Indonesian Forestry Industry in Crisis: The Looming Political Disaster for Jokowi



The Indonesian forestry industry, much like the rest of the country, is slithering into crisis. Although commodities are somewhat recovering, the political future is uncertain. Some reports suggest the economy is “rotting from the inside out” and the opposition has called for the firing of the Forestry Minister.

The populist policies eagerly executed by team Jokowi, although getting praise mainly from Western inspired NGOs, and the 1998 old-timer demonstrator generation are economically and, more importantly, ecologically a disaster in the making. Socialist ambitions lack economic reality.

The ambitious policies of President Jokowi and former members of the NGO community who are now in the cabinet – policies such as the land for vote scheme, the creation of a secondary indigenous law based on South American ideologies, imported by UK based NGO groups and the repossession of land – are backfiring.

However, not all is well in the Kingdom with the Peatland Agency (BRG) head, the former WWF Indonesia leader Nazir Foaed, regularly catching flak from his own ministry for doing shabby work.  But the president is nevertheless steaming ahead.

Records show that today’s restoration plans are considerably close to the 2005 WWF presentations made of destroying the industry in Riau. “Seems nobody bothers about a conflict of interest when it comes to foreign NGOs,” said a parliamentarian member in Jakarta. The plans are close to a similar 1998 Greenpeace strategy against Asian investors in Brazil.

To shore up support for the Jokowi agenda, a new head of the DPD, the Dewan Perwakilan Daerah or Regional Representative Council, was appointed. The appointment of Oesman Sapta, head of the Hanura party, is seen as an attempt to unify the provinces to support the ambitious agrarian goals of the president just before the next presidential election cycle.

The economic and ecological schemes of neo-eco models of Jokowism have turned the industry on its head. Economic expectations are not being met, export figures are dropping, tariffs are being imposed, and the economy, thanks to pro-NGO, eco-policies, is going into a tailspin. Foreign NGOs can pat themselves on their back. Activism kills economies. Congratulations.

However, many are warning to beware of the angry backlash. Economic change is, if we take the history of similar ambitious policies as a gauge, a dangerous gamble.  Usually at the expense of the lower income classes.

Jokowi and his minister’s creation of new forestry schemes and agrarian fantasies are challenging the social fabric in communities and causing confusion and new conflicts. Well intentioned policies, such as the peat-swamp (the correct definition of “peatland”), have not prevented the haze. The policy of repossessing land has not benefited the economy or Indonesians.

Fights over land now in possession of the government have emerge in recent days. The conflicts highlight vested interests and new fiefdoms emerging. Jokowi’s policies have so far produced little evidence showing greater economic prosperity.

Many of the newly introduced schemes are untested, and are often the product of questionable agrarian practices. Creating a commune-like agrarian concept has not worked since Marx and Lenin, and is not likely going to work today either, regardless of how populist policies sound.

The halting of commodity producing crops, rubber, palm oil, paper, and the moratorium has not protected the environment, despite claims by NGOs and government officials. Studies show a consistent per annum 1-3 percent GDP loss as the result of poor government support for the industry.

Of course, the usual bogeyman – the forestry and palm industry – is being blamed by the myriad foreign NGOs. The reality is a lot more bio-socio-economic-ecological-complex than a foreign NGO press release.

Recent populist high-value media stunts of “symbolic” removal of Acacia trees by government officials on the concession space of APP and APRIL “enforcing the president’s directive” were met with public outcry. A visiting European academic interviewed at the Agricultural Institute in Bogor called the actions “amusing.” Public commentaries were less diplomatic.

The academic added, “When political leaders are more focused on YouTube ratings than understanding the greater dimensions of economics associated with the biosphere and the role each party plays in the agricultural sector, including the industry, much room for improvement is present.”

Expectations by Jokowi to create an agrarian revolution and the creation of new cooperatives sounds more like the creation of social communes of other failed states. These schemes are not scalable and lack economic viability. Take the Russian Revolution, China’s Great Leap Forward and Zimbabwe’s Agrarian policies for example.  The future does not bode well for anyone in agriculture in Indonesia. The South African recent disastrous agricultural reforms serve as a stark warning for Jokowi.

The recent events in Jakarta also concern many. The lack of support for Ahok by Jokowi negatively influences the market perception.  One foreign executive in Jakarta opined, “If Jokowi does not even support his own closest ally [Ahok] who helped him becoming president, what can the forestry industry expect?”

Foreign investors are, despite euphoric claims by the administration, skeptical about Jokowi’s agricultural vision. Investing in an uncertain tenure rule, insecurity, and populist polemics is high-risk.

“Indonesia is deciding between a populist-leftist and a nationalist-economic government. The fight has just begun and Jokowi, and Indonesians, need to decide what will be the course of their future,” said an EU diplomat interviewed.

“There is a gap between what the president thinks is agrarian policy and what is happening on the ground. The industry is usually caught in between, at great loss to the government one might add.”

The ban by the European Union of Indonesian products is threatening the stability of the economy in the most populous Muslim country. The EU ban is problematic in various aspects. Since the NGOs are no longer focusing on the quality of the Indonesian and Malaysian products but demanding Indonesia address human rights in Papua, revisit the 1965 issues and other non-food subjects, many view the issues raised by the EU itself as somewhat hypocritical.

Without doubt, the EU ban was the result of years of campaigns against Indonesian products.  Jokowi, domestically weak, has shown little support for his own industry or little comprehension for complex global politics.

Increasingly, executives in the industry are disappointed. “Uneasy,” one executive from a paper mill in Jambi described the relationship with the Jokowi administration. “It is easier to blame us in the industry, instead of looking inside his cabinet,” she added.

Jokowi now faces new Australian taxes on Indonesian paper products. The ruling will put new pressures on Indonesian paper exports. The US may follow. According to a 2016, US International Trade Administration fact sheet, Indonesia stands accused of price dumping, a claim the industry rejects.

Much to the delight of the NGOs, the Indonesian forestry industry is in crisis after having successfully damaged the reputation of the Indonesian products. A few Indonesian lawmakers warn about the decade long “buycott” boycott, and sanction campaigns waged against Indonesian products. Jokowi and his forestry minister so far have sided with the foreign NGO interests.

For years, foreign activists with close ties to US legislators are directing a divestment campaign targeting Asian banks supporting the Indonesian paper industry. In the US, a Canadian company went on the offensive and filed charges in US federal court against Greenpeace. Following the judgment against Ahok, few are finding solace for the industry at home.

Industry studies warn about the immediate job loss, the economic impact, loss of foreign currency trade for Indonesia, and shrinking competitive advantage facing the Indonesian producers. Eventually, the Indonesian average consumer carries the costs.

Jokowi’s lackluster economic performance received a stinging rebuke from Jake Van der Kamp, an economist for the South China Morning Post. Jakarta was quick to deflect the claim the president is generating “fake news.” However, the mood is changing, both economically and politically, and agrarian policies and the Ministry of Forestry are being viewed with an increasing skeptical eye.

The Ministry of Forestry, with its Slap-Around-Policy eager to hit the industry almost daily, does not recognize the harm the government causes.

“A backlash from the industry should come to no surprise,” a market economist for a Singapore based bank said. “The recent resistance by APRIL is silently applauded by many in the industry, even their competitors.” He added,  “It’s a fight of David against Goliath, only this time the Goliath is the government.”

Jokowi’s, radical domestic reform was the feel-good-moment in election campaigns.  But history shows that radical reforms cause greater damage than benefits to society.

Insiders warned the Indonesian Forestry Minister of her actions harming the economy, and therefore the government. Many in Jakarta are asking how long it will be before the president reviews the minister’s performance and that of his NGO followers in the cabinet.


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