PT Bina Duta Laksana (PT BDL) is an industrial logging and pulp wood plantation company that supplies tropical timber and plantation fiber to Asia Pulp and Paper (APP), Indonesia’s largest pulp and paper company that has recently moved its headquarters to China. With PT BDL, APP is now grabbing land, decimating the farms, wetlands and forest lands once considered useless or unprofitable for the logging sector. The new frontiers and increased impacts of industrial pulp wood plantations are taking a serious toll on Riau’s forests, leaving only 37 percent of the forest that existed in Riau in 1985.

35 Indonesian NGOs sent a letter to companies to ask them to reduce your company’s consumption and environmental footprint by establishing social and environmental safeguards on procurement and by helping to bring about crucial changes to the Indonesian pulp and paper industry’s practices as well as supporting related government policy reforms. The Indonesian NGOs request that investors adopt similar safeguards in relation to investments in Indonesia’s pulp and paper sector.

Indonesia has one of the world’s largest areas of remaining forest but also one of the world’s highest deforestation rates. Reported exports from its lucrative timber sector were worth $US6.6 billion in 2007, second only to Brazil and worth some $2 billion more than all African and Central American nations combined. But in recent years almost half of all Indonesian timber has been logged illegally at a staggering cost to the Indonesian economy and public welfare.

In this report Human Rights Watch details these costs and their human rights impacts. Using industry-standard methodology, we estimate that the Indonesian government lost an average of nearly $2 billion annually between 2003 and 2006 due to illegal logging, corruption, and mismanagement. The total includes: forest taxes and royalties never collected on illegally harvested timber; shortfalls due to massive unacknowledged subsidies to the forestry industry (including basing taxes on artificially low market price and exchange rates); and losses from tax evasion by exporters practicing a scam known as “transfer pricing.”

A report into how corruption on the part of Indonesian police and government officials is to blame for continued illegal logging in Indonesia’s national parks. 

In 1997, a major financial crisis struck Asia. In the wake of that crisis, the International Monetary Fund and the World Bank provided large loans to the Indonesian government in return for their commitment to implement policy reforms intended to stabilize the economy and rekindle growth. Those reforms included various measures explicitly designed to improve forest management, most of which focused on forest concessions run by large Indonesian conglomerates.
The strategy those two agencies adopted had three major flaws regarding forests. First, at the same time that the two agencies were supporting forest policies intended to limit unsustainable logging, they also encouraged several non-forest policies that actually stimulated deforestation and more widespread logging. Second, by the late 1990s large forest concessions were responsible for an increasingly small portion of forest clearing and unsustainable logging. Logging outside concessions and land clearing for agriculture had become the main sources of forest destruction. Hence, focusing on concessions dealt with only a limited piece of the problem. Third, a number of the specific forest concession reforms endorsed by the IMF and the World Bank may have actually increased pressure on Indonesia's forests.

The research conducted for this study was funded, in part, by WWF-Austria, WWF-Switzerland, and the United Kingdom’s Department for International Development. WWF-Indonesia has also assisted in the dissemination of some of the study’s preliminary findings. I gratefully acknowledge the support of each of these organizations. Any opinions presented in the following chapters, however, are those of the author and do not necessarily represent the official policy of any of these organizations.