Indonesia has one of the highest rates of deforestation in the world, and the loss of government revenue associated with illegal deforestation has been estimated at $100 million in East Kalimantan alone.
Deforestation is caused, in part, by land use changes resulting from cash-crop plantations and mining, particularly for coal in East Kalimantan.
Recent increases in deforestation rates have occurred in three stages, and have been exacerbated by a number of policy developments and reforms.
The first stage occurred when small-scale forest concessions were granted for collecting forest products — these were granted through the issuance of a Forest Product Harvesting Permit (HPHH).
Under Indonesia’s centralized government system, HPHH were issued by the provincial governor, while after decentralization they were issued by the head of a district or a city.
While China and the developed Asian economies engage in various kinds of currency manipulation, Southeast Asia’s open economies have been bearing the brunt of inflows from bigger countries and the oil states.
The issuance of HPHH was a key driver of deforestation until 2002, when the authority of the district and city heads to issue HPHH was withdrawn by the government through a ministerial decree.
The second stage of deforestation occurred between 2002 and 2005, mostly due to the expanding plantation sector, particularly oil-palm plantations.
Recently, multinational food corporations General Mills, Nestle and Unilever spurred by a Greenpeace campaign cut off orders for palm oil from Indonesian producer Sinar Mas Agro Resources & Technology on charges that it has illegally cleared woodlands.
These boycotts came about because due to consumer and civil society pressure over environmental issues, such as the damage caused to the habitat of the orangutan, one of the country’s most endangered and charismatic species.
Greenpeace has also put pressure on Wal-Mart to cease buying from Smart, and has successfully lobbied global finance giant HSBC to sell its shares in the company.
There are short-term socioeconomic impacts resulting from the cancellation of palm-oil contracts, such as the loss of employment and the reduction of wealth flowing into rural communities — but these are insignificant when compared with the long-term disaster that unchecked deforestation welcomes.
The third stage of deforestation dates from 2005 until the present as a result of the expansion of small-scale coal mining.
This has been driven by three factors.
First, changes to the law on land use allowed for mining in forest, including protected areas, through the issuance of special permits approved by the forestry minister.
These permits were granted to mining companies under the proviso that they already held rights to mine in forest areas before the changes to the land law were made.
Initially, only 13 companies were eligible under this proviso, but by May 2010, 54 permits had been issued in East Kalimantan alone.
Some 53 of these were issued after a 2008 government regulation that set the tariff rate for exploiting non-forest products, including minerals and coal. This regulation was often perceived as an effort to “sell” forest areas.
Second, the dramatic increase in the price of commodities prior to the global financial crisis increased mining in forested areas.
The financial crisis depressed coal prices, but as of 2010, the price of coal has rebounded, and this has seen an increase in investment in the mining sector.
This flow of capital has been supported by the central government, and local communities and indigenous communities have been more than willing to open up their land for mining.
Third, decentralizing the issuance of mining concessions combined with local direct elections gave rise to local capture and rent seeking.
Mining permits became a political commodity to garner votes, and political campaigners and those who had access to the district head or mayor became brokers to investors.
Unless broad ranging policy reforms occur, and corruption is reduced, Indonesia will struggle to reduce levels of deforestation to internationally acceptable levels — but these reforms will not occur overnight. For now, continued international pressure by the public will be the most successful path of action.
By Maria Monica Wihardja Associate Fellow at the Center for Strategic and International Studies in Jakarta.
East Asia Forum
Indonesian Chamber of Commerce and Industry KADIN elects Suryo Bambang Sulisto as its new chairman
Suryo was born in Solo on Feb. 11, 1947. He earned his undergraduate degree from the University of Wisconsin and his master’s in business administration from Washington International University.
Suryo was the founder of conglomerate Scatmarindo Group, which has interests in oil and gas, mining, tourism, steel manufacturing and retail.
Before joining Bumi’s board, Suryo served the government as the presidential trade representative to the Americas.
CHINA likes to cover large distances in small steps. Last month it said that a few lucky foreign banks, including central banks, could invest some of the yuan they hold offshore in local Chinese bonds. The first to take up the offer was Malaysia’s central bank, the Financial Times reported this week. With that purchase, another stone was removed in the great wall shielding China’s currency from the outside world.
Global currencies emerge sporadically—the dollar in the first half of the 20th century, the euro over the past decade. That China could even have a plausible claim to such a thing is a remarkable turnaround. Its monetary policy and its mints were often in such wretched shape before the 1949 revolution that old Mexican silver dollars still circulated. The very word “yuan” is a contraction of “yang yuan”, or “foreign round coin”. After the revolution the currency situation got even worse, with ration coupons playing a role in transactions. International deals went through the creaking hands of the Bank of China or, quietly, black markets. It was only in 1994 that a unified, official exchange rate was established.
After solidifying the role of its currency in its domestic market China resisted the next logical step. It kept a tight grip on the flow of capital across its borders.
And even as its companies conquered world markets, they priced their goods in other people’s money. The limits on conversion allow China’s authorities to steer the economy and control business. But this strategy has exposed China’s companies to potential foreign-exchange risk, one reason why the authorities are reluctant to let the yuan move more freely against the dollar. It has also deprived China of the easy “seigniorage” profits that come from buying foreign goods and assets in return for non-interest-bearing pieces of paper adorned with portraits of Chairman Mao.
Slowly, however, China seems to be changing its approach. As a result of reforms begun last year, exporters to China can now price their goods in yuan, rather than dollars, and deposit the proceeds in offshore corporate accounts, mostly in Hong Kong. At first the reforms were a flop, says one banker. Few accounts were opened and not much business done.
Offshore accounts offered puny rates of interest because banks could do so little with the money. But as deposits have grown (see chart), so has the number of firms seeking to tap them. In the past two months McDonald’s has issued a yuan-based bond in Hong Kong, as has Hopewell, a property firm. Both were oversubscribed. Banks and the Chinese government itself have also gone to the well.
The off- and onshore markets are still separated by a cliff of controls. Companies cannot borrow yuan from the mainland; they must earn them through trade. Crudely put, yuan flow out of China only if goods or services flow the other way. And offshore yuan do not easily travel back into China either. A currency represents a claim on a country’s underlying assets. “The good news is that those assets in China are ever-growing,” observes Ronald Schramm, a visiting professor at China Europe International Business School in Shanghai. “The bad news is that with all the restrictions, there are few ways for outsiders actually to cash in on the claim.”
Last month’s decision to let some banks spend their offshore yuan on local Chinese bonds creates another link between these otherwise parallel universes. It will allow some offshore yuan to climb back onshore in exchange for assets rather than goods. These purchases will be subject to a strict quota but still broaden the menu considerably. The onshore bond market is after all worth $2.9 trillion, 725 times bigger than its nascent offshore rival.
If global trade in yuan does swell, international banks have a good chance of developing other fee-generating, predictable businesses, such as handling letters of credit or payments. And since money on its way from one place to another inevitably pauses, there should be more rises in deposits, which become the stuff of loans.
And yet, for all the financial logic, there is a huge argument going on within the Chinese government about whether to proceed. If foreigners sell their dollars to hold yuan instead they will put upward pressure on the currency, making it harder to “manage” (to use the word China prefers) or “manipulate”.
Despite China’s capital controls, the offshore market also affords its firms an alternative source of borrowing. Hong Kong, unlike China, allows almost anyone to issue a bond and repatriating the proceeds “is unlikely to be too challenging,” notes a report by Standard Chartered. This may erode the architecture of China’s credit system, which allows policymakers to channel funds to favoured firms and projects.
Many foreign bankers, and even some government officials, will say these kinds of changes are necessary and inevitable. Some sort of opening up of capital flows certainly seems to be under consideration. But given the potential consequences, there may be far more talk than action.
The Economist
In a blur of headlines over the past few days, Americans have been surprised with brief, seemingly contradictory glimpses of how China is wielding its newfound power.
POWER PLAY Japan was forced to rescind the arrest of a trawler captain.
There was China the neighborhood bully, cutting off Japan’s access to rare-earth minerals unless Tokyo folded in a minor, but longstanding, territorial dispute. (The Japanese folded.)
There was China the schmoozer, with its prime minister, Wen Jiabao, trying his hardest on Thursday to deflect President Obama’s pressure over the value of China’s currency — really a battle over whether jobs go to workers in Seattle or Shenzen. The two leaders talked for two hours at the United Nations. The outcome was left unclear.
And there was China the classic realist, opting for convenient inconsistency on sanctions against North Korea and Iran in efforts to balance its competing national interests. (The first is to engage the West on the Security Council. The others include securing oil and protecting a client-state from collapse.)
In one sense, there’s nothing surprising about a rising power finding subtle ways to handle complex problems. But before China’s breakout from poverty to arguably the world’s No. 2 economy, its default position on foreign policy was to restate the principle of non-interference in other nations’ affairs and focus largely on its neighborhood.
That was before it had the military resources and the incentive to start thinking of how to secure and defend interests around the globe. Today, its interests include access to oil in places like Sudan and Iran, safe shipping around the Horn of Africa, the ability to manipulate its currency for its own gain.
And for the first time, the world is seeing a distinct range of behaviors, from aggressive to passive-aggressive to diplomatic, in places that 20 years ago China’s leaders rarely thought about.
What American diplomats and analysts now have to figure out is what drives China’s actions and responses, how to try to shape them and, some would argue, what limits to try to set.
“The China that President Obama hoped he was getting a year ago, the one that becomes this great cooperative global power on the biggest issues of the day — that’s not the China he’s dealing with today,” said David Shambaugh, director of the China policy program at George Washington University.
A senior administration official who often deals with the Chinese leadership said: “As they begin to manage their many constituencies, their politics is looking more like ours.”
Here’s a scouting report so far on China’s style of muscle-flexing:
THE NEIGHBORHOOD: TIME FOR THE BIG STICK
For decades countries around Asia have been wary of China’s resurgence — tracking how many ships and missiles it was acquiring, and how it was using its influence as an investor. A decade ago, as President Bush took power, a number of neoconservatives urged him to “contain” China’s presumed ambitions.
But containment would have probably been impossible and it proved, at least in the past decade, unnecessary. So far Beijing has not pressed new territorial claims; it has simply begun to defend old ones in sparsely inhabited places.
The Japanese stepped into one of those when they arrested the captain of a Chinese trawler near a group of islands in the East China Sea, called the Senkaku by the Japanese and the Diaoyu by China. The Japanese said the trawler rammed a Japanese coast guard vessel. A few years ago this might have been sorted out quietly as a consular issue. Not this time.
The Chinese — perhaps driven by the People’s Liberation Army, perhaps eager to begin to declare their equivalent of the Monroe Doctrine — demanded the captain’s return. Japan refused. Pushed by a nationalistic groundswell, China started blocking shipments of the rare earths, an act that threatened Japan’s electronics industry.
“This played to the Asia First crowd in China,” said Mr. Shambaugh, referring to a faction in China’s establishment that says the wise course is to dominate the region while avoiding tussles with great powers. In recent months there have been disputes over American exercises in nearby waters and over the border with India.
“We’ve begun pushing back,” said a senior administration official, explaining why the United States is sending an aircraft carrier to the area.
But the Japanese, after 20 years of recession, had no push left in them. The prosecutor dropped charges on Friday.
WASHINGTON: THE ART OF DEFLECTION
If China’s strategy with Asia is all sharp elbows, with the United States it is largely politeness and deflection — most of the time.
When Obama first encountered Hu Jintao, the country’s president, a fire was threatening to consume both their economies, and they pursued the common strategy of massive stimulus. For most of 2009, one of Obama’s top aides noted, “everything else was set aside.”
Then they narrowly skirted clashes on environmental policy at Copenhagen, and a cyber attack on Google was traced to China. But it is China’s foot-dragging on its promise to gradually let the market determine the value of its currency that has really strained relations. In Congress, rightly or wrongly, China is often accused of manipulating its currency to keep its factories humming, at the expense of American workers. Democrats and Republicans are calling for tariffs.
So far China’s strategy appears to be to maintain the trappings of routine diplomacy while dragging its feet. Prime Minister Wen used the word “cooperation” or “cooperative” six times in just a few minutes when standing beside Obama here. But when the doors closed, America pressed for immediate action, and, a witness said, Mr. Wen “dodged and weaved,” restating arguments that it takes generations to build an economic powerhouse.
Jeffrey Bader, the National Security Council’s Asia director, said the president noted he was “disappointed that there had not been much movement” since they last met. But his leverage was scant, which is why the White House threatened to to take other steps. Now the Chinese are gauging what he meant.
SPECIAL CASES: NORTH KOREA AND IRAN
North Korea and Iran are where China’s local imperatives and great-power interests collide.
If America’s No. 1 goal is a stripping North Korea of its nuclear weapons, China’s is keeping North Korea stable. Should it collapse, the Chinese suspect, South Korea (and its American allies) will move in, perhaps up to China’s border. As one American intelligence official put it recently, “if the choice is between living with a half-crazed nuclear North or with us on top of them, the Chinese are choosing the first option.”
That doesn’t mean they are happy about it. James Church, pen name of the author of “The Man With the Baltic Stare,” his latest spy novel about North Korea, learned about the country as an intelligence officer. He said in an interview: “The Chinese may not like the North Koreans much. But there is too much geography, history and emotion tying them together and shaping Chinese thinking” for Beijing to jettison its long-time client, particularly if it means North Korea’s absorption by America’s ally, the South.
So in 2009, after the North’s second nuclear test, it suited China’s interests to join sanctions against Pyongyang. This year, when the United States again tried sanctions over the North’s presumed role in sinking a South Korean warship, the situation had changed: Kim Jong Il, the North’s dictator, was ill, and China needed to gain influence over his son and presumed heir, Kim Jong Un, to keep the lid on the North. So the Chinese watered down the sanctions effort here, and, foreign diplomats said, held a small victory party with the North Korean delegation.
Iran is another special case. Twelve percent of China’s oil comes from the country; while it has gone along with sanctions, it has also made sure that energy imports and exports were kept off the United Nations list. There is constant talk of new, long-term energy investments by the Chinese in Iran. But so far, few of those deals have been consummated. And when American officials point out that a confrontation with Iran over its nuclear ambitions would disrupt the flow of oil out of the Persian Gulf, the Chinese say they are certain it won’t come to that.
It is the ultimate three-dimensional chess board, played Chinese style. The Economist
The National Police have learned that terrorists aim to wage a war in cities across Indonesia, which will turn the country into strife-torn Afghanistan and Iraq.
National Police chief Ge told a televised press conference on Friday the terrorists might recruit warriors from overseas stating they will launch a city war as happens in Iraq and Afghanistan and will also bring in mujahids from the two countries. He said the terrorists would continue targeting police and military posts, particularly those which are deemed weak. Three police officers were killed in a pre-dawn attack on a police precinct in Deli Serdang, North Sumatra on Wednesday. Police state that the terrorists had developed their strategic plan as evident in the bank heist in Medan, which he said served as a signal for other members of the terror network in the rest of the country.
Terror attacks in the country have claimed 298 people since 2000.
Whether President Aquino takes action against government officials for their part in the Philippines bus hostage crisis will shape the country's international image. Philippines President Benigno Aquino III faces a double-edged crisis of leadership when he returns next week from seven days in the US.
Besieged by critics at home and abroad he's under severe pressure to show his ability to deal decisively with bitter recriminations over his response to the hostage tragedy in August in which a former police colonel killed eight Hong Kong tourists on a tour bus after an 11-hour standoff. China, extremely critical of the way authorities in the Philippines responded to the episode, is demanding action against government, police, and military officials for failing to resolve the crisis before it ended in the massacre of Chinese citizens.
Now, however, influential Filipinos accuse Mr. Aquino of putting relations with China above the interests of his own country. They complain that Aquino turned over a full governmental report on the incident to the Chinese government before releasing it to his own citizens in hopes of getting Chinese officials to tone down complaints that have clearly soured relations between the two countries – and discouraged Chinese tourists from coming. Nationalist sentiments have distracted from the investigation, but now Aquino must decide what to do about 13 people, including the powerful mayor of Manila, Alfredo Lim, whom a fact-finding commission recommends for disciplinary action. As questions about Aquino's competence mount, the severity of his response against those found responsible could have serious implications for his ability to lead.
“There’s a consensus that the people entrusted by President Aquino to handle the situation failed in their duties,” says Satur Ocampo, president of the minority leftist People First Party. “Now they are playing a blame game. It’s a simple question of incompetence of management.” "Aquino was totally unprepared when he became president," says Ocampo. "These problems increase pressure on him to meet the high expectations of the people"
Who's responsible?
The commission to look into the hostage tragedy, formally called the Investigative and Review Committee, is recommending more than bureaucratic wrist slaps. It wants criminal charges ranging from dereliction of duty to failure to obey orders. Manila’s police chief was the first to feel the heat when he was dismissed in the middle of the hostage episode for deploying a police SWAT team rather than a better trained commando unit as ordered by Aquino. Angry outbursts over the hostage standoff have managed to merge into an investigation of illegal gambling in which top government officials and politicians are suspected of having made huge profits. At the center of the scandal involving what is know as "jueteng," a numbers game in which thousands of poor people buy slips of paper in hopes of winnings that rarely materialize, is a senior official whom Aquino named to coordinate all the forces marshalled to deal with the hostage standoff.
The day after the commission placed primary responsibility on Rico Puno, undersecretary of interior and local government, for the hostage fiasco, his name appeared at the top of a list of a dozen people named by a retired archbishop in a senate hearing as having profited immensely from "jueteng," pronounced, "hwe-teng,"literally "flower bet." Denying all, Mr. Puno said he would extend a "courtesy resignation" to Aquino, whom he served as a consultant when Aquino was in the senate. But the problem of corruption and lack of accountability goes beyond individuals, say analysts here. “It’s all part of the culture of impunity,” says Vilnor Papa, coordinator for Amnesty International here. “It’s the system. It’s not just one government agency.”
'Tiptoeing to China'
By giving the report on the standoff to the Chinese embassy here, however, Aquino did succeed in answering some of China's demands. "We hope that the Philippine side continues to handle the aftermath in an appropriate manner," said a Chinese statement, "so as to console the souls of the victims and render comfort to the bereft families and injured Hong KJong compatriots." Joker Arroyo, a member of the Philippine senate who battled Marcos on behalf of Benigno Aquino Jr. and served as Corzaon Aquino's executive secretary when she was president, has annoyed President Aquino by saying he’s running the government “like a student council" and accusing him of "tiptoeing" to China. The government, said Mr. Arroyo, was "very sensitive to Hong Kong" but "not sensitive to the sentiment of the Filipino society."
Aquino, elected president by a sizeable majority in May in a spirit of revulsion over dirty politics and misrule, put off a decision on what to do about the commission's report on the hostage standoff until his return, saying he wanted to be "fair." The suspicion is that he will compromise and continue to postpone definitive action. The Christian Science Monitor
Indonesia is mourning the death of three police officers, who were shot to death by a group of armed men while they were on duty at a precinct police office in Deli Serdang, North Sumatra, early Wednesday morning. The incident occurred just a few days after the police arrested and killed a group of alleged terrorists in the province. We should not rule out the possibility that the rampage in Medan was just a preliminary act by the terrorist groups. It is clear that these criminals have abundant resources and the skills to realize their evil agenda.
We are obliged to share our views with the nation that the courage of the terrorists to attack the police station and open fire on the officers was a blatant humiliation of the state and the government.
The killing of the officers is a slap in the face for President Susilo Bambang Yudhoyono’s government and, unless the President proves his capability and strong political will to eradicate terrorism in the short term, our country will be included on the list of dangerous zones among the international community.
However, the government cannot win the war without wholehearted support from all layers of society. Terrorists are now knocking on our doors, while many still tend to belittle the danger of these criminals as they often hide behind religious slogans.
Indonesia has made quite significant achievements in the war against terrorism in the last few years.
However, many Indonesians still cannot accept the fact that our motherland has become fertile soil for terrorism. For many of us, the terror designation is just an irresponsible attempt by Western countries to damage Indonesia’s reputation as a tolerant, democratic, inclusive and peaceful nation. Wake up and let us confront the facts.
The terror movements have now changed their strategy. The terrorist group in Medan, which reportedly has links with other armed groups in Medan and in Java, was declared by police as responsible for the recent bank robbery in Medan, which killed a police officer.
Our nation owes the murdered officers and we must make sure that the loss of their lives will be the key momentum to bring to justice those who declare they can violate any laws and commit barbaric acts in the name of religion, faith or on any other pretext. The state is obliged not just to provide state funerals for the three officers but also ensure the sustainable welfare of their families.
We declare a total war against terror. But we should never allow ourselves to justify all means to eliminate terrorism. Terror cannot be overcome by terror, although it often looks effective in the short term. Can we do that? Editorial, The Jakarta Post
