Indonesia Country Profile

Environment, Natural Resources and Extractive Industry

Business Corruption

According to Transparency International Global Corruption Report 2009, illegal logging takes place in thirty-seven out of forty-one national parks. In addition to the tremendous ecological cost, illegal logging costs the nation up to USD 4 billion a year. Further, Global Integrity 2008 reports that company inspections by government officials to ensure public environmental standards are not always carried out in a uniform and even-handed manner. Allegedly, in many cases, a company can bribe the officials to get the certificate.

Under-reporting of log production in the forestry sector is common and is used to circumvent legislation and enable the smuggling of timber.

Companies which received loans for forestry sector projects from state-owned banks under the industrial forest programme are accused of spending the majority of the money on projects in other sectors, according to an independent audit. Additionally, the government is planning to cancel their debts. Environmental observers argue that giving those companies a debt reprieve would be rewarding them for illegal logging operations.

Political Corruption

Indonesia is the world's largest exporter of tropical wood. However, more than half of the country's timber production is illegal and decentralisation has fostered local attempts to control and exploit natural resources and created localised corruption. The military is reported to be engaged in illegal resource exploitation such as logging and mining. Even in national parks, which cover about 10% of the country, resource exploitation is heavy and unsustainable, owing to illegal logging activities. According to Transparency International Global Corruption Report 2009, Adelin Lis, a successful timber industrialist, was acquitted of corruption and illegal logging charges in November 2007 despite a strong government case against him, including nearly forty eyewitnesses. This affair shed light on the links between environmental destruction, judicial corruption and political interference. This case elucidates how environmental laws are openly flouted by the private sector, often in collusion with local and provincial government officials. As a consequence, vast areas of natural rainforest have been cleared and replaced with fast growing plantations to produce wood fibre for paper-making, as well as palm oil.

In 2009, the Corruption Court condemned a former Indonesian legislator, Al Amin, for receiving bribes in connection to the conversion of protected forests in Bintan, Riau Islands and in Banyuasin, South Sumatra.

Frequency

The Bertelsmann Foundation: Transformation Index - Indonesia 2010:
- Approximately 500,000 hectares of rainforest are illegally logged each year.