Executive summary

Corruption – the abuse of entrusted power for private gain – undermines good governance and the rule of law. Corruption in the forestry sector further degrades the environment, threatens rural communities and robs the public of billions of dollars each year. Transparency International (TI) is committed to promote corruption-free forest governance that enables sustainable forest management, increased economic development, poverty reduction and environmental protection. To help achieve this objective, TI Indonesia (TII), through the Forest Governance Integrity Programme (FGI), will monitor the existing corruption risks and anti-corruption tools in the forestry sector in Riau, Aceh and Papua, Indonesia.

The methodology of the research is based on the FGI Risk Manual1 which provides a generic framework for assessing the impact and likelihood of corruption in the commodity chains related to the forestry sector and the anti-corruption tools that are available, in order to establish the high-risk corruption areas for focused advocacy. Using this analysis, several high risk areas for each province are proposed:

In Riau:

1. Regulatory chain: Bribery used to change the zoning of an area within the spatial land use planning and forestry planning to allow logging.

2. Licensing chain: Bribery used to acquire a licence without a technical review or recommendation, or through the manipulation of data and analysis.

3. Timber supply chain: Bribe the person in charge of Area management planning to falsify the needed documents, conflict of interest; public officials owning shares of logging company.

4. Enforcement chain: Bribery used to persuade officers to be hard on competitors, to avoid reporting violations or to withdraw sanctions.

5. Certification chain: Bribery used to pass certification processes without meeting required standards.

Each of these areas was judged to have a high impact and high likelihood of occurring in Riau, according to desk-based research and stakeholder consultation. Bribery to weaken regulations relating to land use zoning has an impact on local communities and their access to the forest and increased forest resource exploitation.

Weakness of regulations and legislation has triggered various interpretations of forest concession licence regulations by different stakeholders. As such, law enforcement finds it difficult to implement laws and punish those who violate them.2 These different interpretations of the law have created opportunities for law enforcers to profit from the taking of bribes from operators for actively avoiding following the law.

Efforts of law enforcement on violation of rules often fail as well as the effort of lawsuits or legal standing by the community based on Environment Regulation and Forestry Regulation. The issued of anti-corruption regulation and Spatial Land Use Regulation is a positive opportunity because both of them recognize violations by state officers as criminal offences.

While certification systems are flawed and often provide opportunities for manipulation, they are also an opportunity to increase monitoring of forest operations and put pressure on concession holders to follow the rules. 

In Aceh:

1. Land rights, e.g. bribery to unduly allow the use of land or to manipulate documents.

2. Licensing, e.g. bribery to obtain licences, change the forest zoning or to manipulate data from EIA reports.

3. Forest management and utilisation of forest products, e.g. bribery to let companies log outside the authorised area.

According to the risk assessment carried out with stakeholders in Aceh, corruption risks run through the whole commodity chain, from the licensing process to forestry operations and the enforcement of laws and regulations. Licensing appears as a particular issue, closely related to land rights. Bribery may be used to obtain licences, to manipulate the information that is used to make decisions on licensing, or to avoid investigations and prosecution in case of violations. Instruments that address these risks do exist, but need to be reinforced. For instance, the one stop services office (P2TSP) and TAKPA (Aceh government anti-corruption team) could be strengthened and better monitored. Laws and regulations also exist, but are not always specific enough, and there may be confusion and conflicts between legislation from the central government and from the local government. Finally, the difficulty for the public and civil society to access information is an obstacle to be addressed in order to control corruption risks.

In Papua:

1. Laws and regulations: Abuse of authority to weaken regulations, bribery to expand operations to protected areas.

2. Forest management, e.g. bribery to falsify EIA documents. 

3. Revenues and taxes, e.g. bribery to funnel tax revenue away from appropriate recipient.

In the province of Papua, corruption was found to be amplified by the lack of human resources capacity within the government to monitor forest management activities. Therefore the falsification of documents or reports such as Environmental Impact Assessments (EIA), are more likely to occur. It has been identified in the risk mapping exercise as an issue that spans over several areas: the awarding of licences, harvesting, the transport of timber, etc. This has a huge impact on the sustainability of forestry activities, since it undermines the process of verification and monitoring of forest management practices. In addition, the implementation of legislation, as mentioned for Riau and Aceh, is made more difficult by conflicts between certain laws or regulations, e.g. on spatial planning and regional autonomy.

Besides the immense financial losses that the illegal timber trade (driven by corruption as explained), which are estimated to be in the range of trillions of rupiahs3, some loopholes in the regulations related to revenue collection may trigger fraud and underpayment of taxes on timber trade.