Indonesia: Govt to reform forestry revenue system to foil rampant graft

Hans Nicholas Jong, The Jakarta Post 23 Feb 16;

The government is planning to reform its non-tax state revenue (PNBP) system in the forestry sector following a finding that corruption in the sector is causing trillions of rupiah in state losses every year.

The national plan is laid out in a draft by the Corruption Eradication Commission (KPK) and other related government institutions including the Finance Ministry, the Environment and Forestry Ministry and the Supreme Audit Agency (BPK).

KPK forestry-sector investigator Hariadi Kartodiharjo told The Jakarta Post on Monday that related government institutions would kick off an integrated plan to improve the revenue system on Wednesday.

“The draft has been finalized. There will be a brief presentation [during the signing ceremony] to make sure that every government institutions adopts the plan that has been discussed.”

The plan is a follow-up on a KPK study published in October, which found that state losses from missing potential non-tax state revenue in the forestry sector between 2003 and 2014 amounted Rp 86.9 trillion (US$521 million), or Rp 7.24 trillion per year.

The number was based on a calculation of all forestry products that could be collected and shows the necessity of establishing a non-tax state revenue system to prevent illegal logging.

The KPK report cited ineffective law enforcement, inaccurate production data and auditing by timber plantations, a lack of transparency on royalties data within government ministries and poor coordination between central and regional administrations as causes for the lost timber revenue.

The Environment and Forestry Ministry responded to the finding by revamping its online system as well as conducting an audit, according to Hariadi.

“But it’s not just the Environment and Forestry Ministry [that needs to act]. The Finance Ministry and the BPK also [have to be involved],” he said.

Therefore, the national plan stipulates that there should be an online non-tax state revenue system connected to the Finance Ministry, the government institution tasked with collecting non-state tax revenue, said Hariadi.

“There is already an online system but it’s still partial. For instance, the system is being managed by the directorate-general of sustainable forest products management at the Environment and Forestry Ministry, but it will now be merged with the system at other government institutions,” he said.

Moreover, the BPK is preparing a list of agro-forestry companies that are prone to corruption.

“These companies are at high risk from a financial perspective,” Hariadi said. “The BPK is also designing an appropriate audit system.”

He added that the reform would be implemented in 12 provinces: Aceh, North Sumatra, West Sumatra, Jambi, Palembang, West Kalimantan, Central Kalimantan, South Kalimantan, East Kalimantan, Central Sulawesi, South Sulawesi and Papua.

“These provinces have a high potential for non-tax state revenue. It follows that they also have a high potential for state losses,” said Hariadi.

He said that the KPK would help these provinces to collect non-tax state revenue in the forestry sector.

“Many provincial administrations are complaining that they find it difficult to collect data from regencies. So, in the national action plan, each governor must ask for data [on the forestry sector] from regency administration in a uniformed format. The data will then be forwarded to the KPK. So, if there are any obstacles in collecting the data, the KPK will call the regents [in question and ask them to submit the data],” Hariadi said.

Indonesia Corruption Watch (ICW) activist Emerson Yuntho said that the national action plan should be accompanied by a thorough evaluation and monitoring process.

“We’re worried this will become another action plan with no comprehensive evaluation and monitoring,” he said.