[asia-apec 1288] Fwd: Foreign Debt Fuels Forest Fires In Indonesia

[tpl at cheerful.com]

FYI

>Date: Tue, 3 Aug 1999 11:04:39 -0400
>Sender: stop-imf at essential.org
>From: Robert Weissman <rob at essential.org>
>
>Down To Earth/International Campaign for Ecological Justice in Indonesia [UK]
>August 2, 1999

>FOREIGN DEBT FUELS FOREST FIRES IN INDONESIA

>Forest fires are spreading in Sumatra and Kalimantan as the dry season
>begins. There are fears of a repeat of the disastrous 1997/8 fires
>estimated to have damaged 10 million hectares of land, much of it tropical
>rainforest. Despite increased concern from Indonesian environmentalists and
>international forestry researchers, there is even less chance of Indonesia
>taking effective action to prevent the fires because of political and
>economic instability in the country. In addition, international financial
>institutions are pressurising Indonesia to increase exports, including
>timber, paper pulp and palm oil. These are the very industries which fuel
>Indonesia's forest fires.

>International donors, led by the World Bank,  pledged a US$ 5.9 billion
>loan last week to help the Indonesian government balance its budget this
>year. This is in addition to the 1997 US$43 billion IMF bailout. Leading
>Indonesian NGOs are opposed to any increase in Indonesia's foreign debt,
>which now stands at above US$ 150 bn. Indonesia was hardest hit by the
>Asian economic crash which caused the value of its currency to plummet, the
>collapse of its banking system and widespread bankruptcies. It has also
>been slowest to recover with the result that many of its 210 million
>population have sunk into deeper poverty. The IMF and World Bank see
>plantation crops and natural resources exports as a means of economic
>recovery. It is Indonesia's forest communities that will bear the long-term
>costs of these policies.

>Companies and farmers in Indonesia that use fire as a cheap way of clearing
>land for agriculture and commercial plantations of palm oil, rubber and
>timber are not afraid to flout the law in the current political vacuum.
>Over 80% of the forest fires in 1997/8 were caused by private companies
>belonging to powerful conglomerates with close connections to Suharto and
>his family. No government action was taken against 176 companies named by
>the Forestry Minister as setting fires. The reformist, but weak, government
>of President Habibie is in the process of being replaced. Yet seven weeks
>after the first democratic elections in over thirty years, the final
>results have not been announced.

>Conservative estimates by international experts put the damage of  the
>forest fires plus the 'haze' for 1997 alone at over US$4.4 billion. This is
>equivalent to about 2.5% of Indonesia's GDP at the time. The principal
>damages include US$493 million in timber losses; $470 million in lost
>agricultural production; $1.8 billion in ecological services (such as foods
>and medicine, water supply, erosion control); and $272 billion for the
>contribution to global warming from carbon release. This figure does not
>include loss of life, damage to health, malnutrition due to crop
>destruction or biodiversity depletion. Once again it is local communities
>who bear the brunt of these hidden costs.

>Indonesian forestry policy has actively promoted the destruction of the
>country's rainforests over the past three decades. Indonesia has the third
>largest area of tropical rainforest left in the world, but it is
>disappearing fast. Figures from a UK-funded aid programme show
>deforestation rates are in the order of 1.5 million hectares per year and
>less than 100 million hectares of forest remain. Over 60% of Indonesian
>timber is the result of illegal logging. Timber and wood products are
>Indonesia's third biggest export earner after oil & gas and textiles.
>The approach to dealing with Indonesia's economic collapse has, until now,
>focussed on the need to avoid defaulting on its massive debts and stay in
>the international financial system. Creditors - both public institutions
>like the International Monetary Fund and the World Bank as well as private
>banks - are not paying the price for their ill-advised bank-rolling of the
>Suharto business empire. Independent economics experts in Indonesia have
>expressed concern that the debt service ratio is approaching 60%.

>Furthermore, due to corruption and lack of monitoring, these huge loans are
>not achieving their aims and merely increasing Indonesia's indebtedness.
>Last year a World Bank internal report estimated that one-third of  its
>project loans disappeared. Now the Urban Poor Consortium claims that as
>much as 70% of Social Safety Net funding intended for the poorest of the
>poor has been channelled off by local officials. At least US$1.5 billion
>have flowed through the Reforestation Fund in the last decade. Instead of
>replanting forest trees, this money was used to subsidise the clearance of
>natural forests for plantations, the failed million hectare swamp rice
>project and a paper pulp plant in addition to non-forestry purposes such as
>the state aircraft company, the national car project and supporting the
>currency.

>The forest fires are a symptom of the crisis in Indonesian politics,
>economics and forestry policy  - policies which are influenced by
>international donors through bilateral aid programmes and contributions to
>the IMF and World Bank. Quite apart from issues of biodiversity loss and
>global climate change, Indonesia's forests are important as they are home
>to millions of Indonesia's indigenous peoples. They also protect the
>livelihoods of many tens of millions more in farming and urban communities
>through preventing soil erosion and regulating water supplies for
>agriculture.

>There are several important immediate steps that the Indonesian government
>could take:
>* Enforce existing laws that regulate the use of fire for land clearing.
>* Identify and prosecute the companies responsible for illegal burning, by
>making prompt use of fire monitoring data provided through regional and
>international programmes.
>* Stop pushing the new Forestry Act through the interim parliament

>In the longer term, the following measures would prevent massive forest
>fires in Indonesia in future:
>* Changing land and forestry laws to recognise the rights of forest
>communities to ownership and access of forest resources.
>* Abolishing regulations which encourage companies and people to clear
>forests as a means of claiming ownership.
>* Reducing targets for conversion of forest lands to plantations.

>Action that international agencies, foreign companies and governments in
>Europe and North America could take:
>* Stop promoting exports of palm oil, timber and wood products and paper
>pulp as the key to solving Indonesia's economic crisis.
>* Prioritise the demands of forest dwellers and local communities for
>socially and environmentally sustainable development in all aid and loan
>programmes.
>* Press the Indonesian government for full compliance with conditions
>covering consultation with civil society groups on forestry policy reforms
>and the use of the Reforestation Fund for its intended purpose on existing
>loans before negotiations on any future loans are considered.
>* Ensure that the IMF and World Bank apply their own policies on land
>rights, environmental protection and resettlement in all their lending to
>Indonesia, including structural adjustment loans.
>* Suspend any further investment in oil palm and paper pulp plantations
>which destroy forests and violate indigenous peoples' rights.

>LC 31/7/99