and Bajau sea nomads in the east (Pemkab Berau 1990). Although HPH
logging operations have been active in Berau since the early 1970s, few locals found employment
in this sector as logging companies brought contract labor from outside (Tim Monografi Daerah
Berau 1976).

The influx of spontaneous migrants (also primarily from Java) to Berau began in the late 1980s
when the company PT Berau Coal was about to open the mining of coal in the district. In the early
1990s, this influx turned into a flood as the Kalimanis group of timber tycoon Mohammad “Bob”
Hassan announced plans to build a large pulp and paper mill in the eastern part of Berau (Barr
1998). For instance, between 1994 and 1995 alone, a crucial construction phase of the PT Kiani
Kertas mill, the population of Berau increased by over 20 percent (BPS Berau 1998:20; Kaltim Post
2002).

1 Kelay and Segah Rivers merge into the Berau River near the town of Tanjung Redeb, district capital, about 50 km

from the estuary.

7
6.1. Overview of the forestry sector in Berau District

Over 2.2 million hectares (ha) – or approximately 90 percent of Berau’s total land area – is
classified as Kawasan Hutan, or Forest Estate (see Table 1). Of this, 1.5 million ha has been
designated as either Permanent or Limited Production Forest; 353,000 ha classified as Protection
Forest; and 329,000 slated for conversion to other uses. Fifty three percent of Berau’s Production
Forest is located in the interior sub-districts of Kelay and Segah, while over one-half of the
kabupaten’s Conversion Forest is located in the coastal sub-district of Talisayan.

Table 1. Forest Area by Forest Land Use Type by Sub-District, as of 2001


Kecamatan Permanent Limited Conversion Protection Total
Production Production Forest (ha) Forest (ha) (ha)
Forest (ha) Forest (ha)
Kelay 62,750 340,750 34.975 182,725 621,200
Segah 105,300 318,500 16,150 99,800 539,750
Talisayan 150,999 45,675 165,950 64,900 427,524
Gunung Tabur 289,475 28,475 20,025 0 337,975
Sambaliung 84,800 48,400 68,775 6,350 208,325
Biduk-Biduk n.a. n.a. n.a. n.a. n.a.
Pulau Derawan 59,650 5,175 23,075 0 87,900
Tanjung Redeb 5,075 0 0 0 5,075
Total 758,049 786,975 328,950 353,775 2,227,449
Source: BPS Berau 2001.

Since the mid-1980s, Berau has been an important area for log production in East Kalimantan,
Indonesia’s largest timber-producing province. Until the collapse of Suharto’s New Order regime in
May 1998, formal timber extraction in the district was largely carried out by companies holding
HPH (Hak Pengusahaan Hutan) timber concessions issued by the central government. As in many
other parts of Indonesia, substantial volumes of logs have also been harvested in recent years by
land clearing license holders and operations based on small-scale logging permits.

6.2. Illegalities associated with extractive forestry operations

The extractive forestry sector in Berau consists of the following sub-sectors: HPH (Hak
Pengusahaan Hutan) large-scale logging concessions, small-scale logging permits such as IPK
(Izin Pemanfaatan Kayu) or IPPK/IPKTM (Izin Pemungutan dan Pemanfaatan Kayu, Izin
Pemanfaatan Kayu Tanah Milik), development of HTI (Hutan Tanaman Industri) industrial timber
plantations and small-scale unlicensed logging teams. The illegality problems associated with
extractive forestry operations in each sub-sector are discussed below.

6.2.1. HPH

The Ministry of Forestry (MoF) allocated the first HPH concessions in Berau in 1969, during the
start of East Kalimantan’s commercial timber boom. Over the ensuing decade, MoF distributed 14

8
HPH concessions in the district, covering an aggregate area of 1.4 million ha (Kanwil Kaltim 1998).
With forests that are rich in high-value dipterocarps, Berau has been one of the province’s most
productive sources of timber over the last three decades. During the 15-year period from 1985-
1999, HPH-holders operating in Berau reportedly harvested 10.5 million m3 of logs, or over 13
percent of the 77 million m3 of roundwood formally extracted by concessionaires in Indonesia’s
largest timber-producing province (Dinas Kehutanan, 1999). It is likely, however, that the actual
volumes of timber harvested have been substantially greater than these official figures suggest, as
illegal logging – by HPH-holders and by other parties – is known to have been common practice in
Berau, and other parts of East Kalimantan (Kartodihardjo 2000).

Since 1998, the reported production of roundwood in Berau by HPH concession holders has been
declining. Among the main reasons for this are financial difficulties and legal uncertainty the
companies are facing as a result of tenure/compensation conflicts with local communities as well
as concession overlaps with other land-use license holders (e.g. coal mining, plantation estates).
For a brief moment in 2001 and 2002, the drop off in the production of roundwood by HPHs was
offset by the increased log output from IPK land-clearing permits and IPPK/IPKTM district timber
extraction licenses (Table 2). However, the allocation of IPKs has fallen sharply in recent years
(Table 3), whereas the process of phasing out of IPPK/IPKTM permits is nearly complete.

Table 2. HPH and IPK roundwood production in Berau, 2001-2003

Production (m3)
Year
HPH IPK Total

2001 294,904 918,378 1,213,282

2002 402,582 348,700 751,282

2003 120,752 244,357 365,109


Source: UPTD, District Forestry Service, Berau

Table 3. Province-level IPK logging permits in Berau, 2002-2004

Year Area (ha) Production target (m3)


2002 18,400 365,202
2003 4,447 65,703
2004 2.000 26.448
Source: Dinas Kehutanan, East Kalimantan Province

It is important to note that over the last few years the reported shipment of log from Berau has
often exceeded the reported log production in the district, indicating serious irregularities (Figure 1).

9
Figure 1. Discrepancy between the production and shipment of logs from Berau, 1996-2003

1,400,000
Logs Shipped (m3)
1,200,000
Logs Produced (m3)
1,000,000
Volume (m3)

800,000

600,000

400,000

200,000

0
1996 1997 1998 1999 2000 2001 2002 2003

Source: UPTD Berau; BPS Berau (2001, 2002)

Between 1996 and 2003, about 775,937 m3 more of logs had been shipped than produced in
Berau. In some years, more logs were produced than shipped. Greater production than shipping
would not be surprising if Berau possessed an established plywood sector (sawmills do not use
HPH or IPK logs for processing), but it does not. This means that in the years when production
exceeded shipping, the excess logs were almost certainly transported illegally out of the district as
well. The official district statistics suggest that between 1996 and 2003 HPH and IPK operations in
Berau extracted between 775,937 m3 and 1,179,876 m3 of logs illegally.

Until recently, the district’s largest timber producer was the state-owned enterprise, PT Inhutani I
(see Appendix 3). Based in Balikpapan, Inhutani I first became active in 1976, when it was given
control of HPH concessions over an area totaling 2.4 million ha in various parts of East Kalimantan
(Dinas Kehutanan 1999). Approximately 365,000 ha of the area initially assigned to Inhutani I is
located in Berau. Since the early-1990s, Inhutani I has also assumed control over 165,000 ha of
forest area in Berau that was previously managed by private concession-holders whose HPH
contracts have now ended. In the late 1990s, Inhutani I had operations at four HPH sites in Berau,
from which it extracted 125,000 m3 – or 30 percent of Berau’s formal roundwood production – in
1998/1999 (Dinas Kehutanan 1999).2

Until 1999, the largest corporate actor among private concession-holders in Berau was the
Kalimanis Group. Controlled by Suharto’s close associate Mohammad ‘Bob’ Hasan, Kalimanis
entered Berau in 1973, when PT Kalhold (later re-named Rejo Sari Bumi) obtained a 70,000 ha
concession. The group expanded its presence in 1978 by securing a 330,000 ha HPH for PT Alas
Helau. By the mid-1990s, Bob Hasan had also become the director of the Astra Group, which
2 Between 1990 and 1995, Inhutani I hosted a French-sponsored STREK project conducted forest disturbance and
recovery studies at its concession area in Labanan. The work initiated by STREK was continued by the EU-funded
Berau Forest Management Project (BFMP) – a cooperative project with PT Inhutani I that operated in Berau between
1996 and 2002 with the capitalization of nearly US $ 15 million. The BFMP work is set to resume with a new EU-
funded 5-year Berau-Bulungan Participatory Forest Management Project.

10
controlled concession areas totaling 140,000 ha in Berau through two HPHs managed by PT
Sumalindo Jaya. The Kalimanis Group also secured the rights to develop tree plantations on just
under 200,000 ha in Berau. These are being established to support the group’s Kiani Kertas pulp
mill, which Kalimanis built just southeast of Tanjung Redeb in 1997.

Since then, Kalimanis’ hold on forest resources in Berau has been severely weakened. In 1999,
Mohammad ‘Bob’ Hasan was jailed on corruption and embezzlement charges associated with,
among others, his remote sensing business operations. In the same year, PT Alas Helau lost its
HPH concession license due to the allegations of irregularities in the process of license
procurement. It was subsequently divided into five much smaller concessions, ranging in size from
30,000 ha to 50,000 ha, awarded to the following companies: PT Karya Lestari; PT Mahardika
Insan Mulia; PT Aditya Kirana Mandiri; PT Wana Bhakti Persada Utama; and PT Amindo Wana
Persada. Hasan also lost control of PT Sumalindo Lestari Jaya forest concessions, as these were
sold to the Hasko Jaya Group in 2000. Finally, in early 2004, the Kiani Kertas pulp and paper mill
was sold to the consortium led by Kopassus Chief Mr. Prabowo, former Minister of Trade Luhut
Panjaitan and the current Intelligence Chief Indra Priyono. At the moment, Mohammad ‘Bob’
Hasan only retains some control over the 200,000 ha of pulpwood plantations intended to feed the
mill.

While the partition of PT Alas Helau increased the total number of HPH concessions in Berau by 4,
between 1999 and 2004 there have only been two new HPH licenses issued for available
unmanaged forest estate in Berau. These licenses were granted to PT Hutan Alam Kalimantan and
PT Karya Lestari Jaya, for 12,000 ha and 8,100 ha respectively. In contrast to other HPH
concessionaries in the district, PT Hutan Alam Kalimantan and PT Karya Lestari Jaya logging
activities are oriented towards the establishment of plantation estates in forest areas currently
under their control. Rather unusually, their licenses are labeled as HPH-TC (Tanaman Campuran,
Mixed Plantation) and HPH-TC (Tanaman Coklat, Cocoa Plantation) respectively.

In 2003, HPH and IPK license holders reported cumulative production of just over 346,000 m3 of
logs (Table 4). However, since many companies were active (i.e. conducted logging) and yet did
not report any production, it seems likely that a significant amount of underreporting had taken
place.

11
Table 4. HPH and IPK log production in Berau in 2003
No Company Jan Feb Mar April May June July Aug Sept Oct Nov Dec Total Remarks
Logged
Perusda Bakti throughout the
1 Praja 0 0 0 0 0 0 0 0 0 0 0 0 0 year
PT. Aditya Kirana
2 Mandiri 0 0 0 0 0 0 0 8,197 1,157 1,014 856 1,003 12,228

3 PT. Daisy Timber 0 0 0 0 0 0 0 0 0 0 0 12,499 12,499


Logged
PT. Dwiwira throughout the
4 Lestari Jaya 0 0 0 0 0 0 0 0 0 0 0 0 0 year
PT. Hutan Alam Underreported
5 Kalimantan 0 0 3,800 21,217 0 0 0 1,687 0 13,277 0 0 39,981 production
6 PT. Inhutani I 0 0 0 11,381 11,401 0 10,156 0 10,966 5,119 9,679 0 58,702
7 PT. Inhutani II 0 0 0 0 0 0 0 5,339 1,506 2,278 0 0 9,123

8 PT. Karya Lestari 0 0 0 0 0 9,038 3,791 3,653 3,843 7,317 3,902 0 31,545

Logged
throughout the
year and
PT. Karya Lestari produced
9 Jaya 0 0 3,656 0 0 0 0 0 0 0 0 0 3,656 significantly more
PT. Malinau Dian
10 Bara 0 0 0 0 0 0 0 0 0 0 0 0 0
PT. Mahardhika
11 Insan Mulia 0 0 0 1,975 8,528 1,887 8,185 0 1,418 1,836 4,274 19,653 47,755
PT. MSK Timber Underreported
12 Co. Ltd 0 0 3,507 0 5,716 1,529 2,618 2,775 0 0 0 0 16,146 production
PT. Multi Puri
13 Sejahtera 0 0 0 0 0 0 0 0 0 0 0 0 0
PT. Puji
Sempurna
14 Raharja 0 0 0 8,062 1,535 3,462 2,875 0 0 4,388 2,718 3,135 26,175

15 PT. Rejosari Bumi 0 0 3,855 2,411 3,768 3,414 4,462 4,073 0 0 0 0 21,983

PT. Repindo Jaya


16 Sawit Sejati 0 0 0 0 0 0 0 0 0 0 0 0 0
PT. Sentosa
17 Kalimantan Jaya 0 0 0 0 0 0 0 0 0 0 0 0 0
PT. Sumalindo
18 Lestari Jaya 0 0 4,658 5,625 7,532 6,023 3,993 9,183 7,019 3,595 1,150 11,917 60,694
PT. Tabalar
19 Wood Industries 0 0 0 0 0 0 0 0 0 0 0 0 0

PT. Wanabakti Likely produced


20 Persada 0 0 0 0 0 0 0 0 0 0 5,531 5,531 significantly more
0 0 19,476 50,670 38,480 25,354 36,080 34,907 25,910 38,824 28,110 48,207 346,019

Source: UPTD Berau, CIFOR survey 2004

In the first half of 2004, most HPH concessions in Berau were officially immobilized due to
difficulties with securing annual work plan approvals (RKT, Rencana Kerja Tahunan), as these
were contingent on prior settling of timber royalty (PSDH, Provisi Sumber Daya Hutan) and
reforestation fund (RD, Dana Reboisasi) payments. This, however, did not prevent them from
continuing logging operations (see ‘remarks’ in Table 5 below).

12
Table 5. HPH and IPK log production in Berau until May, 2004

No Company Jan Feb Mar April May Total Remarks


Operated for most
the period;
underported
1 Perusda Bakti Praja 0 912 0 0 0 912 production
PT. Aditya Kirana Operated for most
2 Mandiri 0 0 0 0 0 0 of the period
3 PT. Daisy Timber 0 0 0 0 0 0
Operated for most
the period;
PT. Dwiwira Lestari underported
4 Jaya 0 0 0 0 0 0 production
Grossly
PT. Hutan Alam underreported
5 Kalimantan 5,296 0 0 3,480 0 8,776 production
6 PT. Inhutani I 0 0 1,557 3,149 4,460 9,165
7 PT. Inhutani II 0 4,266 0 2,705 3,556 10,526
Operated for most
8 PT. Karya Lestari 0 0 0 0 0 0 of the period
Operated for most
the period; grossly
underported
9 PT. Karya Lestari Jaya 0 0 0 0 0 0 production

10 PT. Malinau Dian Bara 0 0 0 0 0 0


PT. Mahardhika Insan Operated for most
11 Mulia 0 0 0 0 0 0 of the period
Operated for most
the period;
PT. MSK Timber Co. underported
12 Ltd 0 0 0 0 0 0 production

13 PT. Multi Puri Sejahtera 5,296 3,840 0 0 0 9,136


PT. Puji Sempurna
14 Raharja 0 0 0 0 0 0
15 PT. Rejosari Bumi 0 0 0 0 0 0
PT. Repindo Jaya Sawit
16 Sejati 0 0 0 0 0 0
PT. Sentosa
17 Kalimantan Jaya 0 0 0 0 0 0
PT. Sumalindo Lestari
18 Jaya 0 0 1,406 1,401 0 2,806
PT. Tabalar Wood
19 Industries 0 0 0 0 0 0
Operated for most
20 PT. Wanabakti Persada 0 0 0 0 0 0 of the period
10,592 9,018 2,962 10,735 8,016 41,322

Source: UPTD Berau; CIFOR survey 2004

Based on field surveys as well as interviews with company insiders, it is clear that most roundwood
producers in Berau (HPH and IPK) were grossly underreporting their production output. The
companies claim that in 2003 and 2004 their operations were based on unfinished logging quotas
(carryover) from previous years. However, this does not explain why the real production figures
were not reported to the forestry authorities.

In order to probe further the practices of large-scale logging enterprises in Berau, 15 HPH and IPK
operations have been studied in greater detail (Table 6). Most concessions show indications of a
range of violations, including:

13
 No clearly marked concession borders
 Current/past/future logging blocks are unmarked
 Delineation of logging roads, skidding trails and the position of log yards and log ponds all
deviate, often radically, from what district forestry and company concession maps indicate

Nearly all concessions face problems with local communities and must deal with land as well as
compensation claims. In addition, most HPH and IPK concessions overlap with other land uses
such as protection forest (Hutan Lindung), industrial timber plantations (HTI, Hutan Tanaman
Industri), oil palm estates, coal mining concessions etc, thus facing a major legal uncertainty factor
(see Appendix 4).

The findings about the surveyed HPH concessions are presented in the table below.

Table 6. HPH operations in Berau, an in-depth look

No Concession Contractor Remarks


1 PT Sumalindo Seeking to break the • Stagnation between 2001 and 2003
Lestari Jaya (SLJ) stagnation of operations in due to compensation conflict with 5
IV 2001-2003, SLJ IV sought to villages on the upper Segah River. SLJ
revive logging operations IV began operating again in late 2003,
through sub-contracting. A following the acquisition of the
number of prospective company by the Hasco Group (PT Aji,
companies were considered, the logging operator, being one of its
including PT. Biru Hijau subsidiaries).
(Malaysia), PT. SURI
(Jakarta), PT. Surya Satria • The conflict with local villagers was
(Panin Bank Grup), finalized with a one-time payment of
PT. Jabontara Eka Karsa Rp 350 million to the communities. In
(oil palm developer), PT. addition, SLJ IV/Aji is paying a fee of
Sues Timber, PT. Johan Rp 15.000 per m3 in cash and Rp 7500
Abadi and PT Aji. per m3 for village infrastructure.
Eventually, PT Aji became
the party responsible for • Logging operations conducted
logging on production comparatively well (RKTs for the most
sharing basis. The value of part clearly marked, TPKs and logging
monthly production is roads not deviating much from forest
divided between PT Aji and management plans/maps). However,
SLJ IV, with 77.5% of in some RKTs (2003, 2004) logging
production going to the has been carried out on very steep
former and 22.5% being the slopes. Although technically most of
share of the latter. SLJ IV concession is located in Limited
Production Forest (HPT), clearly in
some areas the viability of log
extraction in rugged topography is
pushed to the limit.

• SLJ IV concession is not yet facing a


serious threat from small-scale illegal
logging operations due to rugged

14
terrain and difficult access, although
improving road connection with Tepian
Buah could change that. In
2002/2003, the concession was briefly
encroached upon by IPPK/IPKTM
operations based in Punan Malinau
and Long Ayan/Long Ayap. Currently,
these are defunct.

2 PT Inhutani I – PT Royindo (no detectable • Although the concession area still


Unit Tepian Buah field operations in 2004) possesses good quality forest
(particularly in the upper
Siduung/Siagung watersheds), its
condition is deteriorating rapidly.

• The area has been encroached upon


by IPPK/IPKTM logging operations
between 2000 and 2003. There were
at least 19 such permits issued within
the concession’s boundaries.

• The concession also suffered


degradation from the activities of PT
Palma Karisma Sekawan. In 1997, the
company obtained 9,500 ha of
Inhutani’s concession ostensibly to
establish an oil palm plantation. In
2001, with most of the area logged and
no trace of plantation, Berau’s Bupati
revoked the plantation permit.
Currently, the 9,500 ha of scrubland is
completely unproductive, unless it is
taken over (as is planned) by another
oil palm developer – a Malaysian
company PT Hutan Hijau Emas. This
plan must be treated with caution and
monitored closely, as PT Hutan Hijau
Emas seeks 40,000 ha of forest/land
for its oil palm estate in the vicinity of
Tepian Buah, Gunung Sari and Trans
SP 2.

• PT Inhutani I Unit Tepian Buah is


overrun by teams of small-scale
loggers from surrounding villages.
These loggers target Bangkirai, Ulin
and Meranti species. Roughly sawn
timber is produced on the spot and it is
transported by trucks to Labanan,
Teluk Bayur and Tanjung Redeb.

15
• Unconfirmed information suggests that
Tepian Buah Unit will be taken over by
PT HSLL (Hutan Sanggam Labanan
Lestari). Given the deplorable state of
the forest in HSLL’s concession (PT
Royindo is the logging contractor), this
does not bode well for Inhutani’s
Tepian Buah Unit.

3 PT Hutan PT Royindo • The concession area suffers from


Sanggam Labanan excessive opening of the forest/canopy
Lestari (HSLL) (PWH - Pembukaan Wilayah Hutan)
due to unnecessarily high density of
roads. The main road, secondary
roads, skidding trails criss-cross the
concession in all directions. Excessive
logging is undertaken in the process of
road construction.

• The concession is invaded by the


teams of small-scale loggers. These
loggers extract mainly Bangkirai, Ulin
and Meranti species. Roughly sawn
timber is produced on the spot and it is
transported by truck to Labanan, Teluk
Bayur and Tanjung Redeb.

• The renowned Plot STREK is located


within the boundaries of HSLL’s
concession. The plot area has been
damaged by an IPKTM operation
conducted by PT Jabontara Ekakarsa
as well as by small-scale loggers.

4 PT Aditya Kirana PT Royindo (since 2003) • The contractor conducts logging


Mandiri operations in proper RKTs. However,
the latter are difficult to locate because
of near non-existent marking of RKT
blocks in the field.

• Although in 2003 logging was carried


out in the proper area, the overall
layout of operations (roads, TPKs etc)
differs substantially from plans/maps
available at the district forestry offices
(Dinas, UPTD). It is unclear whether
there is official clearance for such

16
discrepancies, although Royindo
employees explain it is an accepted
fact that operations in the field will
diverge, sometimes substantially, from
the official planning.

• In 2004, while preparing a camp at Km


70 in preparation for RKT 2004, a
branch road was constructed going
deep into steep slope areas and out of
the approved RKT block.

• HPH area of PT Aditya is relatively free


from small scale loggers. There is
some small scale logging activity on
the border with Inhutani’s Tepian Buah
Unit, but so far it has been very limited.

5 PT Wanabakti PT Royindo • Carried out logging in RKT area for


Persada Utama 2004 well before the permit was
issued. Royindo explained that logging
was based on carry-over volumes from
the previous year, but district
government forestry sources do not
confirm this
• There is information suggesting that
not only has Royindo logged RKT
block for 2004 prior to receiving proper
documents, but it has already logged
in the block for 2005
• There is a continuing disagreement
between the villages of Long
Keluh/Boy, Long Pelay and Lamcin
and PT Wanabakti/Royindo over areas
that can be logged as part of HPH and
those that should be left out as
community (adat) forest.

6 PT Amindo Wana PT Amindo Wana Persada • PT Amindo Wana Persada began


Persada operating in 2001. The main difficulty it
was faced with was linking its
concession to more accessible parts of
Berau. It had two options: 1) build a
connecting road across the Kelay
River into the HPH of PT Aditya; or 2)
try to link up with the road network of
PT SLJ IV on the upper Segah River.
PT Amindo decided on the first option.
In 2002/2003, it completed the Long
Keluh-Long Lamcin road that linked its

17
HPH concession to the corridor road
established by PT Aditya. Inside
information indicates that in the
process of the road construction,
Amindo helped itself to about 4000 m3
of commercial logs from HPH Aditya
(this is in addition to logging done to
open up the road bed).

• The link road was badly constructed


and it was usable only for a very short
period of time. Bad roads, sub-par
equipment and very difficult terrain all
conspired against PT Aditya. The
company was never able to fully
establish production activities in its
HPH concession

• In early 2004, PT Amindo suspended


operations in Berau. Apparently, the
company has been considering the
possibility to access its concession
from the Wahau (East Kutai) side by
linking it to the Narkata-Mugi Triman-
Essam corridor road. The company
hopes it will be easier that in Berau,
but such an assessment is flawed.
Distances involved are considerable,
terrain as very difficult and, under the
current District Development Plan
(RTRWK); most of the areas to be
traversed are classified as Protection
Forest (Hutan Lindung).
7 PT Mahardika PT Royindo (in charge of • PT Mahardika is one of two HPH
Insan Mulia logging since 2002) companies in the upper Kelay
(operates since watershed (the other one: PT Karya
2001) Lestari) that transport logs via the
corridor road to Labanan (part of this
road overlaps with the Samarinda-
Berau trans-Kalimantan highway).

• Inside information indicates that in


2003 the company logged well in
excess of its RKT allowance. PT
Mahardika was supposed to work on
500 ha/22,000m3 in 2003. However, in
reality it logged 1200 ha, producing
about 41,000m3. The company has not
received its RKT for 2004 until late in
the year.

18
• In 2001/2002, the company “allocated”
800 ha of its concession for an IPKTM
enterprise. The license, under the
name of Long Gie village, was
operated by PT Royindo and PT Alam
Permai Bhakti (based in Tarakan).
According to local estimates, the
companies logged approximately twice
the size of the licensed forest area.

8 PT Karya Lestari PT Prima Wanatama • Carried out logging in the 2004 RTK
(HPH Pesantren (based in Tarakan) area prior to securing the permit. In
Hidayatulah July 2004, when RKT for 2004 was
Balikpapan) granted, the company already
extracted more than 2000 m3 (TPK
transit on the Kelay River)

• In 2003, the company’s logging


contractor intruded into the Protection
Forest area between the Kelay and
Gie Rivers. The case was investigated
by the District Forestry authorities and
the Police. The company was
supposed to pay a Rp 2 billion fine.
However, the fine has not been paid
yet, as negotiations continue.
9 PT Sumalindo PT Surya Graha Sakti • The concession is severely degraded
Lestari Jaya I and it will likely be abandoned in the
near future.

• There is little control over access in


and out of the concession. Intensive
production of square logs and roughly
sawn timber by logging teams from
Dumaring and Talisayan is taking
place. The small-scale loggers are
logging old RKT areas as well as the
few ones with still good timber stands
on which SLJ I depends for survival in
the next few years.

• A part of SLJ I concession was taken


over by PT Dwi Wira Lestari for a
logging venture called HPH-TKS
(Tanaman Kelapa Sawit, Oil Palm
Plantation). The company is run as a
partnership between a well-known (but
disreputable) figure in the logging
circles in East Kalimantan – Luther

19
Kombong – and an ex SLJ I staff
Turyadi/Ateng. If other forestry
operations by the Kombong family in
Berau are any indication (see the case
of PT Karya Lestari Jaya below), this
part of ex-SLJ I concession is headed
for destruction.

• SLJ I HPH concession area has also


suffered degradation from the activities
of Berau-based enterprise PT. Berau
Perkasa Mandiri, which carried out
logging based on the IPK permit for
road construction.

10 PT Daisy Timber PT Daisy Timber • PT Daisy Timber suspended


operations in late 2003 and it has been
inactive for the first half of 2004. In the
second half of the year, it planned to
resume logging activities by hiring PT
Nabila (Hanurata Group) from
neighboring East Kutai as a contractor.

• Because the company was officially


not active in 2004,.it is surprising that it
shipped a few thousand m3 in the
middle of the year -- even though
clearly all of its log ponds, TPKs were
empty. Timber sector insiders in Berau
suspect that Daisy Timber documents
(Daisy Timber did have an RKT for
about 6,000 m3) have been used to
cover the logs of PT Nabila extracted
in East Kutai without RKT.

• Small-scale logging has penetrated


parts of Daisy Timber concession, but
currently it confined to the area north
of the Suleiman River.
11 PT Puji Sempurna (Malaysian outfit) • The concession is heavily degraded
Raharja
• On the northeastern side, it has been
illegally logged by PT Meranti
Samarinda Kalimantan (MSK) based
on the IPK permit related to the
planned development of coal mining
(see the section on IPK, IPPK/IPKTM
logging below)

• More illegal logging inside the

20
concession was done by an IPK
related to road construction (Tanjung
Redeb – Kasai – Tanjung Batu),
carried out by the individual named
Awong, and an IPK for oil palm
development (PT Bina Maju
Hutanindo)

• The concession is overrun by small-


scale logging teams producing square
logs and roughly sawn timber. The
teams are based in Kasai and in
Gunung Tabur
12 PT Rejosari Bumi PT. Sentosa Kalimantan • At the moment, the concession is
Jaya (SKJ) inactive. Local press indicates that the
Governor of East Kalimantan will
recommend the license to be revoked
for subsequent auction.

• The concession is degraded. It is


overrun by small-scale logging teams
from Gunung Tabur that produce
square logs and roughly sawn timber.

• The concession area overlaps with the


area licensed for coal-mining by PT
Berau Coal. Currently, there are two
IPK operations associated with PT
Berau Coal (located within the HPH of
PT Rejosari Bumi) conducted by Mitra
Abadi cooperative and by PT. Sungai
Berlian Jaya (Haji Abidinsyah)
13 PT Dwiwira Lestari PT Dwiwira Lestari • The concession of PT Dwiwira consists
– HPH-TKS of two enclaves (Lahan I and Lahan II),
(Tanaman Kelapa north and south of the Talisayan
Sawit, Oil Palm Protection Forest (Hutan Lindung) –
Plantation) see Appendix 5.

• The area is heavily degraded.

• The communities are engaged by the


company in IPK-like logging activities
to clear the forest for the plantation,
fow which there is no IPK permt.

• Lahan II is in large part a scrubland.


The link between Lahan I and Lahan II
is the ex PT Gonpu road, which cuts
across the Talisayan Protection Forest.

21
• This road is also used by PT SLJ I as
well as by small-scale loggers. The
condition of the road is terrible. Both
companies state they keep the road in
deteriorated state on purpose to limit
encroachment. This strategy seems to
have little success.

14 PT Karya Lestari Joint venture with PT • Cooperation with PT Segara Timber


Jaya (KLJ), Segara Timber allows Karya Lestari to use PT
HPH-TC (Tanaman Segara’s machinery. In return, Karya
Campuran Coklat, Lestari is obliged to sell its logs to PT
Mixed Plantation – Segara’s wood working industry in
Cocoa), Samarinda – PT Segara Plywood.
established in 2000
• The biggest problem with KLJ is that
its license status is unclear (its HPH
license has not been finalized and the
company operates based on an IPK)

• Widespread underreporting and


logging out of block have taken place
(see the case study below)
15 PT Hutan Alam PT. Samarinda Harapan • In mid-2004, PT HAK made provincial
Kalimantan (HAK), and national press/TV headlines when
HPH-TC (Tanaman it was discovered that the company
Campuran, Mixed has logged extensively out of the
Plantation) block.

• Internal/confidential information
indicates that PT HAK logged about
33,000 m3 in excess of what it was
allowed. However, only 12,000 m3 was
seized by the Police and District
Forestry authorities as the proof of
wrong-doing. This amount was
eventually reduced further in Berau
District Police reports to 8,000 m3.
Forestry insiders in the district are of
the opinion that the company was
allowed to keep the rest in exchange
for a substantial fee per m3 to a
number of locally powerful figures.

Among the worst cases of violations associated with HPH logging currently in effect in Berau is that
of PT Karya Lestari Jaya. A detailed case study of this logging enterprise follows below.

22
Illegal logging by HPH license holders – the case of PT Karya Lestari Jaya
In July 1999, KLJ applied for a HPH license covering just over 8,100 ha of the forest in the ex
concession area of PT Hanurata. KLJ sought a hybrid between HPH concession and HTI
plantation in the form of HPH-TC (Tanaman Campuran Coklat, Mixed Plantation of primarily
cocoa). Although as a concept HPH-TC was without precedence in the Indonesian forestry
nomenclature, the Ministry of Forestry agreed to allocate the concession.
Within 2 months of getting the official nod for HPH-TC (but with no permit in hand), in October 1999
the company requested a 1,000 ha IPK from the provincial forestry office in Samarinda. In
February, 2000 the permit was granted, even though legally KLJ was not yet a HPH concession
holder for the area in question.
The 1,000 ha IPK had the production quota of 16,610 m3 of logs, to be completed by the end of
January 2001. In October 2000, KLJ requested an extension from the provincial forestry office in
Samarinda, explaining it had logged only 300 ha and produced 9,892 m3 (quota left: 700 ha, 6,718
m3). The extension was granted, inexplicably with an additional production allowance of 22,025 m3,
to be completed by October 2001.
In June 2001, a survey team from the provincial forestry office visited KLJ site in Berau and
established that the company had by then produced 33,132 m3 of logs (twice the original target
production volume). However, it was concluded there was still a substantial production potential in
the IPK area. Consequently, the provincial forestry granted an extension for another year (until
August 2002) and added another 20,704 m3 to the production target (total of 53,863 m3).

23
6.2.2. Small-scale logging permits – IPKTM, IPK

Until recently, small-scale logging permits in Berau have come in two types: district and province
licenses. The district-based small-scale logging permits, or IPKTM (Izin Pemanfaatan kayu Tanah
Milik, Utilization Timber Permit form Privately Owned Land), have been at the center of logging
boom in Berau and other parts of East Kalimantan in the aftermath of decentralization and regional
autonomy in Indonesia. The number of these permits issued between 1999 and 2002 totals more
than 200. In 1999, there were 24 licenses (with multiple extensions) awarded for the total of
11,396 ha. Between 2000 and 2001, additional 183 permits were issued covering more than
35,000 ha of forest with the production target of nearly 1.4 million m3 of roundwood (Table 7).

Table 7. IPKTM issued by Bupati Berau in the period 2000-2001

Total of IPKTM permits Production target


Sub-district
Area (ha) Output (m3)
1 Biduk-biduk 10 1,200 62,039
2 Segah 14 1,729 129,622
3 Gunung Tabur 47 20,336 300,304
4 Kelay 24 2,575 196,625
5 Pulau Derawan 6 995 72,785
6 Sambaliung 28 3,437 256,221
7 Talisayan 35 3,528 232,753
8 Teluk Bayur 17 1,573 115,425
9 Tg. Redeb 2 200 14,923
Total 183 35, 573 1,380,697
Source: Dinas Kehutanan and UPTD Berau.
IPKTM based logging peaked in 2001 and subsequently declined as a result of progressive
limitations imposed by the central government authorities on districts’ right to issue such permits. In
late 2002, Berau officially ceased to issue new IPKTM licences. In early 2003, it announced that
extensions would no longer be granted once the existing licenses expired. However, as indicated
by the case of PT Taurus (see box 2), some IPKTM operations found ways to survive well into
2004.

IPKTM for Livestock by PT Taurus


In February 2002, Cipta Abadi cooperative from the village of Gunung Sari, Segah sub-district,
obtained an IPKTM permit seeking to use timber fees for the expansion of livestock (cattle). The
party responsible for the implementation of the IPKTM was a Berau company PT Berlian Indah. PT
Berlian Indah was to establish a herd of about 50 cattle in return for which it was allowed to carry
out logging on 200 ha of forest with the production quota of 6,216 m3 of roundwood. The logging
was to be completed within a year.
In April 2004, nearly a year after the expiration of Berlian Indah’s IPKTM license in Gunung Sari, its
contractor (PT Taurus) continued to log in forest areas well beyond the designated IPKTM site. The
survey of all logged areas indicate between February 2002 and April 2004, PT Taurus, on behalf of
PT Berlian Indah, extracted about 65,000 m3 of logs – more than 10 times its licensed production
quota.

24
Since the mid-1990s, a growing portion of Berau’s timber production has been carried out by
companies holding Wood Utilization Permits (Izin Pemanfaatan Kayu, or IPK). In contrast to the
selective harvesting techniques required under the HPH system, IPK permits allow logging
companies to harvest all standing timber from a forested area that is being converted to another
form of land use. The Ministry of Forestry holds full authority to issue IPK permits, and it has
generally assigned these to companies converting forestland to timber or pulp plantations, agro-
industrial estate crops, or mining operations. In 1997, 13 companies held IPK permits in Berau for
a combined area of 43,000 ha (Table 8).

Table 8. IPK Wood Utilization Permit-Holders in Kabupaten Berau, as of 1997


Company Area (ha) Type
PT Inhutani I/PT Tanjung Redeb Hutani 9,557 HTI Pulp
PT Rejo Sari Bumi 4,291 HTI Pulp
PT Tabalar Wood 3,230 HTI Pulp
PT Hanurata 854 HTI Pulp
PT Sumalindo Lestari Jaya I 2,637 HTI Trans
PT Alas Helau 1,331 HTI Trans
PT Tabalar Wood 1,100 HTI Trans
PT Baldiwasa Palmaindo 4,250 Estate Crop (Oil palm)
PT Palma Kharisma Sekawan 4,000 Estate Crop (Oil palm)
PT Jabonsara Ekakarsa 2,600 Estate Crop (Oil palm)
PT Tanjung Buyu Perkasa 1,000 Estate Crop (Coconut palm)
PT Inhutani I/PT Sentosa Kalimantan Jaya 400 Estate Crop (Coconut palm)
PT Berau Coal 7,822 Coal Mining
Total 43,072
Source: Cabang Dinas Kehutanan Berau, 1997

25
In 1998, after the fall of Suharto’s regime there was a flurry of applications for plantation estate
permits in Berau. By 1999, there were no fewer than 19 companies applying for a total of 240,200
ha of the forest, ostensibly to establish oil palm plantations (Table 9).

Table 9. Plantation ventures seeking IPK permits in 1999

No Company Plantation Location Plantation Area (ha)


permit date type
1. PT. Jabontara Ekakarsa 3/10/1997 Batu Putih /Talisayan Oil Palm 29,500
29/9/1998 (HGU
14,000 Ha)
30/11/1999
addition of 6,000
Ha

2. PT. Berau Bukit Gemilang 11/11/1998 Long Laai, Segah Oil Palm 11,000
3. PT. Teras Cakra Perdana 28/02/1998 Long Ayap, Long Ayan, Oil Palm 20,000
04/02/1999 Segah
4. PT. Mega Buana Utama 03/03/1998 Tg.Batu, Semurut, P. Oil Palm 20,000
04/02/1999 Derawan,
5. PT. Kartika Propita Ganda 03/03/1998 Talisayan, Dumaring, Oil Palm 20,000
04/02/1999 Tembulan, Talisayan
6. PT. Lini Andalan 11/02/1998 Tg.Prepat, Pantai Oil Palm 12,700
04/02/1999 Harapan, Biduk-biduk
7. PT. Taman Buana Tirta Indah 27/02/1999 Maluang, Gn.Tabur Oil Palm 18,000
8. PT. Agritimur Karya Graha 15/04/1999 Long Ayan, Segah Oil Palm 16,000
9. PT. Palma Kharisma Sekawan 05/06/1999 Punan Malinau, Segah Oil Palm 20,000
10. PT. Batu Sempit Sawit Indo 08/07/1999 Sepinang, Biduk-biduk Oil Palm 15,000
11. PT. Dwi Wira Lestari Jaya 11/08/1999 Biatan Hilir, Talisayan Oil Palm 20,000
12. PT. Repindo Jaya Sawit Sejati 20/09/1999 Sembakungan, Gn.Tabur Oil Palm 18,000
13. PT. Borneo Agro Sawit Lestari 20/09/1999 Tasuk, Gn.Tabur Oil Palm 20,000
14. PT. Inhutani I Adm.Berau 07/10/1999 Tepian Buah, Segah Oil Palm 11,000
15. PT. Behowen Sumber Makmur 18/11/1999 Long Beliu, Lesan Dayak, Oil Palm 13,000
Kelay
16. PT. Hono Baswen Sumber 18/11/1999 Long Ayan,Long Ayap, Oil Palm 4,000
Rejeki Segah
17. PT. Badiwata Palma Indo - Biatan Lempake, Oil Palm 15,000
Talisayan
18. PT. Teras Cakra Perdana 04/02/1999 Long Ayan, Segah Oil Palm 20,000
19. PT. Sentosa Kalimantan Jaya - Tg.Batu, P. Derawan Coconut 6,000
Total 240,200

Source: Dinas Perkebunan Kabupaten Berau

26
Nearly all of these plantation applications turned out to be front schemes for timber exploitation.
However, unable to secure the necessary financial investment, most of the new plantation IPK
holders never established operations on the ground. As a result, between 2002 and 2004, the
government authorities in Berau revoked inactive plantation permits of this kind. Consequently, the
area allocated for IPK logging declined as well (Table 10).

Table 10. Provincial IPK logging permits in Berau, 2002-2004


Year Area (ha) Production target (m3)
2002 18,400 365,202
2003 4,447 65,703
2004 2,000 26,448
Source: Dinas Kehutanan, East Kalimantan Province

Despite this decline, the existing plantation IPK operations are far from being effectively controlled.
As is evident from the analysis of two IPK sites in Berau, plantation development continues to be
used as a a façade for timber extraction.

IPK by Perusda (district company) PT Bhakti Praja

PT Bhakti Praja is a district-owned enterprise (BUMD, Badan Usaha Milik Daerah) established in
1999 to help Berau district government increase locally generated income (PAD, Pendapatan Asli
Daerah).

In September 2000, PT Bhakti Praja obtained an IPK permit from the provincial forestry office in
Samarinda for 3,200 ha of forest with the production target of 53,540 m3 of logs (435/Kpts/KWL-
4.2/2000). The logging was to be completed within a year.

In September 2001, Bhakti Praja reported to the provincial forestry office that it had managed to log
only 832 ha of forest, producing 10,018 m3 of timber, and requested an extension. Following an
exchange of documentation and field visits, the provincial forestry service granted a 1 year IPK
extension (358/Kpts/KWL-4.2/2001).

In May 2002, Bhakti Praja asked for the second extension, indicating that to date it had carried out
logging on 1,200 ha of forest only. It also reported that during the first extension term it produced
9,793 m3 of logs in addition to 10,018 m3 produced during the first year of operations.

The second one-year extension of Bhakti Praja’s IPK permit was granted only in September 2003
(522.21/4810/DK-VII/2003). During the intervening 12 months, Bhakti Praja reported no production
activities to district forestry authorities, although it logged continuously.

In May 2004, Dinas Kehutanan Berau and the Police raided Bhakti Praja’s IPK location, impounded
over 7,700 m3 of illegally cut logs and uncovered what they claim to be extensive cutting out-of-
block dating back to at least 2001/2002.

27
Coal-mining IPK – PT Berau Bhakti Permai

In February 2003, Bupati Berau granted a coal exploration permit (Ijin Kuasa Pertambangan
Eksplorasi) to PT Nusantara Jaya Perkasa for 6,436 ha in the northeastern part of the district.
Having secured the exploration permit, the company applied for an IPK license to clear the area
intended for exploration. On 17 March 2004, the provincial Dinas Kehutanan in Samarinda issued
such an IPK permit for 2,000 ha (with the production target for 26,448 m3) to a Berau based firm PT
Berau Bhakti Permai (SK Kadishut Propinsi Kaltim No 522.21/777/DK-VII/2004), which sub-
contracted the logging to PT Meranti Samarinda Kalimantan (MSK) – an ex HPH concessionary in
the area. Although the permit states the IPK covers 2,000 ha, the survey of the area marked on
the concession map indicates it actually extends over 3,000 ha.

Once the IPK became effective, PT Nusantara Jaya Perkasa suddenly realized the coal deposits it
was seeking to exploit were geologically “too young” and therefore of no economic value. As a
result, it asked the Bupati of Berau to cancel its coal exploration permit. The coal exploration permit
was cancelled. However, the IPK land-clearing license remained in effect.

In late 2004, PT MSK continued to operate in Berau based on the IPK for non-existent coal
exploration. Nearly all of its logging activities were carried out outside the allocated IPK area and
its main log pond in Tanjung Bone, near the border with Bulungan district, was filled with
improperly or completely unmarked logs.

28
6.2.3. HTI

The industrial plantation estates are a comparatively new segment of the forestry sector in Berau. If
HPH and IPK logging have been in effect for over 30 years, the establishment of HTI (or HPHTI)
plantation estates in the district dates back only to mid-1990s.

The most prominent HTI industrial plantation in Berau is PT Tanjung Redeb Hutani. The 180,330
ha plantation was established in 1996 in order to supply natural, and eventually Acacia, wood to PT
Kiani Kertas pulp and paper mill in Mangkajang near the estuary of the Berau River.

As Kiani Kertas mill was officially launched in September of 1997 by then President Suharto,
instantly becoming the largest wood-processing industry in the district, PT Sumalido Lestari Jaya
established a 10,673 ha HTI unit near Batu Putih on the ex-HPH area of PT Gonpu Indonesia. In
order boost the raw material base for Kiani Kertas mill further, in 1998 the Kalimanis Group and PT
Inhutani I formed a HTI company PT Belantara Pusaka on 15,610 ha of the HPH area of PT Alas
Helau.

The production activities of HTI companies in Berau entail clearing the natural forest as well as
harvesting of planted Acacia or Eucalyptus pulpwood. In 2003, the above companies produced just
over 164,000 m3 of natural forest logs. After the first five months of 2004, their production of natural
forest logs stood at 105,762 m3 (Table 11 and Table 12).

29
Table 11. HTI natural forest log production in Berau, 2003
No Company Jan Feb Mar April May June July Aug Sept Oct Nov Dec Total
HTI PT.
Sumalindo
1 Lestari Jaya 0 0 15,836 12,660 14,711 6,677 0 3,549 0 0 0 12,811 66,242
HTI PT Tanjung
2 Redeb Hutani 0 0 0 0 0 65,663 7,665 1,397 0 12,781 0 0 87,505
HTI PT.
Belantara
3 Pusaka 0 0 0 0 0 0 0 0 0 4,399 0 6,435 10,834
0 0 15,836 12,660 14,711 72,339 7,665 4,946 0 56,005 28,111 78,715 164,582

Source: UPTD Forestry Bureau, Berau

Table 12. HTI natural forest log production in Berau in the first half of 2004

No Company Jan Feb Mar April May Total


HTI PT. Sumalindo
1 Lestari Jaya 12,729 10,061 7,690 6,864 12,696 50,040
HTI PT Tanjung Redeb
2 Hutani 9,444 12,097 6,271 11,217 16,694 55,722
HTI PT. Belantara
3 Pusaka 0 0 0 0 0 0
22,173 22,158 13,961 18,080 29,389 105,762

Source: UPTD Forestry Bureau, Berau

The natural forest logs are produced through land-clearing, subsequent to which planting is to be
undertaken. The HTI companies in Berau invariably subcontract land-clearing operations to smaller
logging companies. For instance, PT Sumalindo Lestari Jaya I hired Samarinda-based PT Surya
Graha Sakti to carry out land-clearing on its Batu Putih HTI site. Similarly, PT Tanjung Redeb
Hutani employs a number of logging contractors for the production of natural forest roundwood.

The production of plantation pulpwood is considerably more difficult to estimate. PT Sumalindo


Lestari Jaya HTI-Transmigration Batu Putih unit appears to be doing comparatively well among the
companies in the district3. In 2003, the company harvested about 400 ha of its planted estate
producing 53,432 m3 of pulpwood, mostly Gmelina arborea (PT SLJ-I:7-8). While the achieved
harvest volume constituted only about 56% of the planned target (99,500 m3), planting has been
implemented on 534 ha, or 66% of the target. In comparison to other HTI plantations in Berau as
well as in the province of East Kalimantan, these numbers are quite respectable.

PT Tanjung Redeb Hutani is by far the largest HTI estate in Berau. The company, established with
the singular task of supplying plantation logs to Kiani Kertas pulp and paper mill, is jointly owned by
the Kalimanis Group (65%) and the state forestry enterprise, PT Inhutani I (35%). The HTI
operations of PT Tanjung Redeb Hutani in Berau have been financed largely from Indonesia’s

3 The same cannot be said about its financially unviable Muara Karangan unit in the neighboring East Kutai district

(Djumainah 2000)

30
national Reforestation Fund (Dana Reboisasi, or DR), of which the company is reported to have
received Rp 83 billion (Ernst & Young 1999). However, despite the relatively high levels of financial
investment and support it has received, the company’s operational record is very poor. Out of
180,330 ha available for the HTI plantation, only 91,000 ha are actually plantable. PT Tanjung
Redeb Hutani claims that since 1993 approximately 67,400 ha have been planted, but only 40,000
ha are currently considered utilizable (Botha 2002). An area of about 7,000 ha of the planted area
is subject to land claims by local communities, reducing the effective plantation area further to at
most 33,000 ha.

In 2003, Tanjung Redeb Hutani reportedly harvested 1,220 ha of its plantation producing 121,024
m3 of Acacia mangium logs, in the process achieving about 22% of targeted harvest area and 28%
of harvest volume (PT Tanjung Redeb Hutani:6-7). Considerably more worrying is the fact that in
the same year the company planted only 493 ha of land (out of the target of 4,523 ha – 11%
realization rate). In addition, replanting of dead seedlings was to be undertaken on 1,800 ha but
was implemented only on 71 ha (4% realization rate).

One commonly given explanation for this poor performance are cashflow problems resulting from
the fact that the main consumer of Tanjung Redeb Hutani’s logs, Kiani Kertas pulp and paper mill,
cannot make timely payments for the deliveries of logs. Having nowhere to go with its pulpwood,
for most of 2003 Tanjung Redeb Hutani was operating with only a skeleton staff, suspending all
non-essential operations (Botha 2002).

Due to the fact that only a fraction of Tanjung Redeb Hutani’s 2003 production and planting targets
were achieved, these were merged with the 2004 work plan (carry over). In 2004, the company
aimed to harvest nearly 7,500 ha of plantation in order to produce approximately 635,000 m3 of
pulpwood. It also planned to plant 6,571 ha of new plantation area. However, direct observation in
the field indicates the company will fall far short of these targets.

The third HTI plantation company operating in Berau is PT Belantara Pusaka located in the Lesan
area in the southern part of the district. Since its inception in 1998, the company has been facing
financial problem resulting from its association with the Kalimanis Group in general, and with PT
Alas Helau in particular. The goal of PT Belantara Pusaka HTI plantation was to complement
Tanjung Redeb Hutani in supplying pulpwood logs to Kiani Kertas mill. As such, Belantara Pusaka

31
is wholly owned by Kalimanis and it was established on the area for which the group’s other
subsidiary PT Alas Helau obtained a HTI permit in 1992.

In 1999, the HPH license of PT Alas Helau was cancelled due to the allegations of corruption,
collusion and nepotism (KKN), placing other Kalimanis companies, such as Belantara Pusaka, in
unfavorable light. The subsequent pressure on the Kalimanis Group, particularly in connection with
the misuse of Reforestation Fund, placed Belantara Pusaka in financial crunch.

As of 2001, the company was reported to have about 8,341 ha of HTI ready for harvest (Gmelina
arborea and Acacia mangium – planted as early as 1995/1996 by Alas Helau). However, financial
difficulties disrupted the harvest operations (PT Belantara Pusaka:4). In 2002, Belantara Pusaka’s
HTI activities stagnated. In 2003, the company received the annual work plan permit according to
which it was expected to harvest 1,711 ha of plantation, produce 159,142 m3 of pulpwood and
plant 500 ha of new plantation. None of these targets were even partially met, as the company
continued to be stagnant.

6.2.4. Small-scale logging teams


Berau wood-working industries’ demand for timber fuels a considerable amount of small-scale
logging throughout the district (see also section 7.3). The survey carried out throughout Berau has
revealed that in 2004 there were approximately 106 small-scale logging teams operating along the
accessible roads in the district. It is estimated that these teams produced approximately 202,750
m3 of logs (Table 13).

Table 13. Small-scale logging teams in Berau District, 2004


/ Total
No Location Number of Number of Number of Production
teams chainsaws Loggers (m3/month)
1 Segah 14 28 73 560
2 Gn. Sari 13 118 239 2,490
3 Gn. Tabur (Merancang, Batu-Batu, Kasai) 17 153 284 4,365
4 Sambaliung (Merancang, Batu-Batu, Kasai) 8 50 103 1,395
5 Teluk Bayur 11 133 383 3,040
6 Teluk Bayur, Labanan, Kelay 14 148 406 3,920
7 Maluang-Bulungan 16 73 165 2,805
8 Talisayan 13 54 144 1,700
Total 106 757 1,797 20,275
Source: Survey CIFOR 2004.

The main concentration of these logging activities is along the roads than can be accessed by
Mitsubishi Colt diesel trucks, which are the vehicles of choice for transporting timber overland in

32
Berau. They are extremely durable and once modified can negotiate very difficult terrain,
penetrating forest along seemingly impassable dirt tracks.

The timber transported is usually in the form of squared logs or roughly sawn timber. In the
southeastern part of the district, the recently improved roads from Talisayan to Teluk Suleiman and
in the direction of Sangkulirang are rife with small-scale logging teams. The Kelay River area, on
the other hand, is relatively free from small-scale logging, except for the section of trans-
Kalimantan highway between the Kelay River and the village of Labanan. As old roads are steadily
improved (Tanjung Redeb-Bulungan, Berau-Samarinda, Berau-Tepian Buah) and new roads are
being built (e.g. Berau-Tanjung Batu-Bulungan, Labanan-Long Paai, Labanan-Long
Keluh/LongDuhung), it is likely the extraction of timber by illegal logging teams for delivery overland
will increase in the near future.

In addition to land based illegal logging teams in Berau, there are also small-scale teams working
along the major waterways. Such teams specialize in producing round logs that are tied into rafts
and floated downstream to sawmills and moulding mills. Most of river-based logging is centered in
the middle and lower sections of the Segah River and its tributaries (Birang, Sambrata, Pura,
Siduung, Siagung, Malinau). Nearer the coast, Lati and Kasai branches of the Berau River are
important areas of small-scale logging. While in the limited time available for this research it was
not possible to undertake a detailed investigation of river-based logging teams, based on

33
interviews with logging team leaders (mandor) in several key areas, it is possible to estimate there
are at least 75-80 such teams employing approximately 1,200-1300 people who, using 520-550
chainsaws, produce 15,000-18,000 m3 of round logs per month, or 150,000-180,000 m3 per year.

Overall, it can be estimated that small-scale logging teams, operating both on land and along the
rivers, annually produce 350,000-380,000 m3 of timber (round logs, square logs, roughly sawn
timber) that are consumed by Berau’s wood-working industries. Approximately 3,000 loggers with
1,300 chainsaws are employed on the annual basis to generate this output.

The government agencies in Berau are de facto formalizing illegal logging activities of this kind by
subjecting them to informal taxation. The survey at key police check points on overland timber
delivery routes converging on the main consumer markets of Teluk Bayur-Tanjung Redeb-Gunung
Tabur-Sambaliung revealed the loggers pay Rp 50,000 per truck (5 m3 of timber) for safe passage.
It can therefore be estimated that the police annually generate just over Rp 2 billion from the
passage fees on trucks ferrying timber to the main consumer markets in Berau. A similar passage
fees are applicable to water-based transport of timber and these generate additional Rp 1.5-1.8
billion per year for the police, bringing the total to about Rp 3.5-3.6 billion.

6.3. Illegalities associated with wood-processing industries


Timber extraction activities in Berau provide raw material to three distinct wood processing
industries in the district: 1) sawmill and moulding industry; 2) timber kiosks and 3) ship-building.

34
6.3.1. Sawn timber and moulding
The history of wood-working industry in Berau dates back to the early 1970s. In 1974, Berau was
reported to have a few manually operated mills producing low quality material for the local market
(Direktorat Perencanaan 1974). In the late-1970s, the first mechanized sawmills were established
in the district (PT Becosurveys 1981). In the early 1980s, as the government imposed a national
ban on log exports, sawmills in Berau began to multiply. In 1981, local government sources
reported 17 mechanized sawn timber and moulding mills in the district (Pemkab Berau 1981). Two
years later, in 1983, this total increased to 22 mills, most of which operated low-yield circular saw
blades for production (BKPMD 1988). In 1995, the number of officially registered mills in the district
totaled 30 units, and the first high-yield band saws were installed. In 2000, the total number of
sawn timber and moulding mills listed by the Industry and Trade Office in Berau was 64 units,
although only 40 of them were active (Obidzinski et al 2001; Casson and Obidzinski 2002).

The official government data on sawn timber and moulding processing in Berau is inconsistent and
often contradictory. For instance, the Industry and Trade Office (quoting UPTD Forestry Office)
states that in 2004 Berau’s sawn timber and moulding mills totaled 59 units. Yet, the same UPTD
Forestry Office reports the existence of only 24 active (reporting) mills. It also reported that in 2003
and 2004 (until May), some of these mills (12 in 2003 and 8 in 2004) produced 31,028 m3 and
16,452 m3 of wood products respectively (Table 14 and Table 15)

35
Table 14. Sawn timber and moulding production in Berau in 2003
No Company Jan Feb Mar April May June July Aug Sept Oct Nov Dec Total
1 CV. Cahaya Bintang 0 0 0 0 0 412 46 0 0 0 0 0 458
2 CV. Linda 0 0 0 0 0 0 0 0 0 0 0 0 0
3 CV. Meranti Segah River 0 0 0 0 0 0 0 0 0 0 0 0 0
4 CV. Sisilia 0 535 0 0 0 0 0 0 0 0 0 388 923
5 CV. Sungai Berlian 0 0 0 0 0 0 130 0 0 0 0 0 130
6 CV. Talisayan Gemilang 0 0 0 0 0 453 0 0 0 0 0 0 453
7 CV. Tanjung Prima Lestari 0 0 0 0 0 0 0 0 0 0 0 0 0
8 Erliana 0 0 0 0 0 0 0 0 0 0 0 0 0
9 Gunung Agung 0 1,211 0 0 0 0 0 0 0 2,962 0 2,763 6,936
10 Herry Chandra 0 3,762 1,802 817 0 1,037 0 0 0 0 0 650 8,069
11 Meranti Jaya 0 590 0 0 0 0 0 0 0 0 0 848 1,439
12 Perdana Nusantara 0 0 0 0 0 0 0 0 0 0 0 0 0
13 PT. Citra Wana Rimba Mulia 0 0 0 0 0 0 0 0 0 0 0 0 0
14 PT. Daisy Indah Wood Ind 0 0 0 0 0 0 0 0 0 0 0 0 0
15 PT. Daisy Sulaiman Wood Ind 0 0 0 0 0 0 0 0 0 0 0 0 0
16 PT. Kaltim Damai Lestari 0 0 0 0 0 0 0 0 0 382 814 0 1,196
17 PT. Paribau Sentosa 0 0 0 0 0 0 0 0 0 0 0 721 721
18 PT. Tanjung Buyu Perkasa 0 0 0 0 0 0 0 0 0 0 0 0 0
19 Sambarata Raya 0 0 0 0 0 0 0 122 0 0 0 0 122
20 Singkuang Jaya 0 0 0 0 0 458 0 0 0 0 0 0 458
21 Syahrani Taram 0 0 0 0 0 0 0 0 0 0 0 0 0
22 UD. Agra Sarana 0 0 0 0 0 0 0 0 0 0 0 0 0
23 UD. Kayu Abadi 0 0 0 0 0 0 0 0 0 0 0 0 0
24 UD. Maluang Raya 0 0 0 3,700 0 0 2,218 1,543 2,663 0 0 0 10,125
0 6,098 1,802 4,517 0 2,360 2,395 1,665 2,663 3,344 814 5,371 31,028

Source: UPTD Forestry Bureau, Berau

Table 15. Sawn timber and moulding production in Berau as of May 2004

No Company Jan Feb Mar April May Total


1 CV. Cahaya Bintang 0 0 0 150 0 150
2 CV. Linda 0 0 0 0 0 0
3 CV. Meranti Segah River 0 0 0 0 0 0
4 CV. Sisilia 0 0 0 0 0 0
5 CV. Sungai Berlian 0 0 392 631 0 1,023
6 CV. Talisayan Gemilang 0 0 0 0 0 0
7 CV. Tanjung Prima Lestari 0 0 0 0 0 0
8 Erliana 0 0 0 0 0 0
9 Gunung Agung 1,115 0 1,120 0 2,616 4,851
10 Herry Chandra 0 0 0 0 2,872 2,872
11 Meranti Jaya 0 0 0 0 0 0
12 Perdana Nusantara 0 0 0 0 0 0
13 PT. Citra Wana Rimba Mulia 0 0 0 0 0 0
14 PT. Daisy Indah Wood Ind 0 0 0 0 0 0
15 PT. Daisy Sulaiman Wood Ind 0 0 0 1,039 0 1,039
16 PT. Kaltim Damai Lestari 342 542 1,450 0 299 2,634
17 PT. Paribau Sentosa 927 0 675 0 0 1,603
18 PT. Tanjung Buyu Perkasa 0 0 0 0 0 0
19 Sambarata Raya 0 0 0 0 0 0
20 Singkuang Jaya 0 0 0 0 0 0
21 Syahrani Taram 0 0 0 0 0 0
22 UD. Agra Sarana 0 0 0 0 0 0
23 UD. Kayu Abadi 0 0 0 0 0 0
24 UD. Maluang Raya 0 0 0 0 2,280 2,280
2,385 542 3,638 1,820 8,067 16,452

Source: UPTD Forestry Bureau, Berau

36
Official log supply vs reported production of sawn timber

According to UPTD Forestry Office as well as District Industry and Trade Office, sawn
timber/moulding mills in Berau obtain the raw material from legal sources – i.e. HPH or IPK
operators. Indeed, HPH and IPK logging permits stipulate that the companies supply 5 percent of
their production for local consumption. However, if one matches the reported sawn timber
production for 2003-2004 with 5 percent of the official log production in the district for the same
period, the mills face a shortfall of about 45,685 m3 of raw material for the entire period, or 2,855
m3 per month (Figure 2).

Figure 2. Supply of HPH/IPK logs and the production of sawn timber in Berau, 2003-2004

2003-2004
14000

lo g demand fo r repo rted levels o f sawn timber


12000 pro ductio n
lo g supply fro mHP H/IP K, hypo thetically 5 % o f all
10000 pro ductio n so ld di B erau)
vol (m3)

8000

6000

4000

2000

Source: UDPT Forestry Bureau, Berau

Reported production vs reported shipping of sawn timber

Similarly, there are differences between the reported volumes of sawn timber produced and
shipped in Berau (Figure 3). The forestry as well as trade and industry officials are at loss to
explain this discrepancy, as it is commonly known that nearly all production output is sold outside.
They suggest it may be the result of statistical errors or, indeed, some underreporting.

37
Figure 3. Sawn timber produced and shipped in Berau, 1993-2002

60,000
Sawn timber produced
50,000
Sawn timber shipped

40,000
Vol (m3)

30,000

20,000

10,000

0
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Source: BPS (quoting District Forestry Service): 2000, 2001, 2002

The research findings for this report indicate that underreporting in Berau’s woodworking sector
occurs on a large scale. In contrast to the UPTD Forestry Office and Industry and Trade Office
data, the survey of all wood-working industries in the district indicates that, as of 2004, there were
37 active sawn timber and moulding mills in Berau (Table 16).

38
Table 16. Sawn timber and moulding mills in Berau, 2004
Wood-working industries Raw material intake/month Output/month
Employment Value (Rp Value (Rp
Type Total Vol (m3) Vol (m3)
billion) billion)
Sawmill 27 335 32,450 8.2 21,510 16.3
Moulding 10 58 535 0.2 485 0.35
Total 37 393 32,985 8.4 21,995 16,65
Source: CIFOR survey 2004.

Most of these mills (32) are located within a 10 km radius of the district capital of Tanjung Redeb,
near the strategic confluence of Kelay and Segah Rivers as well as along the lower course of the
Berau River. The remaining 5 mills operated in the Talisayan seaboard area and in the Berau
River delta4 (see the Appendix 2). The mills are relatively new enterprises – the oldest ones date
back to 1995, the majority was opened in the late 1990s, while the most recent one was
established in 2004. The sawmills and moulding mills in Berau are operated by local businessmen
(Berau Malay, Banjarese and Chinese) who engage in various other parallel enterprises – e.g.
shop-keeping, hotels, transport. Increasingly, they are also becoming involved in government
infrastructure projects.

In terms of legal status, most mills possess business licenses (HGU) or permits form the Industry
and Trade Office. Some even submit annual raw material supply plans to District and UDPT
Forestry Offices. However, the reported annual raw material supply volumes are significantly lower
than the volumes needed to match the official production and shipping figures.

Real raw material input and production

The survey findings indicate that in 2004 sawn timber and moudling mills in Berau consumed about
329,850 m3 of raw material in order to generate approximately 219,950 m3 of timber products,
valued at Rp 80 billion and Rp166.5 billion respectively5. These figures differ greatly from the
official district government records.

Despite abundant evidence to the contrary, district policy-makers are of the opinion that
woodworking in Berau is still small-scale, that it produces and consumes relatively small quantities
of timber and therefore, in order to boost the local economy, it needs to be intensified. The fact that
far more sawmills operate that the official industry registers show and that these mills produce and
consume between 5 and 7 times the reported volumes of timber calls for a reconsideration of such
ideas.

6.3.2. Timber kiosks


A relatively new development in the wood-working sector in Berau over the last few years has been
the emergence of timber kiosks (kios kayu) as the main source of wood for local consumption. In

4 Villages of Batu-Batu and Kasai.


5 Assuming 11-month work year, which is the sector’s norm.

39
2004, there were 31 such timber kiosks, almost all located in Tanjung Redeb-Teluk Bayur -
Gunung-Tabur-Sambaliung urban area (Table 17).

Table 17. Timber kiosks in Berau District, 2004

Vol intake Procurement value


Timber kiosks Sales
(m3/month) (Rp million)
No Origin of raw material
Value (Rp
Location Established min max min max Vol (m3/month)
million)
1 Tepian Buah 2000 T.Buah 20 20 10 10 20 15
2 Tepian Buah 2002 T.Buah 20 30 10 15 30 22.5
3 Teluk Bayur 2000 Tumbit,Labanan,Segah 50 70 35 35 70 63
4 Teluk Bayur 2000 Tumbit,Labanan,Segah 60 80 30 56 80 67.5
5 Teluk Bayur 2003 Labanan,Segah 30 30 15 21 30 27
6 Teluk Bayur 2003 Labanan,Segah 30 40 20 21 40 27
7 Teluk Bayur 2001 Birang,Segah,Sbrata 40 40 28 28 40 36
8 Rinding 2002 Birang,Segah,Sbrata 40 40 28 28 40 36
9 Rinding 2003 Segah,Labanan 80 80 40 56 80 67
10 Rinding 2003 Tepian Buah 40 40 20 28 40 36
11 Rinding 2002 Labanan,Tumbit; Segah 50 200 35 100 200 105
12 Rinding 2004 Labanan,Tumbit; Segah 25 25 12,5 17.5 25 22.5
13 Rinding 2004 Birang,Labanan 20 20 10 14 20 18
14 Sambaliung 2004 Bangun 20 30 10 21 30 27
15 Jln.Pemuda 2004 Birang, Sambarata 40 50 25 28 50 31
16 Jln.Durian III 2002 Birang,Merancang, 30 30 15 21 30 27
17 Jln.Durian III 2003 Labanan,Segah 50 50 25 35 50 45
18 Jln.Durian III 2002 Labanan,Segah 50 60 25 42 60 45
19 Jln.Durian III 2001 Labanan,Segah 40 40 20 28 40 36
20 Milono 2000 Kasai,TLS,Segah 100 100 70 70 100 81
21 Murjani III 2000 Labanan,Segah 50 60 25 42 60 54
22 Manunggal 2002 Birang 50 60 25 42 60 54
23 Manunggal 2003 Birang,Sambarata 25 25 17.5 17.5 25 22.5
24 APT.Pranoto 2004 Labanan,Birang 60 60 30 42 60 54
25 Mangga II 2003 Birang,Kasai 50 70 35 35 70 45
26 Merah Delima 2003 T.Buah,Lbnan,Mracang 70 100 49 50 100 63
27 Sanipah II 2003 Kasai,Merancang 60 80 30 56 80 72
28 H.Isa II 2002 Birang,Kasai 50 50 25 35 50 45
29 Jln.Bulungan 2003 Birang,Merancang, 40 40 28 30 40 36
30 Sanipah II 2003 Birang,Sambarata 50 80 35 40 80 45
31 Sei.Buluh 2004 Labanan,Segah 25 25 12.5 17.5 25 22.5
Total 1,365 1,725 783 1,082 1,725 1,348
Source: CIFOR survey, 2004.

The presence and activities of timber kiosks in the district have been legally regulated by the
District Regulation (Perda) No. 13/2003. The emergence of timber kiosks in Berau is closely linked
to economic development processes in the district taking place within the framework of post-2001
regional autonomy. The spectacular growth of the financial wealth available to the district (the
district budget increased from Rp 54 billion in 1998 to over Rp 440 billion in 2002) translated into a
multiplicity of infrastructure projects – especially roads, upgrade of port and waterfront areas, as
well as construction of government offices and housing complexes. Naturally, such infrastructure
project require large volumes of timber.

40
This study estimates nearly all construction-based demand for timber in Berau is supplied by
timber kiosks. In 2003, such kiosks sold about 18,975 m3 of timber in the main urban areas in the
district. In 2004, they are likely to supply a similar amount. The timber kiosk owners procure sawn
timber of various sizes through a network of chain saw operators in the villages in the proximity of
main town and communication arteries.

While at the moment 18,975 m3 may not seem as a significant amount of timber, it is likely to
increase in the near future. The 2001-2011 District Strategic Development Plan envisages an
acceleration of construction projects in the district (roads, airport, industrial and manufacturing
centers, tourism facilities etc). It is assumed that timber for these projects will come from sawmills,
the official production of which is expected to double by 2011 (BAPPEDA Berau 2001). If this
assumption is applied to the actual supplier of timber for development projects in Berau, i.e. timber
kiosks, it means they will be supplying close to 40,000 m3 of timber per year in the near future.

6.3.3. Ship-building

A largely unknown aspect of the use of timber in Berau is the construction of wooden vessels
(ships, boats, canoes etc). In 2004, 129 manufacturing enterprises of this kind employed 256
people and consumed 901 m3 of timber year (Table 18).

41
Table 18. Ship-building in Berau, 2004

Sub-district Number of enterprises Employment Raw material use (m3/year)


Biduk-biduk 21 58 332
Gn Tabur 5 25 78
Kelay 30 58 150
P. Derawan 31 43 193
Sambaliung 17 37 48
Segah 13 17 37
Teluk Bayur 12 18 63
Total 129 256 901
Source: CIFOR survey, 2004. Note: a 40-ton ship requires 15 m3 of timber, whereas a 100-ton ship needs 30 m3 of
wood.

A particularly interesting feature of ship manufacturing in Berau is that enterprises of this kind
require small volumes of wood and are highly labor intensive. While ship-building is only slightly
behind sawmills in terms of employment (256 jobs vs 335 jobs), the former is distinguished by the
fact that only 40 m3 of timber are consumed per employee per year whereas each sawmill worker
processes more than 24 times that amount of timber (970 m3) during the same period of time.

6.3.4. Pulp and paper production

In the mid-1990s, Bob Hasan’s Kalimanis Group developed a large-scale pulp project in
Mangkajang, located 40 kilometers south of Tanjung Redeb. The Kiani Kertas pulp mill had an
official production capacity of 525,000 tons per annum when it came online in mid-1997, and
reportedly cost US$ 1.3 billion to build (Kenny 1997). Drawing on its owner’s close ties with
President Suharto, the Kalimanis Group received heavy government subsidies for the construction
of the Kiani mill (Barr 2000). These included at least US$ 300 million in loans from four state
banks; an allocation of US$ 100 million from the government’s Reforestation Fund; and a 10-year
holiday on corporate income tax. In addition, the Suharto government gave Kiani Kertas a
permanent waiver on the payment of import and export duties for all capital goods.

It is widely reported within the industry that the real costs involved in the construction of the Kiani
mill were substantially lower than those reported by the company – perhaps by as much as one-
half (Barr 2000). According to individuals involved with the mill’s operation, the diversion of finance
during the construction of Kiani Kertas resulted in the creation of a highly inefficient processing
unit.6 Many of the components purchased for the mill were apparently rebuilt, rather than new; and
the use of sub-par equipment in some parts of the mill has limited other parts from running at full

6 Confidential interview with a pulp mill engineer employed by PT Kiani Kertas, Tanjung Redeb, November 11, 2000.

As this informant explained, “For a mill to run efficiently, it needs high levels of coordination between raw material
supply and processing; proper use of machinery and the right equipment in place; and spare parts on hand when
equipment breaks. Kiani has none of these. Equipment is being pushed to the max. If the normal life of a part is 3-4
months, Kiani pushes it to 6-8 months. The problem is, you never know when you are going to have a catastrophic
breakdown. Normally, when a part needs to be replaced, a mill will run down its stocks to 30 percent or less. In Kiani’s
case, the mill is run until a part breaks, then everything stops.”

42
capacity. In the years since production began at Kiani, the mill has experienced frequent
shutdowns, which have incurred substantial costs.

Since the fall of the Suharto regime in May 1998, Kiani Kertas’s operations have been further
complicated by the Kalimanis Group’s overall financial problems. In September of that year,
Kalimanis pledged Kiani Kertas, together with 33 other companies, to the Indonesian Bank
Restructuring Agency (IBRA) as collateral for the repayment of some Rp 12 trillion (or US$ 1.8
billion) in Bank Indonesia liquidity credits (Barr 2000). Kiani Kertas is also directly responsible for
US$ 628 million in outstanding debts in IBRA’s portfolio. In October 2000, IBRA entered into a debt
restructuring agreement with Kiani that allowed the company to continue operating under its pre-
crisis management team and to pay its debts over an extended, 10-year period (IBRA 2000). In
August 2002, IBRA sold some US$ 480 million of Kiani’s debt to Bank Mandiri and a consortium of
investors (Barr and Setiono 2003).7

Because of technical and financial problems, Kiani Kertas has reportedly operated well below its
installed capacity since it came online in 1997. In its first year of operation, Kiani Kertas produced
and exported only about 22,000 tones of pulp. This number increased to 175,406 tones in 1998,
declined to 138,233 tones in 1999, increased again to 273,875 tones in 2000 and declined again to
236,667 tones in 2001 (BPS Berau 2001). In 2002, the mill produced 143,749 tones of pulp, which
is only about 35 percent of its installed production capacity (BPS Berau 2002). In 2001 and 2002
the mill is estimated to have consumed approximately 1,065,000 m3 and 646,870 m3 of wood
respectively, as approximately 4.5 m3 of wood (under bark) are required to produce one ton of pulp.

The industry sources estimate that since the mill began operating, roughly 10 percent of it’s raw
material intake have been mixed tropical hardwoods (MTH) harvested from natural forests in Berau
and other parts of East Kalimantan. The remaining 90 percent have been plantation pulpwood
imported from Sabah, Vietnam and Australia (Tasmania) (Botha 2002). A negligible amount of HTI
pulpwood is also produced and delivered by HTI operators in Berau – particularly PT Sumalindo
Lestari Jaya I and PT Tanjung Redeb Hutani.

7 This consortium includes former president Suharto’s son-in-law, Prabowo Subianto and Luhut Pandjaitan, the former

trade minister and ambassador to Singapore, and Hendropriyono, Indonesia’s current Chief of Intelligence.

43
7. ILLEGAL FORESTRY ACTIVITIES IN THE NORTHERN PART OF
EAST KUTAI DISTRICT

7.1. Overview of the forestry sector in East Kutai District

East Kutai District is located in the central-eastern part of East Kalimantan province. It is
considerably larger than Berau as it covers 35,747 km2, or 17 percent of the province’s land area.
In 2002, the district had a population of 167,559 people, of whom 56,853 resided in the district
capital of Sanggata – a coal-mining town on the coast (BPS Kutai Timur 2002). Along its eastern
edge, the district is facing the Celebes Sea and it has an extensive and diverse coastline running
from the Mahakam delta to the eastern tip of Mangkalihat Peninsula. In its central and southern
parts, East Kutai is dominated by undulating plains, lowlands and swamps. In the north, northwest
and northeast the district’s topography is defined by mountainous terrain that includes carst
mountain ranges.

East Kutai has two major communication arteries: 1) trans-Kalimantan highway that cuts through
the eastern and northern parts of the district connecting it to Samarinda in the south and other
districts to the north and 2) Wahau-Kedang Kepala Rivers flowing into the Mahakam River.

7.2. Illegalities associated with extractive forestry operations in the


northern part of East Kutai District

According to District Forestry Office (Dinas Kehutanan), in 2002 about 2.8 million ha of East Kutai’s
land area were classified as a forest estate. This forest area comprised: 1) Production Forest (0.97
million ha); 2) Limited Production Forest (1.09 million ha); 3) Conversion Forest (1.07 million ha); 4)
Protection Forest (0.45 million ha) and 5) Park/Reserve Forest (0.22 million ha) (BPS Kutai Timur
2002:96). These forest resources support a range of licensed and unlicensed extractive activities
(HPH, IPK, small-scale logging teams) as well as licensed and unlicensed woodworking (sawn
timber, moulding mills).

44
Table 19. Log production in East Kutai, 2001-2002
C um u lative
An nual produ ctio n (m 3)
No C o m pany L ocation p ro du ctio n
2001 2002 (m 3)
1 P T. H anurata unit M anum bar S andaran 20,467 46,357 66,824
2 P T. H anurata unit K elokan Sangkulirang 18,537 32,784 51,321
3 P T. H anurata unit S angata S angata 9,134 16,625 25,759
4 P T. H anurata unit B engalon B engalon 10,953 7,928 18,881
5 P T. S im a A gung S andaran 18,334 25,867 44,200
6 P T. S egara Indochem Afd S G I Sangkulirang 0 23,814 23,814
7 P T. S egara Indochem Afd S G T Sangkulirang 16,003 15,744 31,747
8 P T. K edungm adu Tropical W ood Sangkulirang 13,864 19,495 33,359
9 P T. Intertropic A ditam a M a. Bengkal 0 9,708 9,708
10 P T. P anam bangan B engalon 18,857 5,271 24,128
11 P T. G unung G ajah Abadi Kongbeng 40,489 33,755 74,243
12 P T. B asuim ex M a. W ahau 19,184 0 19,184
13 P T. B asuim ex carryover M a. W ahau 2,032 6,286 8,318
14 P T. Loka D wihutani R aya Kongbeng 15,660 24,190 39,851
15 P T. M elapi T im ber B usang 7,948 18,972 26,919
16 P T. N arkata R im ba M a. W ahau 10,005 2,557 12,562
17 P T. D harm a Satya N usantara M a. W ahau 10,994 29,863 40,856
18 P T. S um ber M as Tim ber B usang 8,087 0 8,087
19 P T. O ceanic Tim ber P roducts M a. Bengkal 0 0 0
20 P T. S ilvaduta C ooperation M a. Bengkal 17,324 0 17,324
P T. Inhutani I Sangkulirang/
21 C arryover K aliorang 0 13,770 13,770
22 P T. S um alindo Lestari Jaya/ IP K Sangkulirang 5,591 4,632 10,224
23 P T. S um alindo Lestari Jaya / H T I Sangkulirang 10,805 82,035 92,840
24 P T. Inhutani Long N ah M a. A ncalong 7,001 2,246 9,247
25 P T. E tam B ersam a Lestari /IPK Sangkulirang 13,412 4,861 18,273

26 P T. E tam B ersam a Lestari /IPK -T P Sangkulirang 0 26,127 26,127


27 P T. S urya H utani Jaya M a. Bengkal 4,736 0 4,736
28 P T. W ana K altim Lestari Sangkulirang 23,071 68,617 91,688
29 P T. Long B agun P rim a S awit Sangkulirang 27,399 1,329 28,727
30 P T. M andu Palm a Lestari Sangkulirang 16,187 7,345 23,532

31 P T. D harm a Satya N usantara /IP K M a. W ahau 8,579 29,906 38,484


32 P T. Inhutani II/Indom inco M B ontang 10,888 11,623 22,511
33 P T. Inhutani II/ Kitadin B ontang 0 0 0
34 P T. K iani Lestari M a. Bengkal 68,033 50,797 118,829
P T. O ceanic Tim ber P roducts M a.
35 D un TP M a. A ncalong 0 65,168 65,168
P T. O ceanic Tim ber P roducts M a.
36 D un Kopkar M a. Bengkal 0 42,393 42,393
P T. O ceanic Tim ber P roducts M a.
37 M arah TP Telen 17,777 48,993 66,769
P T. O ceanic Tim ber P roducts M a.
38 M arah K opkar Telen 0 46,407 46,407
39 P T. H anurata M anum bar / IP K S andaran 2,535 1,608 4,143
40 P T. P utera K alim antan Perm ai Sangkulirang 0 21,125 21,125
41 K op. Bum i U layat Telen 0 721 721
42 K U T. E lang M entari Kongbeng 0 2,151 2,151
43 K op. Telaga M andiri M a. Bengkal 0 3,960 3,960
44 K op. Prim er K arya Baru M a. W ahau 10,150 19,468 29,618
45 K op M andu S aka Lestari Sangkulirang 2,463 19,275 21,738
46 K op. Karya P em bangunan K aliorang 0 12,742 12,742
47 K op. Peridan K erayaan Jaya Sangkulirang 0 13,674 13,674
48 LKM D . M ukti Lestari Sangkulirang 0 7,889 7,889
49 LKM D . Batu Lepoq Sangkulirang 0 3,147 3,147
50 P T. S oko Joyo M akm ur M a. W ahau 0 45,431 45,431
51 P T. Inhutani SP III Pengadaan K aliorang 0 2,960 2,960
52 P T. B orneo K arya Indah P erm ai Sangkulirang 0 6,732 6,732
53 C V A lfath Sangkulirang 0 68,922 68,922
54 K elom pok Tani G ajah Indah M a. W ahau 0 1,526 1,526
55 K elom pok Tani Tiga T awai M a. A ncalong 0 2,891 2,891
56 Y ayasa Fastabiqul K hairat B usang 0 10,251 10,251
Total H P H 359,333 482,644
Total IP K 127,163 587,290
TO TAL 486,497 1,069,934

Source: Dinas Kehutanan East Kutai, Sanggata. Note: IPK production figures are in shading.

45
7.2.1. HPH

In contrast to Berau and other districts in East Kalimantan, HPH sector in East Kutai maintained its
dominance in extractive (logging) activities through decentralization and the initial period of
regional autonomy (until 2001/2002). While in other parts of the province IPK operations had by
then out-competed HPHs, in East Kutai the latter were able to hold out longer. In 2001/2002 there
were still 22 HPH concessions active in the district, some of them operating multiple logging units
(Table 19, also see Appendix 3).

By 2003, however, the slowdown in the HPH sector became pronounced and the dominance of
IPK logging established. Only about 10 HPH license holders continued to be active that year. In the
Wahau-Kombeng area, only 2 HPH concessionaries secured RKT work plans and continued to
operate in 2004 (i.e. Gunung Gajah Abadi and Dharma Satya Nusantara).

Table 20. Log production in East Kutai in 2003


HPH (m3) IPK (m3) HTI (m3)
No Month Valuiable Valuiable Gmelina Acacia Paraserianth
Meranti Mixed Meranti Mixed
species species arborea mangium es f
1 Jan 0 0 0 30,075 0 22,714 0 0 0
2 Feb 10,863 0 0 37,500 12 8,222 0 0 0
3 March 13,011 4 145 32,119 0 1,975 312 0 0
4 April 14,645 0 28 29,413 19 5,059 2,105 100 501
5 May 21,506 7 198 40,427 8 26,674 588 92 321
6 June 16,065 4 1,310 48,220 7 6,098 2,081 0 0
7 July 26,361 13 1,350 41,412 0 7,499 298 2,664 0
8 Aug 23,767 0 300 86,868 0 30,909 0 0 0
9 Sept 17,638 0 2,921 37,345 0 27,819 0 0 0
10 Oct 13,770 21 402 44,016 0 456 0 0 0
11 Nov 5,572 0 41 9,988 5 178 0 49 0
12 Dec 35,199 55 2,328 24,337 3 2,095 0 256 0
Subtotal 198,398 103 9,023 461,719 54 139,698 5,385 3,161 822
HPH = IPK = HTI =
Total 207,524 601,740 9,369
Source: Dinas Kehutanan East Kutai, Sanggata

Overall, between 2001 and 2003, HPH operations in East Kutai went into decline while IPK logging
expanded (Figure 4). This growth occurred in no small degree due to the fact that many HPH
concessionaries, facing financial difficulties, social conflicts and problem with securing RKT work
plans, switched to IPK operations that carry far fewer responsibilities. A prime example of this is a
HPH concession holder PT Oceanic Timber Products Inc in Telen and Muara Ancalong sub-
districts. The company has a prime quality logging concession in the Atan-Marah watersheds in the
north-western part of the district. Due to difficulties with RKT documents, in 2002 the company
suspended its HPH operations and focused on IPK logging. In partnership with company
employees and local villagers, it secured 4 IPK permits with the total production target of 202,961
m3 over 2 years. It is far more than it would have been allowed to extract as a HPH concessionary,
and with far fewer strings attached. A similar shift from HPH to IPK logging was undertaken by PT
Narkata Rimbah in the Wahau-Kombeng area.

46
Figure 4. HPH-IPK roundwood production in East Kutai, 2001-2003
700,000
HPH
600,000
IPK
500,000
Vol (m3)

400,000

300,000

200,000

100,000

0
2001 2002 2003

Source: Dinas Kehutanan East Kutai, Sanggata


In 2003, HPH companies transported 237,405 m3 of logs that had been extracted in East Kutai,
slightly in excess of what they reported as the production output – i.e. 207,534 (difference: 29,881
m3) (Table 21).
Table 21. Reported transport of HPH logs in East Kutai in 2003
Month/m3
No Company Total
Jan Feb Mar April May June July Aug Sept Oct Nov Dec
Hanurata
1 - - - - 6,018 - 7,118 6,651 4,232 1,164 4,176 4,069 33,427
Manumbar
Hanurata
2 4,018 8,156 - - - 3,358 - - 1,824 5,783 - 3,402 14,368
Kelolokan
Porodisa
3 - - - - - - - - - - - - -
Bengalon
Porodisa
4 3,963 - - - - - - - 1,505 - 1,971 - 3,476
Sangata
5 Sima Agung - - - - - 5,530 7,061 4,952 5,928 - - 4,614 28,085
Segara
6 - - - - 1,384 4,083 5,157 3,931 1,641 1,734 4,020 2,244 24,194
Indochem

7 Segara Timber 1,408 3,225 - - - - - - 4,989 - - - 8,314

8 KTW - - - - - 3,860 - 2,036 - 1,960 -1,700 7,857

9 Penambangan 2,011 25,218 - - - - 1,978 - - - - - 1,978

Intertropic
10 - - - - - 2,021 - - - - - - 2,021
Aditama
11 Basuimex - - - - - - 4,972 - 2,449 4,320 - 11,741

12 Narkata Rimba - - - - - - - - - - - 653 653

13 DSN 3,862 1,813 4,598 - 4,360 - 2,420 2,219 4,953 2,234 2,993 1,011 24,789
14 Inhutani I Skl 3,151 - - - 5,128 - - - 1,121 - 2,726 - 8,974
15 Melapi Timber 2,501 - - - - - - - - - - - 2,501
Gunung Gajah
16 - 41,343 - - 5,412 6,253 5,766 8,330 6,590 7,148 - 6,926 46,424
Abadi

Loka Dwihutani
17 - 4,167 - - 8,084 - 6,695 - - - - 3,825 18,604
Raya

TOTAL 20,915 83,923 4,598 0 30,386 25,106 41,167 28,119 35,232 18,062 22,166 25,043 237,405
Source: Dinas Kehutanan East Kutai, Sanggata
While this disparity is minor, the main problem with HPH concession holders who have shifted to
IPK operations is that logging out of block is widespread. Interviews and field investigations in

47
Wahau-Kombeng clearly show that current IPK ventures by PT Oceanic Timber Products and PT
Narkata Rimbah log well beyond the allocated territory, manipulate production reports and
understate log transport8.

7.2.2. IPK

As in Berau, IPK logging permits in East Kutai come in two types: province-level permits and
permits issued by the district government. As of 2004, there were at least 21 provincial IPK permits
in effect that covered 107,336 ha (some permits dating back to 2001) with the cumulative 2001-
2004 production target of 1,307,716 m3 (Table 22).
Table 22. Provincial IPK permits in East Kutai active in 2004

Production
No Company Permit date Location Area (ha) IPK Objective
target (m3)

1 PT. Etam Bersama 14-Jun-01 Sangkulirang 3,000 31,090 Oil palm


16-Jul-02 Sangkulirang Permit renewal
30-Dec-02 Sangkulirang 100 Permit renewal
2 PT. Mandu Palma Lestari 14-Feb-02 Sangkulirang 200 36,470 Oil palm
18-Jul-02 Sangkulirang 15,656 21,690 Oil palm
3 PT. Kiani Lestari 20-Feb-02 Telen 36,407 178,740 Salvage logging
4 PT. Oceanic Timber Products Inc 6-Dec-01 Ma. Ancalong 13,277 200,119 Salvage logging
5 Koperasi Karyawan PT. OTP 7-Jul-02 Ma. Ancalong 200 233,352 Salvage logging
6 PT. Hanurata Coy Ltd 22-Oct-01 Sandaran 1,866 6,250 Settlement expansion
7 PT. Wana Kaltim Lestari 26-Sep-01 Sangkulirang 566 59,900 HTI
5-Sep-02 Sangkulirang 445 77,199 Permit renewal
8 PT. Sumalindo Lestari Jaya 13-Nov-01 Sangkulirang 9,776 35,042 HTI -Trans
9 PT. Inhutani II (PT. Indominco) 13-Nov-01 Bontang 593 54,814 Coal mine
10 PT. Inhutani II (PT. Kitadin) 13-Nov-01 Bontang 3,000 6,995 Coal mine
11 Koperasi Mandu Saka Lestari 1-Oct-01 Sangkulirang 1,100 47,860 Oil palm
12 Koperasi Telaga Mandiri 11-Dec-01 Telen 3,000 6,237 Rubber
13 Koperasi Perindam Kerayaan Jaya 11-Jan-02 Sangkulirang 7,000 35,430 Oil palm
14 PT. Dharma Satya Nusantara 17-Feb-03 Ma. Wahau 2,000 22,410 Oil palm
15 PT. Long Bagun Prima Sawit 8-Apr-02 Sangkulirang 2,000 27,404 Oil palm
14-Nov-02 Sangkulirang 800 53,750 Permit renewal
16 LKMD Desa Persiapan Mukti Sari 3-May-02 Sangkulirang 700 10,130 Leftovers from
landclearing for HTI PT.
SLJ
17 LKMD Desa Batu Lepoq 14-Jun-02 Sangkulirang 1,650 10,686 Leftovers from
landclearing for HTI PT.
SLJ
18 PT. Inhutani I Sangkurilang 14-May-02 Sangkulirang 2,000 9,850 Permit renewal
19 CV Alfath 16-Sep-02 Sangkulirang 2,000 33,793 Rubber
20 Yayasan Fastabiqul Khairat 24-Sep-02 Ma. Ancalong 84,440 Salvage logging
21 Koperasi Primer Karya Baru 10-Aug-01 Ma. Wahau 24,065 Leftovers from
landclearing for HTI PT.
Bulungan Sarana
Total 107,336 1,307,716
Source: Dinas Kehutanan East Kutai, Sanggata

Between 2001 and 2004, the district government of East Kutai (Bupati) issued at least 35 IPKs
covering 153,741 ha of forest with the production target of 1,494,663 m3 of logs (Table 23).

8 Wahau, Miau Baru, Nehes Liahbing – July 2004.

48
Table 23. IPK permits issued by East Kutai District (Bupati), 2001-2004
Target
No Company Permit Date Location Area (ha) production
(m3)
1 PT. Borneo Karya Mandiri 101 tahun 2002 11-Feb-02 Sandaran 47,850 no data
2 PT. Nadila Indodaya 426/522/Bup-Kutim/2002 11-Feb-02 Sandaran 50,000 no data
3 PT. Putra Kalimantan Permai 456/503/BUP-Kutim/IX/02 13-Aug-02 Sangkulirang 3,000 78,500
362/02.188.45/HK/IX/2003 19-Sep-03 Renewal 1,886 47,005
4 PT. Soko Joyo Makmur 224 tahun 2002 19-Jul-02 Kongbeng 2,000 62,193
444/02.188.45/HK/XII/2003 22-Dec-02 Renewal 667 23,750
5 PT. Kalimantan Bolivia Maloiindo 97/02.188.45HK/VI/2003 4-Jun-03 Sangkulirang 2,000 49,200
6 PT. Binakarya Nuansa Sejahtera 143/02.188.45/HK/V/2003 24-May-03 Sangkulirang 4,000 3,284
7 PT. Sima Agung 92/02.188.45/HK/III/03 26-Mar-03 Sandaran 538 20,085
8 PT. Putra Daya Kaltim 78/02.188.45HKIV/03 16-Mar-03 Kongbeng 3,000 106,920
9 PT. Inhutani I, Unit Balikpapan 145 /02.188.45HKIII/203 24-Mar-03 Sangkulirang 1,500 58,890
10 PT. Kutai Timur Prima 279/02.188.45/HK/VII/2003 29-Jul-03 Bengalon 100 30,320
11 PT. Etam Bersama Lestari 144/02.188.45/HK/III/03 24-Mar-03 Sangkulirang 2,500 1,799
12 CV Alfat 68.B/02.188.45HK/III/2003 21-Mar-03 Sangkulirang 3,000 76,398
13 CV. Kalimarau 64.A/02.188.45HK/III/2003 26-Mar-03 Sangkulirang 2,500 14,280
14 CV. Ardi Jaya 343/02.188.45HK/IX/2003 5-Sep-03 Sandaran 1,000 44,670
15 CV. Kutai Inovasi Utama 57/02.188.45/HK/II/04 27-Feb-04 Sangkulirang 1,200 50,312
16 CV. Sumber Jaya Abadi 92.B/02.188.45HK/IV/2003 27-Mar-03 Sangkulirang 2,000 7,920
17 CV. Labbaika 62/02.188.45HK/III/2004 11-Mar-04 Sangkulirang 1,000 27,042
18 Kop. Karya Pembangunan 67/02.188.45/HK/III/2004 3-Mar-04 Kaliorang 1,000 20,000
19 Kop Bina Usaha Pelita Warga 246 tahun 2002 2-Jul-02 Bengalon 500 39,316
20 Kop. Cinta Hutan Lestari 193.A tahun 2002 21-Oct-02 Sangkulirang 5,000 135,000
21 Kop. Bumi Etam Sejahtera 68/02.188.45/HK/III/2003 1-Apr-03 Sangkulirang 2,000 67,460
22 Kop. Min Sut Lekut 91/02.188.45/HK/IV/2003 4-Jun-03 Ma.Wahau 2,200 55,594
23 Kop. Pertanian Semoga Jaya 241/02.188.45HKVI/2003 20-Jun-02 Sangkulirang 800 30,240
24 Kop. Telaga Mandiri 239 tahun 2002 8-Aug-02 Telen 1,100 36,697
115/02.188.45/HK/IV/04 7-Apr-04 Renewal 1,200 49,880
25 KUT Elang Mentari 258 tahun 2002 17-Sep-02 Kongbeng 2,000 71,708
26 Kop. Karya Bakti 282/02.188.45/HKVII/2003 31-Jul-03 Sandaran 2,000 52,994
27 Kop. Kertha Nugraha 204/02.188.45/HK/VII/2003 2-Jul-03 Kaliorang 1,200 44,967
28 Kop. Pertanian Sangkulirang Permai 364/02.188.45/HK/IX/2003 19-Sep-03 Kaliorang 400 15,100
29 Kop Serba Usaha Tunas Jaya 363/02.188.45/HK/IX/2003 19-Sep-03 Bengalon 1,500 39,315
30 Kop. Nelayan Kakap Putih 452/02.188.45/HK/XII/2003 31-Dec-03 Sangkulirang 1,600 26,779
31 Kop. Batu Lepoq Lestari 75.a/02.188.45/HK/IV/2004 8-Mar-04 Sangkulirang 1,500 41,455
32 Kop. Serba Usaha Warga Rimba no data
33 CV Sinar Meranti 365/02.188.45/HK/IX/03 19-Sep-03 Bengalon 11,001
34 Kop. Bumi Ulayat Indah Lestari 238 tahun 2002 8-Aug-02 Telen 47,025
35 KUD Marga Jaya 452/503/BKT/DK-VIII/02 13-Aug-02 Ma.Ancalong 7,564
Total 153,741 1,494,663

Source: Dinas Kehutanan East Kutai, Sanggata

In 2003, both provincial and district IPKs cumulatively reported the production of 601,740 m3. In the
same year, IPK operators reported to have shipped 670,856 m3 of logs in the district – thus,
shipping exceeded production by 69,116 m3 (Table 24). This discrepancy may seem minor.
However, only 39 out of 66 IPK holders reported shipping of logs. Some IPK operations were

49
probably not active, but according to forestry insiders in East Kutai (the Wahau-Kombeng area), a
good number operated but officially pretended to be inactive9.
Table 24. Reported transport of IPK logs in East Kutai in 2003
Month/m3
No Company Total
Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec
1 PT. WKL 2,024 5,150 0 0 0 0 0 0 0 1,147 0 0 8,321

2 PT. Long Bangun 0 5,573 0 0 4,848 0 1,705 4,426 9,457 8,795 0 6,199 41,002

3 PT. MPL 1,359 0 0 0 0 0 0 0 0 0 0 0 1,359


4 PT. OTP Dun TP 5,638 11,809 8,835 2,699 0 2,802 4,106 21,475 10,613 0 4,237 6,255 78,467
Kopkar Rimba K
5 5,329 3,803 3,821 1,683 12,932 18,619 3,821 0 10,854 12,178 4,112 868 78,020
OTP
PT. OTP Marah
6 0 0 0 0 0 0 10,427 15,748 7,324 0 8,094 0 41,593
TP
Kopkar Marah
7 0 0 0 0 0 0 0 0 0 15,449 4,073 256 19,778
OTP
8 PT. PKP 0 896 0 0 608 1,914 0 2,080 3,114 1,420 0 0 10,034
Y. Fastabiqul
9 0 4,607 0 0 2,658 0 4,564 0 5,058 1,617 0 2,593 21,097
Khairt
Bumi Etam
10 0 0 0 0 2,469 0 0 0 0 0 0 0 2,469
Sejahtera
11 Sumalindo LJ 0 1,969 0 0 7,373 607 0 2,874 2,041 3,842 1,906 3,840 24,453
12 Cinta Hutan L 0 0 0 0 0 6,271 7,575 5,029 4,014 11,440 13,289 0 47,619

13 Kop. Marga Jaya 0 0 0 0 0 0 1,003 0 3,044 0 0 0 4,046

14 Kiani Lestari 0 0 0 0 0 0 3,447 1,363 742 1,543 3,607 1,171 11,873


KUT Elang
15 2,998 0 0 0 0 0 0 4,365 0 0 0 0 7,363
Mentari
16 Sbr Jaya Abadi 0 0 0 0 0 0 0 2,958 2,566 0 0 0 5,524
KT. Beringin Jy.
17 0 0 0 0 0 0 0 0 1,364 0 1,614 0 2,978
Skt
HPHH Long
18 0 0 0 0 0 0 0 0 3,249 0 0 0 4,145
Wehea
19 PDKT 0 0 0 0 0 0 0 0 0 14,913 8,408 7,367 30,688
IHPHH Long
20 0 0 0 0 0 0 0 0 0 2,249 0 0 2,249
Salimin
21 SMS 0 0 0 0 0 0 0 0 0 0 2,068 0 2,068

22 Kop Karya Bhakti 0 0 0 0 0 0 0 0 0 0 0 3,194 3,194

Kop Semoga
23 0 0 0 0 0 0 0 0 0 0 0 1,730 1,730
Jaya
24 PT. Inhutani I Skl 3,151 0 3,565 1,859 0 0 2,731 0 0 0 0 0 11,306
25 PT. BKIM 0 2,968 0 0 2,149 2,927 0 1,590 2,049 3,842 0 0 15,525
26 PT. EBL 0 5,059 0 0 5,097 4,923 0 1,174 4,819 3,746 0 3,284 28,103
27 LKMD Bt Lepoq 0 0 0 0 0 1,166 0 513 0 0 0 0 1,679
28 CV Wana Bhakti 1,169 0 0 0 0 0 0 0 0 0 0 0 1,169
29 CV. Alfath 0 0 0 0 0 0 0 0 0 0 2,526 0 2,526
30 Kop Mandu S 1,378 2,437 0 0 0 0 0 0 0 0 0 0 3,815
31 BKNS 0 0 0 0 0 0 0 0 0 0 0 1,815 1,815
32 LKMD Mukti 0 0 0 0 3,148 0 3,454 0 0 0 0 0 6,603
33 PT. Soko Joyo 7,478 12,019 0 0 0 0 0 0 0 0 0 0 19,497
Ke. Tani Tiga
34 820 0 0 0 1,206 0 0 0 0 0 0 0 2,026
Tawai
35 OP Telaga M 16,384 0 0 7,453 0 0 0 20,126 0 0 0 43,963
Bumi Ulayat
36 0 0 0 0 6,230 7,345 6,022 0 49,600 0 0 0 69,197
Indah L
37 Kopkarya Pemb 1,863 0 0 0 0 0 0 0 0 0 0 0 1,863
Kop Primer Karya
38 3,362 0 0 0 0 0 0 0 0 0 0 3,362
Br
39 CV. Kalimarau 0 0 0 0 0 0 1,736 5,205 0 1,397 0 0 8,338
TOTAL 52,953 56,291 16,221 6,240 56,171 46,574 50,591 68,801 140,033 83,576 53,935 38,573 670,856

Source: Dinas Kehutanan East Kutai, Sanggata


Besides the production-shipping discrepancy, the problems with IPK operations in East Kutai are
twofold: 1) As of 2004, IPKs continue to be issued by district authorities, in direct violation of the

9 Interviews with IPK operators in Wahau-Kombeng area, July-September 2004.

50
central government regulations revoking Bupatis’ authority to issue such permits and 2) IPK
licenses are often issued for dubious plantation schemes (mainly oil palm). A prime example of this
are IPKs operated by PT Narkata Rimbah. In 2004, the company carried out logging on behalf of at
least 4 village cooperatives in Wahau-Kombeng: Putra Dayak Kalimantan (Miau Baru), Sentiang
Indah (Miau Baru), Pancasila Abadi (Nehes Liahbing) and Borneo Prima (Nehes Liahbing). The
last two licenses cover 27,500 ha and 47,000 ha respectively and are located on the ridges of
Gunung Kulat and Gunung Beriun near the border with Berau. Cumulatively, the production target
of these IPKs reaches hundreds of thousands of m3. In September 2004, PT Narkata Rimbah was
investigated by the provincial Forestry and Police authorities for logging outside the area of its IPK
permits and for failing to make progress with community plantation projects.

7.2.3. Small-scale logging teams

As in Berau, woodworking industries in East Kutai (sawmills and moulding) depend entirely on raw
material (either square or round logs) delivered by small-scale logging teams. Such logging teams
have become increasingly more active in recent years. Prior to 2000, small-scale logging was
carried out by locals largely along major waterways. The last 2-3 years have seen the arrival of
“truck logging” teams from Samarinda and from as far as Banjarmasin (South Kalimantan) and
Kotawaringin (Central Kalimantan). The truck loggers deliver round logs and square logs to
sawmills, employing ingenious methods of hauling the logs to the roadside using rear wheels of the
truck as a winch. Innovative winching methods are also used for loading the logs onto trucks.

In the Wahau-Kombeng area, a sample of 11 small-scale logging teams has been studied.
Cumulatively, the sample had the manpower of 116 loggers who, using 45 chainsaws, produced
about 3,830 m3 of round and square logs per month, or 42,130 m3 per year (see Table 25).

51
Table 25. A sample of small-scale logging teams near Muara Wahau, East Kutai, 2004

Name of Number of Number of Production Sales


No Origin Location Financing
the team chainsaws loggers in team m3/month Destination
1 Jaim Jabdan Gentung River Independent; Rp. Sawmills in M. Wahau
1,750,000 + ketingting + 1 1 4 600
chainsaw
2 Siman Jabdan Gentung River Independent; Rp. Sawmills in M. Wahau
2,500,000 + ketingting + 1 1 4 400
chainsaw
3 Yanto Jabdan Gentung River Independent; Rp. Jainudin (Koramil
2,000,000 + ketinting + 1 1 4 350 M.Wahau), then on to
chainsaw Samarinda
4 Kleasong Nehes, Gentung River; Agus and Roby (Chinese Sawmills in M. Wahau
Liahbing Selek River inside from Samarinda); Rp.
12 30 600
GGA concession 20,000,000/6 months + 12
chainsaws
5 M. Tik Nehes, Selek River inside Independent; Rp. Sawmills in M. Wahau
Liahbing GGA concession 60,000,000/5 months 8 20 800

6 Yuda SP 2 Jembatan Tiga on Independent; 13 buffalos Sawmills in SP2, M.


the road to Wahau
Samarinda 3 6 120

7 Samikun SP 1 Km 47 from M Independent Sawmills in SP, M. Wahau


Wahau in ex
3 9 120
Basuimex
concession
8 Anwar SP 2 GGA concession Independent Sawmills in SP, M. Wahau

8 20 400

9 Ajis SP 1 GGA concession Km Independent Sawmills in SP, M. Wahau


21; Km 47 in ex
Basuimex
6 15 320
concession (in the
direction of Gergaji
Mountain)
10 Wingdyang Dyaklai Km 41 in ex Independent Sawmills in SP, M. Wahau
Basuimex 1 2 60
concession
11 Wungsam Miau Baru Km 41 in ex Independent Sawmills in SP, M. Wahau
Basuimex 1 2 60
concession
TOTAL 45 116 3,830

Source: CIFOR survey, 2004.

Since there are 31 woodworking mills in the Wahau-Kombeng area with the installed production
capacity of 105,000 m3 of sawn timber year (see section 7.2.1 below), in order to feed these mills
there must be about 55 teams active in the area, totaling 580 loggers, 225 chainsaws and
producing 19,100 m3 per month or 210,000 m3 per year.

52
7.3. Illegalities associated with wood-processing industries in the
northern part of East Kutai

The woodworking sector in East Kutai is mainly comprised of sawmills and moulding mills. Some of
the latter also act as timber kiosks, particularly in Sanggata. East Kutai also possesses one
plywood mill located in Sangkulirang – PT Pacific Bontang Raya – with the installed annual
production capacity of 90,000 m3 per year. Due to the fact that the focus of field investigations was
on the area of Wahau-Kombeng, the sourcing of raw material and production activities of this
plywood mill were not studied as part of this project.

7.3.1. Sawmills and moulding

Official records show that as of 2004 there were 48 woodworking mills in East Kutai, centered
largely in Sanggata and Bengalon (Table 26). However, there are reasons to believe the real
number of active mills is substantially higher. The official district register is not listing the largest
sawn timber and moulding producer in East Kutai – PT Putra Bengalon Wood10. In addition, the
Forestry and Trade-Industry Offices in Sanggata seem to be aware of only 1 sawmill in Kombeng
and none in Wahau. In fact, there are 31 woodworking mills active in the Wahau-Kombeng area
(see Appendix 10).

Provincial forestry sources estimate this mill’s annual production capacity at up to 70,000 m3 of sawn timber and
10

moulding.

53
Table 26. The official record of sawn timber and moulding mills in East Kutai in 2004
Installed
Type of capacity
No Company Owner/manager Location Established industry (m3/year)
1 CV. Nusantara Comelius Rantelangi Sangkulirang 14-Sep-02 Sawmill 3,000
2 Kop. Leken Meren Balan Laway Kombeng 4-Sep-02 Sawmill 2,950
3 PT. Sumber Meranti Sakti Soegianto Benggalon 10 Jan 01; 17 OcSawmill 2,500
4 PT. Kalimantan Lestari Hatta Norjali Sangkulirang 17-Oct-02 Sawmill 18,000
5 CV. Bahtera Agung E.A Hairun Sangkulirang 6-May-03 Sawmill 2,500
6 CV. Rimba Mas Plaju Jaubi Syarief Sangkulirang 3-Apr-03 Sawmill 2,500
7 Tanjung Manis Indah Zuldani Sangkulirang 6-May-03 Sawmill 3,000
8 PT. Porodisa Budiman Molek Bengalon Sawmill no official data
9 PT. Pasifik Bintang Jaya Budiman Molek Bengalon Sawmill no official data
10 PT. Putra Bengalon Wood Budiman Molek Bengalon Sawmill no official data
11 PT. Panambangan Drs. Sukamdani Bengalon Sawmill no official data
12 Sawmill Bansaw Angah Udin Bengalon Sawmill no official data
13 Bansaw Zaenal Bengalon Sawmill no official data
14 Meduai Bakti H. Abd. Karim Bengalon Sawmill no official data
15 H. Slamat H.Slamat Bengalon Sawmill no official data
16 Arif Rani Arif / Rani Bengalon Sawmill no official data
17 M. Yunus M. Yunus Bengalon Sawmill no official data
18 Sumber Rejeki Mulia Bahruni Bengalon Sawmill no official data
19 Meubel Aidil Fitriansyah Sangkulirang Sawmill no official data
20 Meubel Agus Sasongko Sangkulirang Sawmill no official data
21 Enggal Enggal Telen Sawmill no official data
22 Syahbudin Syahbudin Telen Sawmill no official data
23 Meubel Fauzi Ma. Bengkal Sawmill no official data
24 PT. Kalimantan Wana Sakti Sangkulirang Sawmill no official data
25 PT. Surya Graha Sakti Sangkulirang Sawmill no official data
26 PT. Hanurata Coy. Ltd Sangkulirang Sawmill no official data
27 UD. Lima-lima Ambo Dalle Sangata 2001 moulding 360
28 Empat Sekawan Suparman Sangata 2000 moulding 1,080
29 Meubel Rukun Jumran Sangata 2002 moulding 360
30 Dwi Tunggal Waridi Sangata 2001 moulding 360
31 Lingga Jaya Moh. Nur Ali Sangata 2001 moulding 360
32 Moulding Sekawan H. Warkasi Sangata moulding 1,080
33 Meubel sukma Jaya Sairoji Sangata moulding 360
34 UD. Basuki Rachmad Sangata moulding 900
35 Andy Moulding Danis Sangata moulding 360
36 Meubel Sangata Mandiri Rais Sahide Sangata moulding 1,080
37 Burhanudin Burhanudin Sangata moulding 360
38 Ray Meubel M. Thamri Akap Sangata moulding 360
39 Teguh Teguh Sangata moulding 360
40 H. Aripin H. Aripin Sangata moulding 24
41 Jaya Raya Sunarto Sangata moulding 540
42 UD. Jaya Usaha Meubel Sri Rahmawati Sangata moulding 540
43 Abadi Sahrani Sangata moulding 1,800
44 A. Fadilah Muchsin Sangata Sawmill 1,800
45 Adi Putra Jaya Antai Sangata moulding 1,440
46 Shaleh Shaleh Sangata Sawmill 1,440
47 Sawmill Yahya Yahya Sangata moulding 1,800
48 Kusuma Meubel Suyatno Sangata moulding no official data
Source: Dinas Perdagangan dan Perindustrian, East Kutai

The officially reported production of sawn timber in 2003 was 58,561 m3 (Table 27). It is interesting
to note, however, that this figure is based on 24 reporting mills only. While it is possible that some
mills were temporarily (or permanently) not active, sawmill sector insiders in East Kutai (the
Wahau-Kombeng area) indicate it is a “standard operational procedure” for many sawmills to
pretend not to be producing in order to avoid unwanted attention as well as formal/informal tax
burden11.

11 Interviews with sawmill operators in Wahau, July-September 2004.

54
Table 27. Sawn timber production in East Kutai, 2003
Month (m3)
No Company Total
Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec
1 Surya Citra Abadi - - - - - - 530 554 - - - - 1,048
2 KNL 322 - - - 1,576 1,582 1,346 1,544 1,522 764 - 548 9,204
3 PO. Ate Jaya - 465 408 - 631 552 694 551 1,182 - 1,073 - 5,556
4 Bahtera Agung 1,026 692 843 810 - - 942 - - - 743 607 5,664
5 Tanjung Manis I - - - - - - - 382 145 331 266 - 1,124
6 Lestari Sejati 1,720 - - 2,087 - - 1,146 - 503 359 - 702 6,517
7 KSU Rahayu L - - - - - 1,834 2,124 748 592 244 668 335 6,544
8 EA. Hairun 463 163 262 - - - - - - - - - 888
9 Adil Makmur - - - - 507 177 - - - - - - 684
10 SMS - - - 772 204 367 467 - 602 - 547 503 3,461
11 Surya Graha Sakti - - - - - - - - - - - - -
12 UD. Harapan Prima 969 416 629 728 620 - 1,758 829 1,728 1,497 1,294 1,909 12,377
13 Leken Meren 669 - - - - 260 50 - - - - - 979
14 CV Nusantara - - 101 144 122 - - - 71 - - - 437
15 PBR - - - - 106 - - - - - - - 106
16 PBW 211 125 - - - 72 140 95 103 - - - 745
17 Mitra Utama S - - - - - - - 382 - 331 266 - 979
18 Rancang Bangun Lestari - - - - 212 - - - - - - - 212
19 Kop Warta Jaya - - 50 - - - - - - - - - 50
20 Wardana - - 376 - - - - - - - - - 376
21 Agus Sumardi - 166 - - - - - - - - - - 166
22 Pmd Pancasila - - - - - - - - 150 298 - - 448
23 CV Kalindo - - - - - - - 104 164 80 159 191 697
24 H. Landang - - - - - 260 - - - - - - 260
TOTAL 5,379 2,027 2,669 4,541 3,978 5,105 9,199 5,189 6,760 3,903 5,016 4,794 58,561

Source: Trade and Industry Office, East Kutai

Out of the total of 31 sawmills in Wahau-Kombeng, a sample of 15 have been studied in detail.
The sample sawmills had a total of 7 bandsaws, 14 circular saws, 83 workers and generated 4,760
m3 of timber per month or 52,360 m3 per year (Table 28). It can be approximated, therefore, that 31
mills located in the Wahau-Kombeng area have about 14 bandsaws, 28 circular saws, labor force
of about 171 people and produce about 105,000 m3 of sawn timber per year. This alone is nearly
double the official figure for the production of sawn timber in the district. At the very least, therefore,
46,439 m3 of annual sawn timber production in East Kutai goes unrecorded. However, the real
figure is likely to be significantly higher as there is at least one other large woodworking center in
East Kutai – in Sebulu – that does not feature in official statistics.

55
Table 28. A sample of 15 sawmills operating in Muara Wahau, East Kutai, 2004
Equipment Raw material Production
No Established Owener Manager Location Sales
Bandsaw Circle Species Form Origin Price/m3 m3/month Price/m3

1 1999 H.Wage Wongso SP 2 1 B, M, K Square logs Purchases from 430,000; 600 500,000;
Wahau any supplier 460,000 600,000;
600,000

2 1999 H.Wage Wongso SP 2 1 K, M, B Logs Purchases from 360,000 600 500,000;


Wahau any supplier 600,000;
600,000
3 2004 Teleah Teleah Dabeq 2 K, M, B, U Square and Purchases from SDA 130
(Dabeq round logs any supplier &
village has logging
head) teams with 15
chainsaws
4 1998 Iksan H. Husin SP 4 1 2 M, K, B, Square logs Purchases from 380,000; 240 500,000;
U any supplier; has 400,000; 600,000;
agreed upon 500,000 800,000
monthly
deliveries
5 1997 Markasi Markasi M. Wahau 1 M, K, U Square logs Purchases from 300,000; 100 450,000;
Nearly all
(Banjar) any supplier; has 400,000 700,000
sawn timber
agreed upon
produced in
monthly
Muara
deliveries
6 Habib Jamaludin SP 2 1 M, K, B Square logs Purchases from 380,000; 600 500,000; Wahau is
Wahau any supplier; has 400,000; 600,000; shipped to
agreed upon 450,000 600,000 Samarinda,
monthly most of the
deliveries time by river.
About half of
7 H. Nurung H. Nurung SP 1 2 M, K, U Square logs Purchases from 380,000; 130 the timber is
any supplier; has 400,000; consumed in
agreed upon 500,000 Samarinda,
monthly while the rest
8 H. Ida Bp. Ida SP 1 1 M, K, U Square logs d li i
Purchases from 300,000; 100 450000; is shipped to
any supplier; has 400,000 700000 Surabaya as
agreed upon well as
monthly abroad to
Malaysia.
9 Kep Hasnan SP 1 1 M, K, U Square logs Purchases from 300,000; 100 450000;
Minor
Sekolah any supplier; has 400,000 700000
amounts of
agreed upon
sawn timber
monthly
are also
10 Jelebug Jelabug Selabing 2 M, K, U d li i
Square logs Purchases from 380,000; 130 transported
any supplier; has 400,000; by truck from
agreed upon 500,000 Muara
monthly Wahau to
11 Yusuf Selabing 2 M, K, U d li i
Square logs Purchases from 380,000; 130 Bengalon
any supplier; has 400,000; (Rp
agreed upon 500,000 150,000/m3)
monthly for shipping
d li i to Surabaya
12 Jalani Mr X Selabing 1 M, K, U Square logs Purchases from 300,000; 100 450000;
(Polsek any supplier; has 400,000 700000
Wahau) agreed upon
monthly
deliveries

13 Habib Bambang SP 2 1 K, M, B Logs Purchases from 360,000 600 500,000;


any supplier 600,000;
600,000
14 (cina Agus SP 2 1 K, M, B, U Square and Purchases from 360,000 600 500,000;
malaysia) (Surabaya) round logs any supplier & 600,000;
has logging 600,000
teams with 15
15 H.Samsi Selabing 1 K, M, B Logs h i
Purchases from 360,000 600 500,000;
(orang any supplier; has 600,000;
wahau) agreed upon 600,000
monthly
deliveries
TOTAL 7 14 4,760

Source: CIFOR survey, 2004. Note: M stands for Meranti, K for Keruing and U for Ulin.

56
The entire output of the woodworking sector in Wahau-Kombeng is shipped to Samarinda. Some of
this timber is subsequently transported to Java. Most of it is shipped to Samarinda by river. An
insignificant amount is transported by trucks to Bengalon on the coast. There are 45 registered
boats in Wahau that are used to transport sawn timber; an equal number reportedly operates
unregistered. There is a queue system for timber boat operators, each subject to the quota of
maximum 3 trips per boat per 2 months. The cost of transporting sawn timber by boat to
Samarinda is Rp 250,000 per m3.

During 2 weeks of monitoring in Wahau in July 2004, 2,445 m3 of sawn timber was shipped by
boats to Samarinda (Table 29). As the water level was low due to dry weather conditions, it is
assumed the river traffic was at the annual low during the period under observation and that it
intensifies with the onset of the rainy season12.

12 This was corroborated by boat operators in Wahau river port (pelabuhan).

57
Table 29. Timber shipments by boat from Wahau to Samarinda, July 2004
Load
Departure
No Name of boat Timber Destination Origins of the shipment
date
species Vol (m3)
1 14-Jul Usaha Bersama K, B 200 Samarinda Sawmill H. Samsi
2 14-Jul Putra Kelinjau K, B 200 Samarinda Sawmill H. Samsi
3 16-Jul Air Bunga I K, B 200 Samarinda Sawmill Wongso Wage
4 17-Jul Putra Diana K, B 200 Samarinda Sawmill H. Habib
5 19-Jul Berkat Usaha 1 B 80 Samarinda Anwar
6 14-Jul Roni Putra A K, B 200 Samarinda Sawmill H. Samsi
7 14-Jul Roni Putra B K, B 200 Samarinda Sawmill H. Samsi
8 14-Jul Air Bunga II K, B 200 Samarinda Sawmill Wongso Wage
9 14-Jul Air Bunga III K, B 200 Samarinda Sawmill Wongso Wage
10 14-Jul Telaga Putra A K, B 210 Samarinda Husin + Wongso (40 m3)
11 19-Jul Tongkang K, B 200 Samarinda Habib
12 15-Jul Berkat Usaha II B 60 Samarinda Anwar
13 15-Jul dinasti K, B 200 Samarinda Habib
14 27-Jul Telaga Putra B K, B, U 95 Samarinda H.samsi
TOTAL 2,445

Source: Survey CIFOR 2003. Note: K stands for Keruing, B for Bangkirai, U for Ulin.

While each year substantial volumes of sawn timber production are not reflected in district
statistics, the movement of sawn timber within and outside of East Kutai is watched closely by the
Police and Military units stationed along the main transportation arteries. The reason for this careful
monitoring is “passage fees” extracted at several strategically located check-points (Table 30). The
105,000 m3 of sawn timber shipped by river each year from Wahau to Samarinda alone adds up to
Rp 3.4 billion in informal tax for the security personnel each year.

Table 30. Passage fee system for sawn timber on the route Wahau-Samarinda
Passage fee
Wahau-Samarinda transit points Location collectors Amount (Rp)
Starting point/Wahau-Kombeng SDC Koramil 75,000
Post 1 M.Wahau Koramil + Polsek 1,000,000
Post 2 Muara Bengkal Koramil + Polsek 400,000
Post 3 Muara Ancalong Koramil + Polsek 1,000,000
Post 4 Senyiur Koramil + Polsek 1,000,000
Post 5 Sebulu Koramil + Polsek 1,000,000
Post 6 Senoni Koramil + Polsek 1,000,000
Post 7 Tenggarong Koramil + Polsek 1,000,000

Source: CIFOR survey 2004

58
8. SUMMARY AND ANALYSIS

Illegal forestry activities are widespread in both extractive as well as processing sectors in Berau
and East Kutai districts. The illegalities can be summarized as follows:

 Logging operations cutting out of block


 Logging companies pretending to be stagnant while in fact they extract timber
 Land-clearing (IPK) permits issued for dubious plantation schemes
 Unlicensed small-scale logging
 Log/sawn timber production is under-reported and shipping documents are illegally altered
 Logging and woodworking enterprises in both districts routinely evade taxation.
 Logging as well as woodworking enterprises engage in tax evasion

Below, the legal forestry activities are juxtaposed with illegal operations in order to examine their
comparative impact on district economy, society/livelihoods and the environment.

8.1. Impact of illegal forest activities on district economy

BERAU DISTRICT

HPH, IPK, HTI operations (revenue gained)

According to the Provincial Finance Office (Dinas Pendapatan Daerah), in 2003 Berau collected
Rp 14.65 billion in PSDH tax revenue on 521,695 m3 of roundwood produced by HPH, IPK and
HTI license holders. Of this amount, 32 percent, or Rp 4.69 billion, entered Berau’s budget while
the rest was divided between other districts, the province of East Kalimantan and the central
government in Jakarta.

In 2003, Berau’s government also generated Rp 1.2 billion from the above volume of timber
through Retribusi Produksi district tax (Rp 2,300 per m3 of logs). In the same year, the district also
received Rp 22 billion in Reforestation Fund (DR). The total value of DR tax on Berau’s roundwood
production in 2003 was about Rp 71 billion. Approximately 40 percent of this amount is divided
between the province and the district of origin. The Rp 22 billion that Berau received in 2003
constitutes about 31% of the total value of DR revenue generated that year. It is anticipated that in
2004, the district will receive Rp 16 billion in DR.

HPH, IPK, HTI operations (revenue lost)

Between 1996 and 2003, HPH, IPK and HTI operations in Berau illegally extracted and shipped
approximately 1,179,876 m3 of logs. Timber industry insiders say the real figure is significantly
higher as production/shipping underreporting is “a standard operational procedure.” Counted at the

59
average domestic price of Rp 500,000 m3 ($ 50) for the last few years, the market value of the logs
taken illegally out of Berau over that period of time is a staggering Rp 590 billion (well over $ 70
million).

In terms of other lost tax revenue on this volume of timber (i.e. PSDH and DR), the numbers are
equally impressive. The 1,179,876 m3 of logs shipped illegally out of Berau between 1996 and
2003 resulted in the loss of approximately Rp 219 billion – Rp 160 billion in reforestation fund (DR)
and Rp 59 billion in PSDH timber royalty.

As already indicated (see Table 2 and Table 11), in 2003 large-scale licensed logging activities in
Berau generated the following output of logs:

Table 31. Production per type of large-scale logging license in Berau, 2003
Type of logging Production (m3)
HPH 120,752
IPK 244,357
HTI 164,582
Total 521,695
Source: Dinas Kehutanan and UPTD Berau

When juxtaposed with the district financial data, these numbers indicate a serious loss of PSDH tax
revenue incurred by the district in 2003. The key figures to illustrate this loss are as follows:
 PSDH collected in Berau in 2003: Rp14.65 billion
 PSDH that should have been collected (521,695 m3 x Rp 50,000): Rp 26.08 billion
 Uncollected PSDH: Rp 11.4 billion (equivalent to 228,711 m3 of untaxed logs)
 Berau’s share of PSDH in 2003: Rp 4.68 billion
 Berau’s share of PSDH if it was fully collected: Rp 8.34 billion
 Berau’s lost share of PSDH in 2003: Rp 3.66 billion

While the collection of PSDH was clearly a problem in 2003, this does not seem to have been the
case with DR, which was duly extracted on the total log production.

For the select few cases of illegal logging activities by HPH, IPK, or IPPK/IPKTM license holders
that have been identified over the last few years, the approximate loss estimate is as follows:

Table 32. Documented HPH/IPK illegal logging cases in Berau, 2000-2004


Company Illegally Year Market value Lost tax Remarks
extracted (Rp) revenue -
volume (m3) PSDH, DR, RP
(Rp)
PT 22,000 2003 13,200,000,000 4,142,600,000 See Table 6
Mahardika
Insan Mulia

PT Karya 2,000 2004 1,200,000,000 376,600,000 See Table 6


Lestari

60
PT Hutan 33,000 2003/2004 19,800,000,000 6,213,900,000 See Table 6
Alam
Kalimantan

PT Karya 40,000 2000/2004 24,000,000,000 7,532,000,000 Timber trade insiders in


Lestari Jaya Berau estimate between
60 and 70 percent of
LKJ's production has
been illegal

PT Bhakti 7,700 2000/2004 4,620,000,000 1,449,910,000 This is a conservative


Praja estimate based on timber
volumes seized by the
Police in 2004 only

PT Meranti 26,448 2003/2004 15,868,800,000 4,980,158,400 This is a conservative


Samarinda estimate based solely on
Kalimantan IPK production target
only (legality of which is
dubious), while intesive
logging is also conducted
out of block
PT Taurus 58,784 2002-2004 35,270,400,000 11,521,664,000 Filed survey revealed
between 2002 and 2004
PT Taurus extracted
about 65,000 m3 of logs.
The legal IPKTM
production target of 6,216
m3 was subtracted from
that
Total 189,932 113,959,200,000 36,216,832,400

Note: DR is $16 per m3 ($1 = Rp 8,500), PSDH is Rp 50,000 per m3; RP stands for a district tax called Retribusi
Produksi and it is Rp 2,300 per m3 of HPH/IPK logs or Rp 10,000 per m3 of IPPK/IPKTM logs.

IPPK/IPKTM operations (revenue gained)

Since the onset of IPPK/IPKTM policy in Berau in 1999, at least 207 small-scale logging permits
have been issued, covering at least 46,969 ha of forest that were to yield nearly 1.6 million m3 of
logs. It is likely that in reality a far greater area is involved because most IPPK/IPKTM permits have
had area and production target additions.

Based on Perda No. 48/2000, which provided the district’s legal framework for small-scale
concession logging, IPPK/IPKTM operations were subject to two types of district taxes: SPK
(Sumbangan Pihak Ketiga, Third Party Contribution) – a one time payment of Rp 200,000 per
hectare of the concession – and RP (Retribusi Produksi, Production Fee) in the amount of Rp
10,000 per m3.

61
Taking into consideration the 2000-2001 period only for which firm IPPK/IPKTM data are available,
the 183 permits issued during that time for 35,573 ha of forest would have generated about Rp 7.1
billion in SPK tax. In addition, the target production of 1,380,697 m3 would have produced Rp 13.8
billion RP tax. In total, it can be estimated that IPPK/IPKTM logging in Berau contributed at least
Rp 20.9 billion to the district’s finances during 2000-2001. Since these concessions operated until
the end of 2003, it is possible than another Rp 10 billion was generated annually in the form of RP
tax in 2002 and 200313.

Research on small concession logging in Berau in 2000 and 2004 has shown that successful
IPPK/IPKTM applications were associated with unofficial payments of Rp 10 million per permit
(Obidzinski and Suramenggala 2000). It can be inferred, therefore, than 207 IPPK/IPKTM permits
issued in Berau between 1999 and 2001 generated about Rp 2.07 billion in informal fees of this
kind.

IPPK/IPKTM operations (revenue lost)

As mentioned earlier, Berau’s branch of the provincial forestry service (UPTD) and Berau’s Bupati
Masjuni have been criticized for exempting IPPK/IPKTM license holders from DR and PSDH taxes
(Kompas 2004). At issue is the wording of District Regulation (Perda) No. 48 of 2000, which is
seen as providing a loophole for district logging enterprises to avoid these key forestry taxes. The
implementation of Perda no. 48/2000 is said to have resulted in the loss of DR-PSDH tax revenue
in the amount of about Rp 88 billion (Kompas 2004).

Small-scale logging (revenue gained)

As indicated in section 6.2.4, small-scale loggers pay Rp 50,000 per approximately 5 m3 of timber
to district authorities (usually Police) for a safe passage. A similar rate is applicable to water-based
transport of timber. Cumulatively, the annual production by small-scale loggers of 350,000-380,000
m3 of logs in Berau generate about Rp 3.5-3.6 billion in unofficial tax income for district officials.

Small-scale logging (revenue lost)

Small scale illegal logging in Berau, between 350,000 m3 and 380,000 m3 of log annually, carries
the following domestic market price tag and tax value:

 Market value: Rp 210-228 billion

 Uncollected DR-PSDH tax: Rp 65.1-70.7 billion

 Uncollected District fee Retribusi Produksi of Rp 2,300 per m3: Rp 0.8-0.9 billion

13 SPK tax is applicable only to the original application permits and not to area or production extensions.

62
Woodworking industries (revenue gained)

According to the official statistics, in 2003 Berau’s sawmill and moulding industry produced 31,028
m3 of timber products. Since 2000, these products are subject to district tax called RP (Retribusi
Pengelolaan) amounting to Rp 10,000 per m3. As a result, in 2003 sawmills and moulding mills in
Berau generated Rp 0.3 billion of Retribusi Pengelolaan tax. A similar amount of Retribusi
Pengelolaan on sawn timber and moulding is likely to be collected in 2004.

There are virtually no financial benefits for Berau stemming from the operations of Kiani Kertas
pulp and paper mill. The company pays symbolic annual fees for the use of water as well as
ground tax (PBB, Pajak Bumi dan Bangunan) that cumulatively average Rp. 0.4 billion.

Woodworking industries (revenue lost)

As shown in section 6.3.1, over the last 12 years (and probably much longer) the officially recorded
export of sawn timber/moulding from Berau has consistently exceeded the reported production
volumes, meaning that production of these products was consistently underreported.

Looking at only a 3-year period between 2000 and 2002, while unreported timber volumes and the
lost RP (Retribusi Pengelolaan) tax revenue do not seem excessive (about 67,000 m3 and Rp 0.67
billion respectively), the market value of the unaccounted for sawn timber is significant (Table 33).
While in East Kalimantan the price of sawn timber is estimated at Rp 760,000 per m3, in major
domestic consumer markets in Java, this value can easily double.

Table 33. Market value and Retribusi Pengelolaan tax losses from undocumented shipments of
sawn timber/moulding in Berau, 2000-2002

Year Sawn timber, Sawn timber, Excess of Market value Uncollected


moulding moulding sawn timber, (Rp) RP district
produced shipped (m3) moulding taxe (Rp)
(m3) shipped (m3)
2000 7,519 28,687 21,168 16,087,680,000 211,680,000
2001 27,057 49,969 22,912 17,413,120,000 229,120,000
2002 29,574 52,507 22,933 17,429,080,000 229,330,000
Total 64,150 131,163 67,013 50,929,880,000 670,130,000

Source: BPS Berau (2000, 2001, 2002) for production and shipping of sawn timber and moulding.

The above numbers become staggering once the real production of sawn timber and moulding in
Berau is considered. The real 2003 production of sawn timber/moulding in Berau, estimated at
219,950 m3 (and expected to be roughly the same in 2004) carries the following market and tax
values:

 Market value: Rp 167.2 billion per annum


 Uncollected Retribusi Pengelolaan: Rp 1.89 billion in 2003 and Rp 1.87 billion in 2004

63
As explained earlier, timber kiosks obtain their raw material from chainsaw operators working in the
proximity of main towns in Berau. Their 2003 production/sales were approximately 18,975 m3. The
same production/sales volume is projected for 2004. Together with 901 m3 annually extracted for
ship-building, the timber felled and processed for timber kiosks generates Rp 0.2 billion per year
in informal tax.

The major economic loss associated with the operations of PT Kiani Kertas pulp and paper mill in
Berau is the fact that the enterprise continues to benefit from a range of excessive privileges. Kiani
Kertas has cost Indonesian state banks (and therefore Indonesian taxpayers) at least $ 300 million
in unpaid bank loans and another $ 100 million in reforestation fund (DR). In addition to soft bank
loans, the mill secured a 10-year holiday on corporate income tax and a permanent waiver on the
payment of import and export duties for all capital goods.

All these privileges, obtained while the former President Suharto was in power, are still in effect. A
considerable part of Kiani’s debt ($ 480 million) was sold by IBRA to Bank Mandiri and a group of
private investors, in one strike erasing a range of questions about the past borrowing and
accounting practices. The continuing corporate income tax holiday and a permanent waiver on
import and export duties for all capital goods mean that Berau is receiving no tax revenue from
Kiani Kertas’ operations.

EAST KUTAI DISTRICT

East Kutai is one of the richest districts in Indonesia. In 2003, its total budget was Rp 828.4 billion.
The majority of its wealth comes from a share in natural gas production, coal mining, oil production
and other mineral exploration royalties. The vast financial resources generated by mining are
augmented by the General Allocation Fund (DAU) and Special Allocation Fund (DAK) dispensed
by the central government.

Locally generated income (PAD) has been relatively insignificant. In 2003, it totaled only Rp 6.3
billion, or less than 1 percent of the total district budget (Dinas Pendapatan Kutai Timur 2003).
Forestry’s contribution to PAD has been minimal. East Kutai’s PAD has two main district tax
categories: Pajak Daerah (district tax) and Retribusi Daerah (district fees), but they do not affect
the forestry sector. PAD includes only one forestry related tax called IHPH (Iuran HPH, or HPH
tax), but it is not being collected. PAD’s “other” category also comprises Provisi Pihak Ketiga tax
(similar to Berau’s SPK – Sumbangan Pihak Ketiga), but in 2003 it generated only Rp 1.6 billion,
nearly all of it from non-forestry enterprises.

Generating vast income from mineral resources, East Kutai seems to consider forestry of little
importance for budgetary purposes. In contrast to other districts in East Kalimantan, the local
government does not impose any district taxes on the production of logs or sawn timber.

64
HPH/IPK (revenues gained)

The PSDH revenue collection in East Kutai has been growing steadily over the last few years,
rising from about Rp 3 billion in 2000 to Rp 17 billion in 200314 (Figure 5). While in the past HPH
concessions were the main sources of this tax revenue, since 2002 IPKs have become the
dominant means of log production and PSDH revenue.

Figure 5. PSDH revenues collected in East Kutai, 2000-2003

18
16
PSDH
14
12
Rp billion

10
8
6
4
2
0
2000 2001 2002 2003

Source: Dinas Pendapatan East Kutai, Sanggata

HPH/IPK (revenues lost)

Despite an impressive growth of PSDH tax revenue over the last four years, there are serious
losses associated with HPH/IPK operations in East Kutai. The disparity between the reported
production and shipping of HPH/IPK roundwood in the district in 2003, amounting to 100,000 m3,
can be viewed as insignificant in this context.

In 2003, PSDH and DR was not collected on a fairly large part of the district’s HPH and IPK log
production15. In 2003, East Kutai District Income Office (Dinas Pendapatan) reported collecting Rp
17.1 billion in PSDH tax. At Rp 50,000/m3, this means that the tax was collected on 341,547 m3 of
logs out of the total HPH/IPK roundwood production of 809,264 m3. This in turn means that more
than half of the production, or 467,717 m3, was not taxed. As a result:

14 East Kutai district is entitled to 32 percent of PSDH annual totals.


15 Or, indeed, they were collected but did not enter the district’s budget.

65
 Nearly Rp 23.4 billion in PSDH and Rp 63.5 billion in DR tax revenue went uncollected,
or were misappropriated
 In 2003, PSDH collected in East Kutai was Rp17.1 billion (district’s share Rp 5.5 billion,
32 percent of total)
 PSDH that should have been collected (809,264 m3 x Rp 50,000): Rp 40.5 billion
(district’s share Rp 13 billion)
 In 2003, DR collected in East Kutai Rp 46.5 billion in DR (districts approximate share Rp
14.5 billion, or 31 percent)16
 DR that should have been collected (809,264 x Rp 136,000): Rp 110 billion (district’s
approximate share Rp 34.1 billion, or 31 percent)
 East Kutai’s lost share of PSDH and DR in 2003: Rp 7.5 billion and Rp 19.6 billion
respectively

Small-scale logging (revenue gained)

As in Berau, small-scale loggers pay Rp 50,000 per approximately 5 m3 of timber (round or square
logs) to Police (Kapolsek) or Military (Koramil) for safe passage to sawmills. This rate applies both
to water and land-based transport. This means that in the Wahau-Kombeng area, the annual
delivery of 210,000 m3 of logs to local mills generate about Rp 2.1 billion in unofficial tax for the
security forces.

Small-scale logging (revenue lost)

Small-scale loggers in Wahau-Kombeng produce at least 210,000 m3 of logs per year, which
means Rp 10.5 billion in uncollected PSDH and Rp 28.6 billion in uncollected DR.

Woodworking industries (revenue gained)

Some government agencies, particularly the Police and the Military, impose informal taxes on sawn
timber transported from the hinterland to Samarinda, Bengalon and Sanggata. Such informal fees
on the Wahau-Samarinda route generate Rp 3.4 billion per year.

Woodworking industries (revenue lost)

Generating nearly all of its income from natural gas, oil and mineral exploration royalties, East
Kutai does not impose any official taxes on woodworking industries.

SUMMARY

Berau District

16 The total PSDH revenue is taken as an indication of the volume of timber subject to taxation in 2003.

66
Illegal logging/forestry activities in Berau are predominantly in the form of HPH and IPK operations
logging out of block, underreporting production and/or manipulating log transport records.
Substantial volumes of timber are annually extracted by small-scale logging teams. There is also a
significant number of unregistered sawmills in the district. Many mills pretend not o be active, while
in fact they operate as usual, manipulating production and/or transport records.

It is clear that over the long term, losses resulting from such practices in Berau outweigh the gains
as the former go into hundreds of billion of Rupiah mainly in uncollected taxes on HPH, IPK, HTI,
IPPK/IPKTM, and sawmill/moulding operations. The comparison between the economic benefits
and the costs associated with all forestry operations in Berau are illustrated below.

Table 34. Revenues gained and lost in Berau’s forestry sector, 2003 (in Rp billion)

Revenue collected Revenue lost


HPH/IPK/HTI
PSDH 14.65 12.15
Retribusi Produksi 1.2 0
DR 71 0
IPPK/IPKTM
DR-PSDH 0 29.3a
Retribusi Produksi 10 0
Small-scale logging teams
Informal tax 3.6 0
DR-SPDH 0 65.1
Retribusi Produksi 0 0.8
Sawmills and moulding
Retribusi Pengelolaan 0.3 1.89
Informal tax 2.03b 0
Timber kiosks and ship building
Informal tax 0.2 0
Pulp and paper
Water tax, PBB tax 0.4 0
TOTAL 103.38 109.24

Note: a This number has been derived by dividing the official figure of lost DR-PSDH of Rp. 88 billion for the period
2000-2003 by three to obtain a yearly average. b This estimate is based on the information that on average each of 37
sawn timber and moulding mills in Berau operates 11 months a year and each has a monthly “informal budget” of Rp 5
million.

67
The key points emerging from the gain/loss analysis in Berau’s forestry sector as of 2003 are as
follows:

 Revenue collected (including informal fees, or bribes) was Rp 103.38 billion

 Without informal fees, the official revenue collected was Rp 97.55 billion

 The informal fees (or bribes) extracted from the forestry sector was
approximately Rp 6.33 billion. However, this is very likely an underestimate as
figures for informal fees from HPH/IPK/HTI operations are not available

 The revenue lost, in the form of uncollected DR, PSDH and RP taxes in the
licensed sector as well as those forfeited in the unlicensed sector, was Rp 109.24
billion. This amount, however, is not literally lost. A good part of it is appropriated
by individuals and government institutions in position to do so

 The lost forestry revenue in 2003 was equal to about a quarter of Berau’s budget
for that year

EAST KUTAI DISTRICT

Similarly to Berau’s case, illegal logging/forestry activities in East Kutai are widespread. They
appear in several forms: 1) IPK and HPH operations logging out of block, underreporting of
production and/or manipulating log transport records; 2) IPK enterprises pretending not to be
active, while in fact they operate as usual; 3) the legal basis for IPK permits in East Kutai is
questionable as Bupati is not allowed (by the central government) to issue such permits any more;
4) IPKs are often issued for dubious plantation schemes; and 6) many sawmills are unregistered
and the reported production is a fraction of the real output.

It is clear that in East Kutai financial/economic losses resulting from illegal activities in the forestry
sector are significant and they far outweigh the gains. In 2003, the losses amounted to at least Rp
126 billion, or nearly 2 times the district’s gains, mainly in uncollected tax revenue on HPH, IPK
and small-scale logging (Table 35).

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Table 35. Revenue collection and loss in the forestry sector in East Kutai, 2003 (in Rp billion)

Revenue collected Revenue lost


HPH/IPK

PSDH 17.1 23.4


DR 46.5a 63.5

Small-scale logging teams

PSDH 0 10.5

DR 0 28.6
Informal tax 2.1 0

Sawmills and moulding


Informal tax 3.4 0

TOTAL 69.1 126

Note: a The amount of DR revenue gained is based on the approximation that about 31 percent of the total DR revenue
generated from 341,547 m3 of logs officially subject to other (i.e. PSDH) taxation was transferred to East Kutai.

The key points emerging from the gain/loss analysis East Kutai’s forestry sector in 2003 are as
follows:

 Revenue collected (including informal fees, or bribes) was Rp 69.1 billion

 Without informal fees, the official revenue was Rp 63.5 billion

 The informal fees (or bribes) extracted from the forestry sector were at least Rp
5.6 billion. This figure is likely a gross underestimate as it is based on informal
taxation on logs and sawn timber in select parts of East Kutai only

 The revenue lost, in the form of uncollected DR, PSDH taxes from licensed and
unlicensed logging operations, was Rp 126 billion. As in Berau, this amount is not
literally lost. A good part of it is appropriated by individuals and government
institutions in position to do so

 The lost forestry revenue is equal to about one-seventh of the total district budget,
which is dominated by the income from mining (oil, natural gas, coal)

69
8.2. Impact of illegal forest activities on livelihoods in Berau and East
Kutai

In the context of livelihood strategies, the main significance of logging and woodworking industries
in Berau and East Kutai is in created employment opportunities.

BERAU DISTRICT

HPH and IPK logging

According to official statistics, in 1999/2000 HPH and IPK operations in Berau supported 1,363
jobs (Dinas Kehutanan Kalimantan Timur 2000:46). Of these, 1,166 were permanent jobs, 32 daily
jobs and 165 output based jobs (borongan). If these employment figures are linked to the
production by HPH and IPK license holders in Berau in 1999/2000 (1,147,072 m3), it means that
each HPH and IPK employee was associated with the production of 841 m3 of logs per year. If this
employee/production ratio is assumed as constant, it is possible to approximate the fluctuation of
HPH/IPK labor over the last few years (Figures 6, 7 and 8).

Figure 6. HPH and IPK employment in Berau, 1999/2000-2003

1,600
Borongan
1,400 Daily
1,200 Permanent

1,000
Jobs

800

600

400

200

0
1999/2000 2001 2002 2003

Source: Dinas Kehutanan Kalimantan Timur 2000

70
Figure 7. HPH-related employment in Berau, 1999/2000-2003

600
Borongan

500 Daily
Permanent
400
Jobs

300

200

100

0
1999/2000 2001 2002 2003

Source: Dinas Kehutanan Kalimantan Timur 2000

Figure 8. IPK-based employment in Berau, 1999/2000-2003

1,200
Borongan

1,000 Daily
Permanent
800
Jobs

600

400

200

0
1999/2000 2001 2002 2003

Source: Dinas Kehutanan Kalimantan Timur 2000

The number of jobs created by the licensed logging sector in Berau has never been great. The
logging jobs peaked at about 1,400 in 2001 and since then they have declined rapidly. The fall in
the number of logging jobs has been caused by two factors: 1) declining number of active HPH
concessionaries and 2) phasing out of IPPK/IPKTM district logging permits. As a result, the
significance of logging-related employment in Berau is small within the framework of the district’s
economy. In 2002, for instance, the total of 893 HPH/IPK jobs constituted only about 2.7 percent of

71
the employment in Berau’s agricultural sector17, or merely 1.5% of the district’s total employment
(BPS Berau 2002).

While the number of logging jobs has been small and is falling, such jobs could still be a useful
source of employment for the rural population. However, their utility is limited by by the fact that
85.5% of logging jobs in Berau are permanent jobs, while only 14.5% is either borongan or daily
output-based employment. The borongan and daily employment are the employment categories
usually accessible to the local people (in situ population, villagers). However, between 1999/2000
and 2003, borongan and daily employment generated by HPH and IPK license holders in Berau
ranged from the high of only 216 jobs (2001) to the low of 67 jobs (2003) only. The majority of
permanent jobs are “skilled jobs”, meaning they are held by the outsiders (town-based population,
immigrants). As a result, HPH/IPK logging is not a significant source of employment for the rural
population in Berau.

HTI plantations

Employment opportunities generated by HTI timber plantations are negligible. As of 2003-2004,


HTI operations in the district reportedly supported about 250-300 jobs annually18.

Small-scale logging teams

In 2003, small-scale logging teams operating in Berau employed around 3,000 people. This is far
more jobs than the number generated either by HPH/IPK logging, HTI plantation operations or
both. The operations of small-scale logging teams have been intensifying in the district over the
last few years. In 2000, it was estimated that such teams hired just over 2,000 loggers, producing
around 200,000 m3 of wood annually (Obidzinski et al 2001). By 2003, the number of jobs linked to
small-scale logging increased to approximately 3,000.

The growth of employment in small-scale logging teams can be attributed to a number of factors:

 Work opportunities in small-scale logging are a welcome alternative (or supplement) to the
nearly non-existent employment in the formal logging sector (HPH, IPK)

 Work arrangements are flexible – i.e. people can work a few months a year, whenever
they have spare time from other tasks or as an alternative income option if other sources
of subsistence (agriculture, trade etc) fail

 Working as a small-scale logger can be financially rewarding if operations run smoothly

 Rising demand for timber within Berau, particularly in urban areas around Tanjung Redeb

17 Agriculture in Berau consists of food crops, plantation estates, fisheries, husbandry and forestry.
18 Interviews with Tanjung Redeb Hutani and Sumalindo Lestari Jaya I staff, April-July 2004.

72
Wood-working industries

When Kiani Kertas pulp and paper mill was opened in Berau in 1997, there were high hopes that
the mill would become a major source of employment for the district’s population. The mill project
did create a lot of jobs during the 4-year construction period (1993-1997), stimulating annual in-
migration of up to 10-20% of the district population (Pemkab Berau 2001:14). Once Kiani Kertas
became operational, the employment available at the mill site settled at around 1,410 workers (385
in production operations, 518 in maintenance and 507 in site services) (Botha 2002:42). While this
is still a substantial pool of jobs, its main limitation is that approximately 70 percent of the
employment (987 jobs) at Kiani Kertas are skilled positions for which Berau residents are unlikely
to qualify (Botha 2002:42). This means the remaining 423 unskilled jobs are the only employment
opportunities Berau residents are likely to obtain per year.

In 2003-2004, the unlicensed woodworking sector – sawmills and moulding mills – annually
employed 393 people. The timber kiosks provided employment for about 124 people. The
construction of wooden ships, boats etc additionally absorbs about 256 people each year in the
district (Table 36).

Table 36. Employment generated by licensed and unlicensed forestry sector in Berau, 2003/2004
Employment
Licensed logging sector
HPH/IPK 434
HTI 250-300
Unlicensed logging sector
Small-scale logging teams 3,000
Licensed woodworking sector
Kiani Kertas pulp and paper mill 1,410 (70 percent are skilled jobs)
Unlicensed woodworking sector
Sawmills, moulding 393
Timber kiosks 124
Ship-building 256
Total licensed forestry sector (logging + 2,094-2,144
woodworking)
Total unlicensed forestry sector (logging + 3,773
woodworking)
Total forestry sector (licensed + unlicensed) 5,867-5,917

The important points emerging from the table above are as follows:

 Employment generated by unlicensed logging teams is over four times the size of licensed
logging

 The licensed woodworking sector’s labor force is twice the size of employment in the
unlicensed woodworking sector, mainly due to the size of Kiani Kertas pulp and paper mill

73
 However, in terms of unskilled jobs, the unlicensed woodworking provides nearly twice as
many jobs as Kiani Kertas

 The unlicensed forestry sector is nearly twice the size of the licensed one, interms of jobs

EAST KUTAI DISTRICT

HPH and IPK logging

According to the provincial statistics, in 1999/2000 HPH and IPK logging operations in East Kutai
generated 2,237 jobs19 (Dinas Kehutanan Kalimantan Timur 2000:46). Of those, 1,084 were
permanent jobs, 570 daily jobs and 583 output based jobs (borongan). If these employment figures
are linked to the production by HPH and IPK license holders in East Kutai in 1999/2000 (339,902
m3), it means that each HPH and IPK employee was associated with the production of 152 m3 per
year. Assuming this employee/production ratio as constant, the HPH/IPK employment dynamics
can be illustrated as follows (Tables 9, 10 and 11).

Figure 9. Logging-based employment (HPH, IPK) in East Kutai, 1999/2000-2003

8,000
Borongan
7,000 Daily
6,000 Permanent

5,000
Jobs

4,000

3,000

2,000

1,000

0
1999/2000 2001 2002 2003

Source: Dinas Kehutanan Kalimantan Timur 2000

19 In 2000, the District of East Kutai did not exist yet and the administration of the province’s forest was still in the
hands of the branches of the provincial forestry service (CDK, Cabang Dinas Kehutanan). The area of today’s East
Kutai District comprised 2 CDK: CDK Sangkulirang and a part of CDK Mahakam Ilir. The logging employment figures
for Mahakam Ilir for 1999/2000 are not available. As a result, the estimate of production/employment ratio (m3/person)
in 1999/2000 for the present-day East Kutai is based on the figures for CDK Sangkulirang only.

74
Figure 10. HPH-related employment in East Kutai, 1999/2000-2003

3500
HPH Borongan
3000 HPH Daily
HPH Permanent
2500

2000
Jobs

1500

1000

500

0
1999/2000 2001 2002 2003

Source: Dinas Kehutanan Kalimantan Timur 2000

Figure 11. IPK-related employment in East Kutai, 1999/2000-2003

4500
IPK Borongan
4000 IPK Daily
3500 IPK Permanent
3000
2500
Jobs

2000
1500
1000
500
0
1999/2000 2001 2002 2003

Source: Dinas Kehutanan Kalimantan Timur 2000

In comparison to Berau, the number of jobs created by licensed logging in East Kutai is significant.
The logging jobs of this kind peaked at over 7,000 jobs in 2002 and stayed well above 5,000 in
2003. HPH employment was strong on its own until the end of 2001. The subsequent decline was
offset by a spectacular growth of IPK jobs, which increased from just over 800 jobs in 2001 to more
than 3,800 in 2002. To a significant degree this growth was fueled by a tendency among HPH
concessionaries to switch to much less legally-demanding IPK operations. The decline of HPHs
and the growth of IPK logging jobs is associated with the emphasis East Kutai is placing on the
development of agro-business/agro-industry sector (mainly oil palm), for which it has allocated 1.3

75
million ha of land. However, forest clearing cannot be sustained in a long term. As a result, IPK
employment (and logging employment as a whole) is certain to decline in East Kutai over the next
few years.

Within the framework of the district’s economy, logging related employment in East Kutai is not
very significant but much more so than in Berau. In 2002, for instance, the total of just over 7,000
HPH/IPK jobs constituted about 6.5% of the district’s total employment (BPS Kutai Timur 2002). As
important as the numbers is the structure of logging-related employment in East Kutai. On average,
about 51.5 percent of all jobs are borongan or daily output-based employment. As borongan and
daily employment categories are most accessible to the locals, in 2003 approximately 2,600
HPH/IPK jobs were available to the rural East Kutai residents. This is a significant source of
employment for the rural population in the district.

Small-scale logging

The study in Wahau-Kombeng has shown there are at least 580 people (55 teams) working on the
annual basis in small-scale logging in the area. These teams feed the local woodworking sector,
which is comprised of 31 sawn timber/moulding mills. Since the official district records enumerate
47 other mills in the district (plus the fact that the sawmill centers of Sebulu and
Bengalon/Sangkulirang have at least as many unregistered sawmills each as Wahau-Kombeng),
there could be well in excess of 2,000 people working in small-scale logging teams throughout the
district on annual basis.

Woodworking sector (licenced and unlicenced)

The woodworking sector in Wahau-Kombeng annually employs about 171 workers who produce
105,000 m3 of sawn timber and moulding. Based on this production/employment relationship (615
m3 per person per year), it could be approximated that the reported sawn timber production of
58,561 m3 in 2003 would generate about 95 jobs annually. It may be that the intensity of production
in Wahau is higher than elsewhere in East Kutai and therefore it may not be representative of the
district as a whole. However, the 2003 sawn timber production figures for East Kutai come from 24
reporting mills only. Since the official records enumerate 47 mills in the districts other than those in
Wahau-Kombeng, as well as the fact that the sawmill centers of Sebulu and
Bengalon/Sangkulirang have at least as many unregistered sawmills each as Wahau-Kombeng,
there may be well over 100 woodworking mills operating in East Kutai, employing 600-700 people.

76
Table 36. Employment generated by licensed and unlicensed forestry sector in East Kutai by
category, 2003/2004
Employment
Licensed logging sector
HPH/IPK 5,319a
Unlicensed logging sector
Small-scale logging teams 2,000b
Licensed woodworking sector
Reporting woodworking mills 95
Unlicensed woodworking sector
Other sawmills, moulding 505-605c
Total licensed forestry sector (logging + woodworking) 5,414
Total unlicensed forestry sector (logging + woodworking) 2,505-2,605
Total forestry sector (licensed + unlicensed) 7,919-8,019
Source: CIFOR survey 2004. Note: a About 74 percent of these jobs (or 3,953) were generated by IPKs; b This is an
extrapolation from the situation in the Wahau-Kombeng area where 55 logging teams (about 550 loggers) annually
supply 210,000 m3 of logs to 31 sawmills that produce 105,000 m3 of wood products; b This is an extrapolation from the
situation in the Wahau-Kombeng area, where 31 sawmills employ 171 people and annually produce 105,000 m3 of
wood products (production/employment ratio: 615 m3/person/year).

The important points emerging from the table above are as follows:

 Licensed logging operations (HPH/IPK) are by far the most dominant source of
employment in the forestry sector

 About 74 percent (or 3,953) of licensed logging jobs come from IPK enterprises. Since
these are short-term land-clearing operations, this pool of jobs is likely to be available for a
few years only

 HPH jobs (1,366) are significantly outnumbered by unlicensed logging operations

 The licensed (reporting) woodworking sector’s labor force is very small – 95 jobs

 The not-reporting (illegal) woodworking sector is 5-6 times the size of the reporting one

 The licensed forestry sector is more than twice the size of the unlicensed one, again
primarily due to disproportionately large number of short-term IPK jobs

8.3. Impact of illegal logging on environment in both districts

BERAU DISTRICT

The impact of both licensed and unlicensed forestry activities is having a negative impact on
Berau’s forests, soil and water resources, although opinions are divided about the severity of the
problem.

77
In 2001-2002, the EU’s BFMP (Berau Forest Management Project) project estimated the amount of
forest lost in the district between 1997 and 2000 was approximately 127,500 ha, translating into the
annual deforestation rate of 42,500 ha (Steenis 2001; Mantel et al 2002). The significance of this
figure can be considered from the point of view of the history of forest cover change in Berau, or by
placing it in the context of the current forest cover in the district. If viewed historically, there is
indeed a cause for concern. Prior to 1997, it took about 27 years (1970-1997) for 127,500 ha of
forest to be deforested. After 1997, the same area was lost only within 3 years, pointing to a
significant acceleration in deforestation rate in the district (Figure 12).

Figure 12. Deforestation in Berau 1997-2000

Source: www.bfmp.or.id

If viewed against the background of the overall forest cover in Berau, officially estimated at 2.2
million ha in 2002 (BPS Berau 2002), the reported 42,500 ha in annual forest loss amounts to
approximately 1.91 percent in annual deforestation rate. A more recent study in the concession
area of PT Hutan Sanggam Labanan Lestari (formerly a part of Inhutani I) reported that between
1996 and 2000 deforestation rate in this part of Berau was about 1.71 percent per year (Dahal et al
2002; Yijun and Atmopawiro 2003).

According to the official forestry statistics, large-scale concession logging operations in Berau
extract about 22 m3 of timber per ha (Dinas Kehutanan Kalimantan Timur 2000). This means the

78
total 2003 log production in the district (521,965 m3) would have been generated from at least
23,713 ha of forest. As small-scale logging teams extract only about 10 m3 of timber per ha, their
2003 production (350,000-380,000 m3) would have come from between 35,000 and 38,000 ha of
forest. Cumulatively, it could be assumed with a reasonable degree of confidence that between
58,713 and 61,713 ha of forest in Berau is annually affected by logging, both licenced and
unlicenced. This area constitutes between 2.7 and 2.8 percent of the total forest cover in the
district.

While well below the dangerous levels of deforestation in other parts of East Kalimantan or
Sumatra, what makes this figure potentially dangerous is in clustering of such logging activities.
Concentrations of small-scale illegal logging activities along passable roads, particularly in lower
parts of the Segah watershed, Berau River and Talisayan seaboard, result in locally high pressure
on the forest. This contributes to soil erosion, river sedimentation and the risk of flooding (Mantel
2001:11). This is particularly the case in the middle and lower parts of the Segah (and to a lesser
extent Kelay) watersheds.

The sedimentation of the Segah and Berau Rivers, key to Berau’s water-based transportation and
trade, has been increasing over the last several years as well20. In the dry season, the district’s port
often becomes inaccessible to larger vessels. With the planned development of a new port in
Berau, dredging of the main river corridor from Tanjung Redeb to Berau’s delta will become a
regular necessity.

EAST KUTAI DISTRICT

East Kutai district is facing far more serious deforestation and forest degradation problems than
Berau. As of 2002, there were at least 890,403 ha of degraded forest in the district, of which
690,000 ha were located in the Production and Limited Production Forest and 200,000 ha in
conservation areas (BPS Kutai Timur 2002).

The man-made forest fires have historically been a major force behind destruction and/or
degradation of the forest in East Kutai. The 1982/83 fires caused mainly by negligent HPH
operations razed hundreds of thousands of hectares in parts of the Mahakam basin as well as on
the coast. Although not nearly as extensive, the 1997/98 forest fires also consumed large areas of
the forest. In addition to the Mahakam basin, among particularly negatively affected was the
Wahau area in the western part of East Kutai. Vast tracts of HTI plantations in Wahau (PT Kiani
Lestari, PT Barito Pacific, PT Sumalindo) were consumed by flames as well as large areas of
adjacent natural forest. To this day, the Wahau area as well as the region between Wahau and
Bengalon on the coast is covered by hundreds of thousands of hectares of burnt stumps.

The largest conservation area in East Kutai, the Kutai National Park, is steadily deteriorating.
Established in the early 1990s, the park’s original area was 198,628 ha. In 2000, only about 62,205
ha still had undamaged forest cover (Kompas 2004b). The park has been destroyed by a
combination of factors, including: migrant settlements, HPH logging, HTI development, small-scale
logging and exploration for coal deposits. As the Kutai National Park is nearing the state of

20 Interviews with district port authorities in Tanjung Redeb, May-September 2004.

79
destruction, district officials (Bupati) have been considering writing off the remaining 50,000-60,000
ha and focusing conservation efforts elsewhere (Kompas 2005).

The other factor behind the forest loss and forest degradation in East Kutai is land clearing by IPK
enterprises. The expansion of IPK logging over last few years is directly related to East Kutai’s
plans to become the center of agro-business and agro-industry in East Kalimantan. To accomplish
this, the district authorities plan to clear 1.3 million ha of land/forest for large-scale plantations,
mainly oil palm (Kompas 2004a). As a result, IPK licenses are continuing to be issued by district
authorities (even though the central government regulations prohibit this) and the allocated forest
areas to be cleared are large.

East Kutai’s forest is also threatened by HPH operations. A prime example of this is the activities of
PT Essam Timber. In 1992, PT Essam Timber, a subsidiary of the Kalimanis Group, was granted a
350,000 ha HPH concession that borders with East Kutai, but is located in the southern part of
Malinau District. The only feasible way to access the concession and extract timber was to link it by
road to Muara Wahau in East Kutai. Unfortunately, Essam’s concession was separated from
Wahau by the extensive Belayan-Klinjau-Telen protection forest. Without much trouble, however,
the company was given a special permission by the provincial and national forestry authorities to
construct a corridor road through the protection forest.

While the road link permit might be a product of the New Order forestry politics, the road was
completed in 2000 (well into the reformasi and decentralization period) and it is surprising how little
attention and/or external scrutiny this project has attracted. The Essam road is nothing short of a
mega project and it has serious environmental implications. The company worked for 5 years to
complete the 200 km corridor road. The road cuts through one of the last (and largest) pristine
areas of sub-mountaine and mountaine forest in East Kutai (and East Kalimantan as a whole). In
some parts it reaches the elevation of over 2,100 meters above the sea level. The concession is
currently stagnant but by constructing the road it has opened this fragile region to intrusion by
commercial NTFP (gaharu, gall stone) collectors, gold miners, bushmeat hunters etc. Since
Essam’s HPH concession has been non-active for over 2 years now, technically its license
could/should be withdrawn. As this is unlikely to happen, the activities of PT Essam Timber should
be closely watched to monitor the risks this company posses to this vast and fragile region.

8.4. Factors facilitating illegal forest activities in Berau and East Kutai
and how to mitigate them

The main driving force behind illegal forest activities (logging, woodworking) in Berau and
East Kutai is their economic significance as a source of enormous rents – well over Rp 100
billion annually in each district. This huge pool of money is an important source for personal
enrichment, as well as institutional budgetary augmentation, for various district government
institutions, private companies and communities. This renders forestry a gold mine for rent-
seekers, an unbeatable opportunity for quick enrichment for those who can take advantage of it.

The vast riches available from illegal forest activities in Berau and East Kutai cause competition
and conflict among the key players seeking to benefit from them – e.g. District/Province Police,
District/Province UPTD, District Forestry Bureau and other institutions. Constantly maneuvering to

80
maximize their respective shares, these parties engage in shifting alliances to undermine the
opponent(s) in whichever way possible. The scramble for rents from illegal forest activities
hampers the cooperation between different government institutions in Berau and East Kutai and
fundamentally undermines forest governance in both districts.

From the livelihoods perspective, illegal forestry sector (logging and woodworking) is an
important source of employment in both districts. The unlicensed logging by small-scale
logging teams in Berau is nearly four times the size of licensed logging; unlicensed woodworking
provides nearly two times as many unskilled jobs as the licensed one. Overall, the unlicensed
forestry sector in Berau is nearly two times the size of the licensed one. Similarly, in East Kutai the
unlicensed forestry sector is an important provider of jobs in the rural parts of the district. The
employment generated by illegal forest activities (in the addition to economic rents) is a major
obstacle preventing these illegalities from being seriously tackled by the law enforcement
authorities.

Environmentally, illegal forest activities are posing a serious threat to forest resources in
both districts, but little as yet is being done to contain it. In Berau, deforestation is understood
as a potential problem, but there is little urgency to do anything (unless forest fires, flooding, soils
erosion and river sedimentation take a dramatic turn for worse), as Berau’s forests are still
generally perceived to be in comparatively good condition. In East Kutai deforestation and forest
degradation are far more severe, but there is a sense in the district that not much can be done but
write off the already damaged or degraded forest areas and focus on agro-development and
conservation in the remaining remote forest areas.

The findings of this project indicate that in order to counter the illegal logging problem in both
districts, a concerted effort on a range of fronts is necessary to even the disparity between the
benefits of illegal forestry activities and costs/risks associated with them (including stricter
monitoring, prevention and enforcement measures by the security apparatus and judicial system).
However, such measures alone are unlikely to succeed because the benefits from illegal forestry
activities, vast rents generated through misappropriation, under-collecting or non-collecting
of the official forestry tax revenue, far outweigh the risks (applicable legal sanctions) or other
costs (environment).

In order to narrow the gap between the costs and benefits of illegal forest activities in both districts,
the official detection, prevention and suppression measures need to be complemented by a range
of other initiatives pursued simultaneously:

1) Maintain the spotlight on a difficult, yet critical, issue of restructuring the enormous
overcapacity of Indonesia’s woodworking industries which drives the insatiable demand for
logs
2) Operationalize bilateral agreements between Indonesia and timber importing countries to
eliminate illegal timber trade
3) Generate incentives for Indonesian timber producers to adhere to the legal standard
through tenure security and certification schemes
4) Help synchronize the forestry legal framework and strengthen tenure security for local
communities

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5) Support grass-root movements to pressure for greater accountability and
transparency in the district forestry sector.

Making the on-going detection, prevention and suppression operations by the government’s law
enforcement agencies work in tandem with these additional initiatives and the grass-root pressure
factor would result in a more potent tool with which to limit illegal logging and other illegal forest
activities in both districts.

82
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APPENDIX 1
Administrative map of East Kalimantan Province

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APPENDIX 2
Berau District

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APPENDIX 3

Forest concession companies in Berau and East Kutai

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APPENDIX 4

Overlap between forestry and mining opetrations in Berau

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APPENDIX 5

Talisayan sub-district

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APPENDIX 6

PT Karya Lestari Jaya

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APPENDIX 7

PT Berau Timber

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APPENDIX 8

PT MSK Timber

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APPENDIX 9

PT Taurus

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APPENDIX 10

Berau and the northern part of East Kutai districts

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