Forest Policy and Economics xxx (2011) xxx–xxx

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Forest Policy and Economics

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An overview of forest and land allocation policies in Indonesia: Is the currentframework sufficient to meet the needs of REDD+?

Maria Brockhaus a,⁎, Krystof Obidzinski a, Ahmad Dermawan a, Yves Laumonier a,b, Cecilia Luttrell a

a Center for International Forestry Research (CIFOR), Bogor, Indonesiab Center International for Research on Agronomy and Development (CIRAD), Montpellier, France

⁎ Corresponding author at: CIFOR, Forests & GovernSitu Gede, Bogor Barat 16115, Indonesia. Tel.: +62 25186

E-mail addresses: m.brockhaus@cgiar.org (M. Brockh(K. Obidzinski), a.dermawan@cgiar.org (A. Dermawan),(Y. Laumonier), c.luttrell@cgiar.org (C. Luttrell).

1389-9341/$ – see front matter © 2011 Elsevier B.V. Alldoi:10.1016/j.forpol.2011.09.004

Please cite this article as: Brockhaus, M., etficient to meet the needs of REDD+? Fores

a b s t r a c t

a r t i c l e i n f o

Article history:Received 29 November 2010Received in revised form 27 July 2011Accepted 2 September 2011Available online xxxx

Keywords:REDD+IndonesiaForestLand allocationPolitical economy

The global community is negotiating an international REDD+ mechanism, and recent multilateral and bilateralarrangements indicate Indonesia may receive a significant share of financial resources attached to thismechanism. Thesefinancial incentivesmay potentially alter the country's economic landscape. However, currentforest and land allocation policies and politics support economic activities that promote the exploitation of forestassets. More recently, global needs for energy and food have increased pressure on forest land. The REDD+mechanism is designed to reverse this situation and create opportunities for necessary reforms both insideand outside the forestry sector. In this paper, we take a political economy perspective to analyze Indonesia'spolicies on the allocation of forest land (kawasan hutan) and, related to this, assess the changes in forest landallocation that are needed to enable REDD+ to compete with other sectors. This paper shows that there arenumerous challenges to create a “space” for REDD+, many of which are rooted in the political economy offorests that shapes the nature and process of the land allocation system. The questions of where, on whichtype of forest land, at what scale and based on which procedures remain key for REDD+ and its capabilityto compete with other objectives within the current forest land allocation framework.

ance Programme, Jalan CIFOR,22622; fax:+62 2518622100.aus), k.obidzinski@cgiar.orgyves.laumonier@cirad.fr

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al., An overview of forest and land allocationt Policy and Economics (2011), doi:10.1016/j

© 2011 Elsevier B.V. All rights reserved.

1. Introduction

The global community is negotiating an international REDD+mechanism, and recent multilateral and bilateral arrangements indi-cate Indonesia may receive a significant share of financial resourcesattached to this mechanism. About 60% of Indonesia's current emis-sions come from deforestation, degradation and peatland conversion(Boer et al., 2009). In September 2009, the President of Indonesiastated that Indonesia plans, by 2020, to voluntarily reduce emissionsby 26% on its own or by 41% with international support (REDD-I,2009), with 14% of all emission reductions to be achieved via the for-estry sector (Kompas, 2009; Antara, 2010).

The Letter of Intent (LOI) of May 2010, between Indonesia andNorway for the transfer of US $1 billion in funding, seeks to set up abilateral arrangement to contribute to significant reductions in green-house gas emissions from deforestation, forest degradation and peat-land conversion. As part of the LOI, in May 2011 the Indonesiangovernment announced a two-year moratorium on the allocation ofnew concessions on forest land, and highlighting which areas would

beplacedunder themoratorium. The implementation of themoratoriumwill focus on conserving peatland and primary forests, while other forestareas will remain open to timber and plantation investments. It will notaffect existing permits. The forest concession moratorium and ongoingdebates on a REDD+ financing mechanism represent a new directionin Indonesia's political economy of forests, which currently promotesthe transformation of forest assets, often at the expense of local rightsand livelihoods. However, given the limited size of the forest estateplaced under the moratorium and its temporary nature, it is unclearwhat role will forests ultimately play in reducing Indonesia's greenhousegas emissions.

An effective mechanism to reduce emissions from deforestationwould involve activities such as setting aside forest to reduce carbonemissions and focusing economic activities on non-forest land. As asupplement to the ongoing debate about the “real” opportunitycosts for these different activities (see, for example, Schwarz (2010)on Indonesia and Gregersen et al. (2010) for a general critique ofthe concept), this paper focuses on the actors, the institutional settingsand development pathways in which land allocation occurs and thusthe political economy space in which REDD+ can emerge. Thispaper shows that there are numerous challenges to creating such a“space” for REDD+ in Indonesia, many of which are rooted in boththe nature and the process of the forest land allocation system.We employ a political economy approach and present a historicaloverview of forest land allocation policies, forest cover and use, thedifferent actors involved during different phases, and the resulting

policies in Indonesia: Is the current framework suf-.forpol.2011.09.004

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conflicts between agents, their objectives, and existing norms. Wethen discuss current forest land allocation and point to areas wherechallenges for realizing REDD+ emerge. We draw on a review ofrelevant policies, research documents and stakeholder interviewsas the sources of information for this analysis.

2. A political economy lens to understand land allocation andREDD+ in Indonesia

Classical economic theory regards governments as rather technocraticbodies that identify and implement in a rational way appropriate policiesto generate and allocate rents or respond to market failures. More recentpolitical economy analyses focus on decision making that allows for anincorporation of the social, historical, economic and political con-text in which policies and policy change emerge (Besley, 2004; Adamand Dercon, 2009). Particularly in the context of natural resource-based rent distribution and deforestation of tropical forests, literatureindicates that decisionmaking cannot be explained purely by economicmodels and rational choice, but requires the consideration of factorsthat explain actors' decision making behavior beyond formal Weberianhierarchies ormarkets (McCarthy and Tacconi, 2011; AdamandDercon,2009; Deacon and Mueller, 2006; Keeley and Scoones, 1999).

In the case of Indonesia, the third largest tropical forest country,discussions on deforestation and forest degradation in Indonesia areinseparable from Indonesia's political economic context. Reducingemissions from deforestation and forest degradation (REDD) as a con-cept was for the first time proposed during the COP 11 in Montreal.

Fig. 1. The emergence of REDD+ in

Please cite this article as: Brockhaus, M., et al., An overview of forest andficient to meet the needs of REDD+? Forest Policy and Economics (201

The submission was led by a group of countries, namely Papua NewGuinea and Costa Rica. The main idea of the scheme was to providepositive financial incentives to countries that would reduce emissionsthrough avoided deforestation (and later degradation as well, movingfrom RED to REDD), and compensate these countries based on theirperformance via carbon credits. In the following COPs, the requiredglobal and national institutional architecture and financing mecha-nisms remain even after COP 16 in Cancun rather unclear.

In Indonesia, REDD+ has received strong commitment by the Presi-dent and a number of political decisions have been made for the designof REDD+(Fig. 1). However, recent studies indicate that REDD+requiresmore than business as usual strategies and plantation programs (Verchotet al., 2010), and lessons have to be learned from former (failed) reformefforts in the forest sector (Barr et al., 2010).

Despite the political will as expressed by the President, and althoughthe discourses around the issues of both forest conservation and eco-nomic development have dominated the public REDD+debate in Indo-nesia during the past few years (Cronin and Santoso, 2010), the privatesector has been less supportive of the conservation-focused LOI andmoratorium. Representatives of oil palm plantations, the pulpwood in-dustry and others from the private sector have expressed concern aboutthe intended moratorium. They claim it would affect their viabilityand hence negatively affect government tax revenues, job creation,welfare of the labor force and infrastructure development (Azly, 2010;InfoSawit, 2010). Concerns over economic restrictions from this LOIhave resulted in increasing uncertainty in the provinces despite theirinitial interest in being the testing ground for this initiative. The

Indonesia (stated June 2011).

land allocation policies in Indonesia: Is the current framework suf-1), doi:10.1016/j.forpol.2011.09.004

Table 1Forest cover in Indonesia by forest function between 1982 and 2009.Sources: MoF/FAO (1990) and MoF (2009).

Forest cover inmillions of hectares

1982 2009

Conservation forest 14.8 15.2Protection forest 26.0 23.0Limited production forest 24.6 18.8Production forest 24.9 22.1Conversion forest 22.8 11.0Total 113.1 90.1

3M. Brockhaus et al. / Forest Policy and Economics xxx (2011) xxx–xxx

lobbying surrounding these concerns has led to a progressive dilu-tion of the moratorium objectives (Simamora, 2010; Greenpeace,2011; Lawrence, 2011).

From the Ministry of Forestry's perspective, the definition andlocation of forest land are regulated by norms established andbuilt around functional categories including “production”, “protection”and “conservation”. These categories determine the purpose of forestland and, as such, where REDD+ can take place. However, policiesfor forest land allocation are heavily affected by interests from othersectors, with growing and competing land demands for food, biofueland pulpwood. According to Agrawal et al. (2008), commenting ona global trend, such extrasectoral demands pose severe challengesto effective forest governance in general, beyond the scope of currentwork on REDD+. In the case of Indonesia, the entrenchment of vestedinterests affecting forest governance is predominantly related to oilpalm and to industrial plantations for pulp and paper (Hunt, 2010).

Indonesian forests and the land on which they grow have beensubject to strong vested interests ever since the forests became avaluable economic resource in the late 1960s. The global demandfor tropical logs and subsequently for plywood and sawn timbertransformed Indonesia's hinterland, handing it over to the control ofthe Ministry of Forestry (MoF). By early 1980s, about 70% of totalland area in Indonesia is under MoF control. Between 1967 and1982, raw logs for export to Japan were the main product. Between1982 and the early 1990s, the focus of the forest policies and economicinterests shifted to expanding downstream processing industries forplywood and sawn timber to enhance the domestic content. In mid1990s, the government forestry policy increasingly focused onthe pulp and paper sector (Barr, 2001; Brown, 1999). This processcontinued in the post-Suharto democratic Indonesia. However, thedemocratic nature of the Indonesian state and associated reformshas never challenged the “entrenched economic oligarchy” and“collusive democracy” pervading all levels of the government andindustry (Brown, 1999; Slater, 2004; Gellert, 2009, 2010). A HarvardKennedy School study (2010) suggests that the economic oligarchyhas more or less survived the decentralization and democratizationperiods. The players in the forestry sector have diversified theiralliances and the “monopoly, uncompetitive behavior and rent seeking”continues, perhaps taking new forms but remaining central to Indonesia'spolitical economy (Harvard Kennedy School, 2010).

The Indonesian land allocation arena and its related decisionmakingprocesses is no exception to this, and specific elements are prevalent:i) powerful, politically connected actors and their interests (governmentalactors, business, international bodies), ii) institutions (understood as rulesof the game, formal and informally shaping regulations, organizations aswell as expectations) and their historical evolution, and iii) structuressuch as the economic and political system or the introduction of newvertical and horizontal trade relations.

By highlighting and discussing these elements in the following sec-tions, we will argue in this paper that the political will to allocate landfor, and the design and implementation of REDD+ as a national,performance-based incentive mechanisms to avoid deforestation anddegradation in Indonesia is shaped by the current constellation of i) theinterests in and around forest land, ii) theway these interests are enabledby the government, and iii) the discourses and paradigms that emerge tojustify the use of forests and allocation of forest land in one way or theother.

3. Historical overview of forest land allocation in Indonesia, forestcover and use: actors, interests, regulations and their implicationsfor REDD+

The history of land use, planning and allocation in Indonesia is com-plex and shows different trajectories before and after Independence.The legal framework is determined by the Indonesian Constitution of1945 (Article 33), which stipulates that land, water, air and the natural

Please cite this article as: Brockhaus, M., et al., An overview of forest andficient to meet the needs of REDD+? Forest Policy and Economics (201

riches contained therein shall be under the control of the state, and usedfor the maximum well-being of the people. Other components of thegeneral land allocation framework are the Basic Agrarian Law(Law No. 5/1960), the Basic Forestry Law (Law No. 5/1967) andthe legislation surrounding spatial planning with a basic frameworkas outlined in Law No. 24/1992. In this section, we focus on forestland, and examine the institutional and economic pathways takenand incentivized in the allocation process.

3.1. Forest land categories and their function

The present forest estate has its origin during the colonial erawhen the Dutch designated forest reserves throughout the region.With the Basic Forestry Law No. 5/1967, the government reiteratedits right to designate forest areas, declaring almost three-quarters ofIndonesia's land area as forest. At the same time, Indonesia waspromoting forest exploitation as a major source of income to balancedeficits in the budget, which has had tremendous influence on theway forest land use planning issues have been addressed. In 1982,the Ministry of Home Affairs requested that the Ministry of Forestry(MoF) applies Consensus-Based Forest Land Use Planning (Tata GunaHutan Kesepakatan; TGHK) to establish the forest estate and designateits use. In 1983, the first TGHK mapping program classified forest land(kawasan hutan) by functions: (1) protection forest for watershedprotection; (2) conservation forest for protected areas; (3) limitedproduction forest, where logging was to be accompanied by measuresto reduce impact on soil erosion; (4) production forest for commerciallogging; and (5) conversion forest for conversion of degraded productionforest to agriculture or other uses.

Since 1980, forest cover in Indonesia has changed considerably(see Laumonier et al. (2010) for Sumatra and UNEP/GRID-Arendal(2007) for Borneo). Official figures for forest cover between 1982and 2009 are given in Table 1.

Despite the decline in forest cover, there has been little correspondingdecrease in the extent of landwithin the forest estate (kawasan hutan)—the latestMoF statistics show the size of forest area about 132 million ha,compared to 144 million ha in 1980s (Ministry of Forestry, 2010). TheMoF asserts the original boundaries of the forest estate remainunchanged and that the area within them has to be rehabilitated usingreforestation programs. Consequently, the MoF maintains some of theterritory under its jurisdiction as forest land without forests.

3.2. Land allocation processes:multiple agents,multiple scales andmultiplemaps

Allocation of land is regulated by norms established by the Minis-try of Forestry and National Development Planning Board. The Min-istries of Agriculture, Public Works, Energy and Mining, as well asthe land agencies and decentralized governments and authoritieshave to refer to them. However, the outcome will vary dependingon the norm, the agency and administrative level, and the purpose.In addition, the allocation process by which forest land is assigned to

land allocation policies in Indonesia: Is the current framework suf-1), doi:10.1016/j.forpol.2011.09.004

Table 2Proposed governance actions for REDD+ currently tasked to 10 authorities.Source: Presentation of Heru Prasetyo, the secretary of Indonesian REDD+ Task Force.Suspension of New Licenses, REDD+ Strategy and Other Policy Matters. June 23, 2011.REDD+ Exchange, Oslo, Norway.

REDDaction

Description Examples of potentialactions

▪ UKP4 ▪Monitoring ▪ Monitor theimplementation

▪ Establish anintegrated monitoringandreportingmechanism involvingnational and sub-national governmententities

▪ Report the results tothe President

▪ REDD+ TaskForce

▪Monitoring ▪ Monitor theimplementation andreport the results tothe President

▪ Establish anintegrated monitoringand reportingmechanism involvingnational and sub-national governmententities

Participate in periodicrevisions on forestcover and peat landthematic map andintegration into spatialplan

▪ Ministry ofForestry

▪ Suspendlicensesandimprovegovernance

▪ Suspend granting oflicenses

▪ Delay granting oflicenses according toscope

▪ Refine forestgovernance

▪ Establish monitoringteam and system ofsuspension audit

▪ Improve theeffectiveness of criticalland management

▪ Review existinggovernance policiesand enforce

▪ Develop indicativesuspension map

▪ Open public access formaps

▪ Participate in periodicrevisions on forestcover and peat landthematic map

▪ Design, syndicate, andimplement critical landprograms

▪ Ministry ofEnvironment

▪ Improvegovernance

▪ Improve forest andpeatland governancethrough AMDAL (EIA)

▪ Review existingAMDAL policy▪ Monitor and enforceuse of AMDAL inexisting licenses andfor granting of newlicenses on secondaryforest

▪ Ministry ofHome Affairs

▪ Coaching ▪ Conduct coaching andsupervision onGovernors andRegent/Mayor inimplementing thisPresidential Instruction

▪ Identify need, designand implementcoaching programs▪ Support stakeholderconsultations

▪ BPN (LandAgency)

▪ Suspendlicenses

▪ Suspend granting oflicenses

▪ Delay granting oflicenses according toscope

▪ Participate in periodicrevisions on forestcover and peat landthematic map

▪ Establish monitoringteam and system ofsuspension audit

▪ BKPRN (SpatialPlan Agency)

▪ Improvegovernance

▪ Accelerate thesuspension map intothe spatial planningmap revision as part ofthe land usegovernance reform

▪ Facilitate stakeholderconsultations▪ Compare suspensionmap with sub-nationalspatial planning drafts▪ Recommendimprovements ofspatial planning drafts

▪ Bakosurtanal(MappingAgency)

▪ Improvegovernance

▪ Lead update ofperiodic revisions onforest cover and peatland thematic map

▪ Define data sourcesand definitions▪ Define methodologies▪ Facilitate discussions▪ Develop map

▪ Governors andregents/mayors

▪ Suspendlicenses

▪ Suspend granting oflicenses

▪ Delay granting oflicenses according toscope

4 M. Brockhaus et al. / Forest Policy and Economics xxx (2011) xxx–xxx

different categories is characterized by competing and overlapping in-stitutions and limited capacity for planning. These challenges, aswell as the problematic issues of efficiency, equity and transparencyrelated to land allocation, are not new to Indonesia (see for exampleWorld Bank, 1994). However, the persistence of these problemsmay prove a massive barrier for new mechanisms such as REDD+.

As discussed above, in 1983 the MoF prepared TGHK maps at ascale of 1:500,000 for each province. These maps classify land in theforest estate. Following this, from 1987 to 1990, the Regional PhysicalPlanning Project for Transmigration (RePPProT), based within theNational Coordination Agency on Survey andMapping (Bakosurtanal)and financed by the UK Overseas Development Administration, aimedto improve the planning capacity of theDirectorateGeneral of SettlementPreparation by providing reliablemaps and data on land quality and landavailability for new settlements. Three basic sets of maps at a scale of1:250,000 were prepared covering the whole country: “Land Systems”,with an interpretation of their suitability for agriculture; “Land Use”,with existing forest zoning; and “Land Status”, with proposed forestzoning based on the methodology used for TGHK based on climate,slope and soil type. The Land Status maps became the country's standardfor practical application, and underpinned provincial sectoral planning asthe new TGHK. However, there is no official recognition and the ‘original’TGHK remains the legal base.

In 1992, a Law on Spatial Planning (No. 24/1992) provided rulesfor spatial land use planning called RTRW (Rencana Tata RuangWilayah or Regional Spatial Land Use Planning) under the authorityof theNationalDevelopment PlanningBoard (Bappenas) and associatedprovincial-level offices (Bappeda). In response to that initiative, theMoF in 1997 engaged in the production of its own “integrated maps”or peta paduserasi instead, to streamline the TGHK maps at theprovincial level (RTRW), and with the process of decentralizationalso at the district level (RTRWP/K). However, some provinces(such as Riau) refuse to accept the peta paduserasi and continue torefer to the TGHK.

Following the Law on Decentralization No. 32/2004 (whichsuperseded Law No. 22/2009), district governments were requiredto coordinate their land use planning with provincial and nationalauthorities. In 2007, the national spatial plan was reenacted with anew law (Law No. 26/2007). Its implementing regulation, GovernmentRegulation No. 26/2008, gave governors and ministers the right tooverride land use decisions made by the districts. The overall authorityresponsible for drafting is the National Spatial Planning CoordinationBoard, chaired by the Coordinating Minister for the Economy. Theboard's office is set up within Bappenas. The Directorate Generalof Spatial Planning of the Ministry of Public Works is charged withhandling the practical implementation of the board's plan. This isreflected in the two most recent ministerial decrees (Permen PUNo. 15/2009 and No. 16/2009) setting down the ministry's rules todeal with spatial planning at national, provincial and regency levels.This setting, with a multitude of different agencies involved, requiresintense coordination.

Land allocation in Indonesia is characterized by a complex landscapeof institutions and legal frameworks. Multiple actors and their interestsare interwoven in this complexity. Some of the involved state agenciesare also supposed to play a critical role in realizing REDD+ in Indonesia,and specific roles are in the process of being attributed to those bodies(Table 2 provides an example). However, if these roles and activitiesare based on the willingness of the multiple agencies engaged, or ifthere will an effective regulation of these, remains so far unclear.

In addition, the state's process of land allocation has hadweak regardfor customary law (adat) and existing land claims, thus allowing someactors to question the legality of existing land allocations. In this land-scape, personal, political and sectoral discourses and objectivesshape policy outcomes and have implications for the formulationof a REDD+ strategy and the political and public support that sucha mechanism will gain.

Please cite this article as: Brockhaus, M., et al., An overview of forest and land allocation policies in Indonesia: Is the current framework suf-ficient to meet the needs of REDD+? Forest Policy and Economics (2011), doi:10.1016/j.forpol.2011.09.004

Fig. 2. The gap between legally available supply of timber and demand for wood by theindustrial sector (the gap indicates the level of illegal logging).

Table 3Illegal log production in Indonesia, 1985–2004.Source: The World Bank (2006).

Year Official log consumption Official log production Illegal log production

1985 23.5 14.6 8.91989 40.4 24.4 161990 37.9 25.3 12.61997 47.4 29.5 17.91998 45.3 19 26.31999 44.9 20.6 24.32000 47.8 13.8 342001 49.1 11.2 37.92002 50.5 9 41.52003 50.5 11.4 39.12004 50.5 13.5 37

5M. Brockhaus et al. / Forest Policy and Economics xxx (2011) xxx–xxx

In summary, the historical development of land use planning andland allocation policies, with competing land use planning agenciesand overlapping jurisdictions for planning and allocation authorities,does not lay a secure foundation for initiating a REDD+ mechanism.Such a mechanism would require a transparent and secure climatefor international and domestic investors in carbon. An effectiveREDD+ mechanism for Indonesia must address the objectives of,and the decision-making processes around, the categorization ofconversion forest and production forest. The existing lack of clarityand transparency in land allocation procedures, particularly overconversion forest, may lead to high transaction costs and thus limitedattractiveness for potential investors in REDD+.

4. Forests and land for development: pulp, paper and palm

The land allocation framework, as outlined in Section 2, wasdeveloped in a context of huge demand for forest land and products.The process originally focused on forest production but more recentlyhas shifted to a prioritization of agro-food production. Historically,Indonesia has promoted forest exploitation as a major revenuesource. A paradigm has emerged over past decades in which forestexploitation is a synonym for development. The forestry sector andassociated industries have traditionally been perceived as an importantcontributor to the national economy, with some commentators arguingthat they are a significant employer and driver for some local economies(e.g. Hunt, 2010), even though their contribution to GDP is relativelysmall (Statistics Indonesia, 2010).

4.1. The supply and demand gap: feeding the hunger for forest conversion

The insatiable demand for timber in the wood-processing sector(especially pulp and paper) originates from the policy of uncontrolledexpansion of the processing capacity of wood-based industries inIndonesia without ensuring sufficient supplies of raw material.The commercial forestry sector in Indonesia developed rapidlyfrom the 1970s until 1985 when Indonesia relied on log exports;by the late 1970s, Indonesia had become the world's largest timberexporter with about 30 million m3 shipped out annually (Barr,2001). Until 1983, Indonesia was one of the global leaders in theexport of tropical hardwood logs. The number and area of commerciallogging concessions increased dramatically from 58 firms with8.7 million ha in the early 1970s to 579 firms with 60.3 million ha inthe early 1990s (Ruzicka, 1978; Ministry of Forestry, 1994).

In 1983, log exports were banned to encourage local wood-processing enterprise development and export of value-added timberproducts. In 1985, Indonesia increased the value of its timber exportsby applying heavy export taxes to discourage log exports and developwood product exports, especially plywood. The number of conces-sions continued to grow. During this period, Indonesia became thelargest exporting country for plywood, supplying about 70% of thetotal global market (Barr, 2001). By 1995, there were 585 forestconcessions that covered about 62.5 million ha of production forest(Brown, 1999). However, the expansion of logging, althoughimpressive, was outpaced by the dramatic growth in the capacityof the wood-processing industries. Between 1985 and 2004, theconsumption of timber by wood-processing industries increasedfrom 23.5 million m3 to 50.5 million m3, being consistently inexcess of legally available supplies of timber (World Bank, 2006).

The indiscriminate issuance of industrial licenses led to theemergence of the supply–demand gap in the forestry sector, whichwas filled from illegal sources (Fig. 2, Table 3). Closing this gapwould require extensive industrial timber plantations, and hencelarge areas of land. Another option would be to reduce the size ofthe timber-based industry. However, so far the crucial question ofindustrial downsizing has made little tangible progress in Indonesia,encouraged by rhetoric that it will lead to job losses (at least in

Please cite this article as: Brockhaus, M., et al., An overview of forest andficient to meet the needs of REDD+? Forest Policy and Economics (201

short term), unemployment, and political repercussions (BusinessReview, 2009).

The effort to expand the volume of plantation timber for wood-working industries dates back to the late 1980s when the governmentof Indonesia launched a policy to facilitate the development ofindustrial timber plantations by providing large areas of the forestestate for conversion. Between 1985 and 2010, about 12 million haof land was allocated for industrial plantations (Hutan TanamanIndustri; HTI). The government is planning the allocation of another9 million ha by 2020 (MoF, 2006). However more land has beenacquired and cleared than actually used for HTI (Brown, 1999).The effectiveness of HTI policy in reducing the supply–demandgap has been weakened further by the parallel development ofthe pulp and paper sector. Repeating some of the same mistakesfrom the 1980s, the pulp and paper sector's processing capacityhas increased by leaps and bounds without much concern for rawmaterial supply. In 1995, the pulp and paper capacity in Indonesiawas 2.6 million tons (APKI, 2007). By 2009, it had increased to6.9 million tons, requiring about 31 million m3 of timber annually(Media Data Riset, 2010).

4.2. Estate crops: lubricating the conversion of forest land to oil palmplantations

During the past few decades, areas of conversion forest haveincreasingly been converted for oil palm and other commercialcrops. This has maintained the economic value of the productionfrom forest areas even though the actual quality of forest resourceshas declined. Although oil palm is not a forestry operation per se, it

land allocation policies in Indonesia: Is the current framework suf-1), doi:10.1016/j.forpol.2011.09.004

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has far-reaching implications for forests. Oil palm has become one ofthe most important estate crops for Indonesia's economy (Casson,2000) and the growth of the sector has been tremendous. Frommerely 106,000 ha in the late 1960s, oil palm estates had expandedto cover 8 million ha by 2010 (Ministry of Agriculture, 2010). Thegovernment plans to develop, between 2010 and 2015, an additional1.5 million ha of new oil palm plantations for food and biofuel;for 2016–2025 there is a target for an additional 4 million ha(Indonesia's Road Map for Biofuel Development, 2025).

Until the 1980s, oil palm development was the purview of large-scale enterprises only, owned by either the government or the privatesector. The government dominated this crop development until 1989,when the area of government plantation holdings was surpassedby the area of private holdings. Since the government of Indonesiaintroduced the oil palm smallholder estates program in 1979,small-scale cultivation of oil palm has developed rapidly (USDA,2009). Despite this growth of smallholder production of palm oil,in 2010, large-scale companies still held 50% of the total areaunder oil palm; smallholders were a close second with 42% (Ministryof Agriculture, 2010). By developing oil palm plantations, Indonesiahas overtaken Malaysia as the largest oil palm plantation holderand palm oil producer in the world, although 30% of the oil palmarea in Indonesia is controlled by Malaysian capital owners.

The area under oil palm is the most rapidly expanding; givengovernment targets, it is likely to continue as such. On what landthis expansion will take place remains less clear. The IFCA (2008)report specifically recommends that the approval criteria for releasingconversion forest (hutan produksi konversi; HPK) for oil palmdevelopments should be reconciled with currently conflictingpolicy. This expansion combined with existing demand fromthe pulp and paper sector does not leave much land for otherobjectives and indicates that economic incentives are directedtoward the use of forest land for production activities. The discourseused to shape these past macroeconomic decisions is related to thedevelopment paradigm, and does not prioritize forest managementfor environmental services such as carbon.

Forests are also lost to mining, both to small-scale community-level mining and large-scale company mining. A 2007 regulationallows mining in protected forests, and in 2010, a new regulationprovided a mechanism to make mining in conservation areas possible.

4.3. Large scale versus small scale: regulating conversion and the right toconvert

It can be argued that an effective REDD+ mechanism is one thathas the flexibility to be implemented at a variety of scales. However,a possible additional challenge to the development of effectiveREDD+ is the prioritization of large-scale corporate actors and thelack of viable production models for small-scale actors for forestmanagement activities. Although smallholder palm oil productionmodels have been rather successful in Indonesia (see the discussionin Section 4.2), land allocation for small-scale forest managementactivities has not been facilitated. This is particularly obvious in thecase of the allocation of logging concessions and timber plantations.Although Government Regulation No. 21/1970 on Forest Concessionsand Forest ProductHarvesting allowed for small-scale timber harvesting,very few small-scale permits were issued due to the prevailingperception that small-scale operations were inefficient (Mappatoba,2004). Instead, millions of hectares were allocated to large-scaleconcessions, many of which were owned by people closely connectedto former president Soeharto and his family (Brown, 1999). In 1999,following the fall of Soeharto and because of pressure from thenewly decentralized provinces and districts, the government replacedthe 1970 regulation with Government Regulation No. 6/1999 on ForestConcessions and Forest Product Harvesting Rights. This regulation, andits implementing rules, provided more opportunities for small-scale

Please cite this article as: Brockhaus, M., et al., An overview of forest andficient to meet the needs of REDD+? Forest Policy and Economics (201

actors such as communities or cooperatives to establish logging enter-prises on small-scale concessions of up to 100 ha issued by districtheads. Between 1999 and 2004, thousands of such small-scale conces-sions were issued. Following the release of evidence of the destructive-ness of small-scale logging concessions, resultant deforestation andother purported abuses such as timber smuggling, the policy onsmall-scale logging permits was eventually revoked (Barr et al., 2006;Dermawan et al., 2006).

A similar series of events affected small-scale timber plantationactivities. Since the onset of the timber plantation program in Indonesiain the late 1980s, practically no small-scale timber plantation permitshave been issued, despite policy goals clearly encompassing small-scale plantation forestry. Instead, aswas the casewith the natural forestconcessions, nearly all plantation permits were issued to large-scaleactors. Small-scale plantation forestry was first encouraged in 2006when the government of Indonesia instituted the community timberplantations program (Hutan Tanaman Rakyat; HTR) and made signifi-cant financial resources available for its implementation. However,because of numerous problems with land allocation and economiccompetitiveness, the HTR program is still far from meeting its targets(Obidzinski and Dermawan 2010).

As the above discussion shows, there have been various regulatoryattempts to encourage small-scale development of forest-based activ-ities but in practice few of these have succeeded to scale. Unlike thepalm oil sector, the forest land allocation framework for forest man-agement activities continues to prioritize large-scale interests. Thelack of success of programs such as HTR highlights the challengesthat REDD+ will face in incorporating small-scale interests, whichlinks the REDD+ effectiveness debate to an equity dimension, andthe question as to how much pro-poor benefits can REDD deliver.Again, political will across scales will be needed to achieve a pro-poor outcome from REDD+, and there are questions to what extentthis is even part of the current REDD+ objectives in Indonesia.

4.4. Global incentives for food and energy: “idle” land in Papua and whatis left for REDD+ and other ecosystem services

During the past few decades, the forest land allocation system hasaccommodated the land requirements of newly emerging economicsectors, of which carbon emission reductions may be the next. Inthis context it is important to mention the ecosystem restoration con-cessions (ERCs), which seem to be gaining popularity among someREDD+ project developers (Myers-Madeira et al., 2010). In 2007,the ERC system was established by the MoF to be applied only inthe category of “production forest for degraded areas”. The conces-sion holder is obliged to perform some restoration activities but hasthe right to generate revenues from payments for environmental ser-vices (such as carbon). Approvals are necessary by the respectivelevel (district, provincial or national), and a local stakeholder consul-tation process has to be established (Myers-Madeira et al., 2010).However, in addition to a global interest in ecosystem services,which may allow for the application of a REDD+mechanism, anotherglobal demand is already becoming evident in Indonesia. From 2005to 2010, transnational companies and government agencies showedincreasing interest in establishing long-term plantations in develop-ing countries. According to recent estimates, since 2006, between 15and 20 million ha of land in developing countries have been subjectto negotiation and transaction for agricultural and energy investmentventures involving foreign participation (von Braun and Meinzen-Dick, 2009).

These global trends are reflected in recent developments in Indonesia.In 2006, the government of Indonesia announced vast expansion targetsfor biofuel feedstock plantations and biofuel production: 5 million ha ofnew plantations were to be developed, of which at least 1.5 millionhectares in Papua were to be planted with oil palm (Business WatchIndonesia, 2008; Suebu, 2008, 2009). Financial assistance from China

land allocation policies in Indonesia: Is the current framework suf-1), doi:10.1016/j.forpol.2011.09.004

7M. Brockhaus et al. / Forest Policy and Economics xxx (2011) xxx–xxx

was to play a significant role in these projects (Dillon et al., 2008). Inthe same year, the government announced a target of 9 million hafor timber plantations (Obidzinski and Dermawan, 2010). Afterthe financial crisis of 2008 and concerns among NGOs and researchorganizations about the implications of biofuel expansion for foodsecurity and the environment, plantation development targetswere reduced. Currently, the provincial government in Papua isseeking to develop about 2 million ha for oil palm and timber plan-tations (Development Alternatives, 2009; Papua Province ForestryBureau, personal communication 16 July 2010) between 2011and 2014 (Jakarta Post, 2010). This is planned to take place aspart of the Merauke Integrated Food and Energy Estate (MIFEE)(Ministry of Public Works, 2010) on frontier land in the south ofPapua that is considered “idle”, “degraded” or “underused” in eco-nomic sense. Indonesian government planners maintain that thisplan has the potential to stimulate economic development in thearea and to improve the welfare of local people (Ministry of PublicWorks, 2010). Although it is expected that international funding(IFC, China) will continue to play a significant role in supportingthe implementation of these objectives, domestic financial actorssuch as Bank Mandiri and the national bank Bank Negara Indonesiaare gaining importance as well (Attalicious, 2010).

The main challenge that the MIFEE case presents for REDD+implementation is that despite official declarations that degradedor grass land will be prioritized for the planned plantations,about 60% of the total area is under forest cover. Some concessionsthat have been earmarked for plantation have up to 80% forestcover. If this project is to be implemented in full, large-scale defor-estation and increased greenhouse gas emissions will occur. TheMIFEE example also highlights the urgency of finding an operationaland economically feasible way to encourage the development ofplantation investments on non-forest land. This will not only requirean effective set of economic incentives to operationalize the use ofdegraded land but also a concerted effort to improve regulatoryaction in order to ensure that laws are more effectively enforced.

As the current debates in Indonesia around the moratorium onconcessions show, a REDD+ mechanism with carbon emission reduc-tion objectives not only faces a longstanding history of land use compe-tition but alsomust consider the demands of newly emerging sectors. Inaddition, a context of lack of clarity and accuracy over what is degradedland, where it is located, and what land use it should support raises thequestion ofwhether activities that take place in the category of “conver-sion forest” can help to deliver reduced emissions.

5. Conclusions and recommendations

Based on the theoretical and empirical evidence providedthroughout this paper, we showed that i) for understanding REDD+and land allocation in Indonesia, a political economy lens is required,ii) discourses and long standing development paradigms shape whatpotential space will be given to new incentives to keep forest stand-ing in Indonesia, iii) entrenchment of forest industry with the govern-ment favors large-scale investments in forest conversion and limitsthe space for REDD, and that iv) new global demands and actorsenter the land allocation arena and limits further the space forREDD. To design an effective (and equitable) REDD+ mechanism insuch a land allocation arena requires deeper understanding of thebroader interests in forested land and the mechanisms employed bythe different actors to realize those mechanisms.

Land allocation policy and process in Indonesia have been dominatedby conflicting policies, lack of institutional clarity and lack of coordina-tion, underpinned by a development paradigm in the forestry sectorthat is characterized by a focus on large-scale economic development.Finding a space for the successful implementation of REDD+ in a forestland allocation system that is designed to champion this paradigm thusremains a key challenge. The recent moratorium on concessions, and

Please cite this article as: Brockhaus, M., et al., An overview of forest andficient to meet the needs of REDD+? Forest Policy and Economics (201

other government efforts such as planning and monitoring activities,may present an opportunity for reducing emissions from deforestation.Attaining transformational change, as is intended with the introductionof a REDD+ mechanism, will be difficult under the current processesfor land allocation. Conflicting regulations, the discourses employed tochampion large-scale private sector interests and governmental actors'reluctance to reduce deforestation, as shown in the MIFEE case, reflectthe multitude of actors in a tense web of interests and competing incen-tive structures. In such a context, the effectiveness of REDD+ could behindered in twoways. First, the nature of policy formulation, the existingincentives and explicit and implicit development priorities raise uncer-tainties as to whether carbon-related incentives under a REDD+ mech-anism will be sufficient to change the existing development pathwaysin Indonesia. Barriers created by unclear and conflicting authoritiesform the second obstacle to REDD+ effectiveness. To overcome bothobstacles, political will beyond international rhetoric of the presidentialoffice, and action beyond the existing moratorium are preconditions. Amore thorough understanding of the political economy in which Indo-nesian forests are embedded is a necessity to develop a regulativeframe that would allow REDD-based incentives to actually changeland allocation and enable effective (and pro poor) REDD+ outcomesin Indonesia.

Thus, the development of incentive structures and a regulatoryframe to direct investors into degraded forest areas is required. Theclassification of degraded forest land thus must be revised, as percep-tions and definitions of degraded forest vary and conflict. Increasedtransparency and coordination, particularly with regard to permitissuing and a strengthened oversight role for independent actors,could also contribute to rationalizing the overlapping interestsand the resulting multiple layers of land claims.

Whether a REDD+ mechanism can be effective in this context isrelated to the higher-level questions of who actually “owns” rightsto land and natural resources in Indonesia and who can make legiti-mate decisions over land use allocation and revenue distribution.Above all, however, such attention would benefit from a clear anduncontested definition of who has the authority to give which spaceat what scale under which procedures.

Acknowledgements

This analysis was conducted as part of the Global ComparativeStudy on REDD, led by the Center for International Forestry Research(CIFOR). We gratefully acknowledge the support received from theNorwegian Agency for Development Cooperation, the AustralianAgency for International Development the UK Department for Inter-national Development, the European Commission, the Departmentfor International Development Cooperation of Finland, the Davidand Lucile Packard Foundation, the Program on Forests and the USAgency for International Development. An earlier version of thispaper was presented at the International Conference-Forum “Emerg-ing economic mechanisms: Implications for forestrelated policiesand sector governance” in FAO Headquarters, Rome (Italy) from 5 to7 October 2010. The authors of this paper would also like to thankElena Petkova, Moira Moelino, Daju Resosoudarmo and the externalreviewers for their insightful comments and feedback on earlierversions.

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