WEST KALIMANTAN - DWINDLING FORESTS AND

UNCLAS SECTION 01 OF 06 JAKARTA 001672

SIPDIS

SENSITIVE
SIPDIS

DEPT FOR EAP/MTS AND EB/IFD/ODF
TREASURY FOR TFCA - BERG
DEPARTMENT FOR OES/IET and OES/ETC

E.O. 12598: N/A
TAGS: SENV EAID ECON TBIO ENRG ID
SUBJECT: WEST KALIMANTAN - DWINDLING FORESTS AND
INFRASTRUCTURE CHALLENGES

REF: 05 JAKARTA 11316


1. (SBU) Summary: West Kalimantan's abundant forest and
fresh water resources are under threat from logging and
plantation companies, though the government has recently
cracked down on some illegal loggers. The majority of
tribal peoples in the province rely on forest resources for
a livelihood, including fresh water fish from the largest
lake ecosystem in Southeast Asia and the country's longest
river, the Kapuas. Land clearing by burning continues to
choke the region with haze during dry season, making the
Pontianak airport unusable and destroying the rich peat of
coastal areas, important for water conservation. The
province has low education and human development levels,
inadequate health care, and poor infrastructure. Severe
electricity shortages mean constant rolling blackouts,
while costly diesel generators keep the lights on. West
Kalimantan officials and non-governmental organizations
(NGOs) are seeking to diversify the province away from
logging into more sustainable growth areas, but lack
funding to compete with the $7 billion plantation and
logging businesses. Cross-border smuggling of endangered
species continues, but international and local NGOs are
providing direct assistance for flora and fauna
conservation, as well as educating local people to protect
forest resources. Eco-tourism is just getting started but
faces infrastructure challenges. Provincial officials and
NGOs are enthusiastic about the Heart of Borneo initiative,
but forest-dwelling ethnic groups want compensation for
conservation. Donors have already provided a great deal of
assistance, but additional community development and
conservation programs are needed to sustain what remains of
the province's dwindling forest resources. End Summary.

Profile of a Province
--------------


2. (U) West Kalimantan's has population of 4.2 million
occupying 146,000 square kilometers, Indonesia's fourth
most sparsly populated province. It is home to several
ethnic groups described collectively as Dayaks, 95% of whom
live in and around forested areas and national parks,
relying mainly on forest resources for their livelihood.
The Santarum Lakes are the largest fresh water lake
ecosystem in Southeast Asia, over 100,000 hectares in rainy
season, connecting to several huge rivers. The Kapuas is
the largest river in Indonesia (1,143 km) and important
transportation waterway. The province's important water
resources are under threat from logging and plantation
activities. West Kalimantan is relatively poor, and its
per capita income rose above $1,000 in 2006 for the first
time since the financial crisis.

Forest Resources Dwindling
--------------


3. (SBU) In 2003-04, Indonesia had the highest rate of
deforestation in the world at 2.5 million hectares per
year. One recent media report described Indonesia as
"losing a soccer field of forest every minute." West
Kalimantan's is an example of this: its rich forests have
been much diminished in the past two decades. Much of the
9.4 million hectares of forest are heavily degraded or gone
and logging concessions have claim to nearly a third of it.
A USAID contractor and expert on Kalimantan forest issues
told us that labeling forest as "protected" or
"conservation" mean very little in practice. For example,
of the "Nature Reserve" forest classification, only 68,681
of 259,585 hectares or 26% are actually primary forest.
The rest is secondary forest, degraded or deforested. "A
label does not bring any protection. It is how it is
managed that is important. In some cases, so-called
'protected' forests are losing trees more rapidly than non-
protected areas." The stunning rainforest of Betung
Kerihun National Park is 800,000 hectares, but its buffer
zone is reportedly under threat from a logging concession,
according to the World Wildlife Federation (WWF).

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Table 1: West Kalimantan Logging Concessions

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Logging (HPH) (1) 1.5 million hectares
Industrial (HTI) (2) 1.6 million
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TOTAL 3.1 million hectares

(1) HPH is a concession for selective logging of primary
forest.

(2) HTI is a concession for planting and harvesting
industrial timber. HTI can be clear cut if replanted.

Jobs Disappear with the Trees
--------------


4. (U) Over the past two years, provincial GDP growth rates
have lagged significantly behind Indonesia's national GDP
growth rates, due largely to a decline in the forestry
sector. Forestry as a percentage of provincial growth has
declined considerably, from 5.2% in 2002 to 1.5% in 2006.
Bank Indonesia (BI) and other officials we spoke with
attribute this to the loss of forest resources as well as
the government crackdown on illegal logging. An estimated
25-30,000 jobs in sawmills were lost in 2006. "One sawmill
collapse cost 18,000 jobs," Pontianak Mayor Buchari
Arrahman told us. Services, trade and retail jobs have
replaced some of these jobs, but unemployment remains about
7%, lower than Indonesia's national average. As forestry
declines, plantations are gradually contributing more to
growth, increasing from 7.9% in 2002 to 8.9% in 2006.

Legacy of Bad Policies and
Enforcement Challenges
--------------


5. (SBU) Officials from the regional Ministry of Forestry
office (BKSDA) told us that bad policies going back to the
early 1990s contributed to the loss of a great deal of
forest, including precious hardwoods. Some were replanted
with faster-growing eucalyptus. Illegal mining, including
illegal gold mining with mercury, also did a lot of damage
to the ecosystems. The provincial authorities are in
charge of policing the protected forest areas, but the
central government is in charge of the national park areas.
Just in Betung Kerihun National Park alone, 30,000 cubic
meters of wood has been taken illegally to Malaysia. The
forested areas are just too big for guarding, we were told.
Small ports are used for exporting tropical hardwood and
buyers are everywhere: in Europe, Asia and North America.
"Some of the companies get a stamp in Malaysia, showing it
is Malaysian hardwood, when in fact it came from
Indonesia," one official told us. The Indonesian armed
forces (TNI) is helping to stop illegal trade, but only at
formal border crossings.


6. (SBU) The HPH logging concession permits were at the
regency (kabupaten) level after the 1997-98 crisis, but
were badly managed in a chaotic land grab. The Ministry of
Forestry in 2001 removed the regencies authority over
concessions and cancelled many logging permits in 2002.
Regencies can still propose them, but the Ministry of
Forestry has the final approval authority. Professor
Heruyono Adimasputro, a professor of Agriculture and
Forestry at the University of Tanjungpura noted that of the
three levels of forest -- low, middle and high - the
lowland forest of the province is mostly gone. (Note: The
lowland and peat swamp forests include some of the most
important biodiversity and habitat for orangutans and other
wildlife.) After the Ministry of Forestry cancelled
logging concessions in 2002, Adimasputro told us, no one
was monitoring the situation. "Outsiders came in and
logged illegally, but enforcement is better now," he noted.
A USAID forestry expert concurred, telling us, "I am aware
of no successful moratorium on logging in Southeast Asia.
It generally brings more problems." Adimasputro also
believes that 75% of the money from illegal logging ends up
in Jakarta. "All that new property construction in Jakarta
is paid for by these forests," he said. Some of the Bupati
or regency heads are also part of the problem. "They

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figure it is too late to conserve, so they might as well
exploit what's left."

Cross-Border Smuggling
--------------


7. (SBU) Cross border smuggling of Indonesian forest
resources into Malaysia's Sarawak state, which shares a
long border with West Kalimantan, is also believed to be a
major problem. Along with timber, rare species of birds,
fish and mammals routinely disappear over the border into
Malaysia. Indonesian officials complain that the Sarawak
state government officials are involved in some of this
smuggling. Commonly trafficked items include exotic birds,
lizards, rare freshwater fish such as the arowana, and
orangutans. Mr. Maraden Purba of the Conservation Office
of BKSDA said that some orangutans are trafficked by sea to
Thailand. "They give the males alcohol and then stage a
fight for shows," he said. Some of the timber and animals
are transported by river and therefore harder to intercept.
"Everyone is paid off. It's a problem of money," lamented
one official. Professor Adimasputro confirmed: "If people
are paid to conserve and replant, they will go for it.
They are looking for income. They no longer want to live
on plantation products. Everyone wants a cell phone, a
motorcycle, a television." WWF agreed, "Alternative
livelihoods are crucial: there are not enough police or
authorities to stop the trade in rare species," they told
us.

Flora and Fauna Conservation Efforts
--------------


8. (U) The World Wildlife Foundation (WWF) and other
conservation NGOs are working with local authorities and
forest-dwelling people on a variety of projects to assist
conservation. Professor Adimasputro said the same thing
noting, "In the United States, national parks only have
plants and animals living in them. Here, nature reserves
are for animals but national parks sustain the livelihoods
of several ethnic groups." WWF programs include:
community-based development; habitat management; education
and awareness campaigns. Conservation officer at BKSDA
Maraden Purba emphasized that the most important thing for
conservation is to get local people inside and in the
buffer zones of forests empowered and working together.


9. (U) WWF works with seven forest-dwelling ethnic groups
to conduct awareness campaigns about conservation via
"mobile cinema," teach methods of organic farming and
alternative job creation. There are considerable disputes
over fish resources. Local people have been using small
gauge nets, which are not allowing fish to get to
reproductive age. Outsiders are coming in using poison or
electric shock to kill fish which the locals rely on. WWF
has worked closely with local government officials to help
mediate these disputes. WWF is also facilitating
replanting projects in many areas which are in most danger
of erosion and degradation from logging activities. WWF
also runs education campaigns about endangered species.
"Some people just don't know," Hermayanti Putera of WWF's
West Kalimantan Program told us. "One sawmill owner had
three baby orangutans, but handed them over when we
informed him it was an endangered species." It also works
with tribal peoples to reduce killing and trafficking of
endangered birds including the ceremonially important
hornbill. Project managers from another NGO we met with,
the Riak Bumi Foundation (Yayasan) said they were helping
local people to market wild honey from the rainforest,
paying a traditional group of honey hunters. They plan to
team up with another NGO to create forest patrols with 90
local people, starting in 2008.

Haze: Annual Environmental Disaster
--------------


10. (SBU) Regarding the annual problem of haze, heavy
pollution from the burning of forest and peat to clear land
for farming every dry season, BKSDA officials showed us a
map indicating most of the coastal area north and south of

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the provincial capital of Pontianak consists of peat.
Roads outside the capital are in poor condition. "It is
hard to get the fire fighting equipment in," one official
told us. Burning is also the cheapest land clearing
method. Professor Heruyono Adimasputro noted that the peat
is 15 meters deep in some areas and is crucial for water
conservation and management. "Once the peat is gone," he
said, "we'll have terrible flooding in Pontianak and other
coastal areas." The province has 16 fire fighting unites
with 240 trained personnel, which are also helping to
conduct public awareness campaigns. (Note: The USG, Asian
Development Bank and other donors have provided extensive
training, technical assistance and other aid for fire
prevention and response to Indonesia for over a decade,
much of which has not been utilized or consistently
implemented.)

Heart of Borneo
--------------


11. (U) We discovered a lot of enthusiasm for the "Heart of
Borneo (HOB)" initiative during our trip. "Progress and
interest is faster than we expected," Hermayanti told us.
WWF had an HOB display for a festival at the provincial
museum in Pontianak. Local officials said they hoped it
would bring more attention and resources to the
conservation efforts in the area. The head of BAPEDA
recognizes the importance of the program, and advised us
that the local people want compensation for conservation.
"People from Kapuas regency come here and ask, 'where is
the compensation?'" He hopes the central government and
interested donors will help provide resources to local
people to patrol the protected area and develop alternative
sources of income. Members of the Riak Bumi NGO expressed
concern about upcoming January 2008 elections for Governor.
(The incumbent governor will end his term on January 13,
2008.) "We have not seen any of the five candidates make
strong statements about conservation. Their policy on HOB
is unclear. If the new Governor allows plantations north
of Santarum Lakes, that ecosystem is finished and HOB will
be irreparably damaged."

Severe Infrastructure Problems
--------------


12. (SBU) BAPEDA officials told us that the province's poor
infrastructure was a severe impediment to human development
and overall growth. Rasyid said that money from logging
Kalimantan went to Jakarta and was not reinvested in the
province. "Most timber companies have now collapsed, and
we're left to clean up the damage," he complained. Erosion
from illegal logging has silted up Pontianak harbor so the
draft is only 5-6 meters: no ships larger than five-tons
can enter. "We need at least one major international
seaport with deep draft," Rasyid said. He noted that a
Japanese businessman seeking to export the province's fast
growing and remarkably refreshing aloe vera chinensis, had
to send it through Tanjung Priok port near Jakarta, rather
than from Pontianak. Since Pontianak airport often cannot
be used during haze season (3-5 months),BAPEDA would like
to construct an alternate airport at Bengkayang to the
northeast, which would serve three regencies. (Comment:
This would be treating the symptom and not the cause, and
also provide procurement opportunities for GOI officials.)


13. (SBU) Rasyid noted that the province's long-term road
network plan requires Rp 15 trillion ($1.7 billion),but
the central government's budget allocation (DAU) for the
province through the Ministry of Public Works is only about
Rp 1 trillion ($110 million). BAPEDA complained that the
province's tax revenue paid into the central government is
not coming back to the province in a large enough budget
allocation. BAPEDA official Memet Agustiar said, "The
province cannot borrow for infrastructure. We hope to
eventually issue sub-sovereign bonds." Agustiar said they
were working with Nikko Securities in Japan to create an
investment fund for the province. The mayor of Pontianak
told us that the water supply was an urgent need. Illegal
logging and burning of peat has also led to the
contamination of the fresh water supply with brackish water

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in dry season. BPKP head Hari Setiyadi also told us that,
"Nothing that PDAM (the state water authority) supplies is
drinkable, and many areas get no water supply at all."

Constant State of Rolling Blackout
--------------


14. (U) BI officials told us that due to the province's
poor infrastructure, prices for fuel and other goods in
remote villages are much higher than in Pontianak. For
example, a liter of premium gasoline costs Rp 4000 ($0.44)
a liter in Pontianak, but Rp 7,500 ($0.83) in Putussibau,
one of the eastern regencies. The price of electricity is
much higher in West Kalimantan than on the Java-Bali grid.
Installed capacity is only 200 MW and demand is much
higher. "The province is in a constant state of rolling
blackouts," BI told us. "Every building spends several
thousand dollars on a generator. A medium-sized home can
spend $50 per month on diesel fuel." Pontianak is right on
the equator, but despite the intense sunshine for twelve
hours a day, there was not a solar panel to be seen
anywhere. "There was no incentive to invest when diesel
fuel was subsidized. Now maybe it will be time to think
about other energy sources," BAPEDA officials told us. The
Mayor of Pontianak Buchari Arrahman also seeks solar energy
investment. "We're an equator city. We need solar power
and a laboratory to study the climate here."

Formidable Development Challenges,
More Private Investment Needed
--------------


15. (U) BI and Planning Office (BAPEDA) officials told us
that the education level and human development index for
the province is still low. There are too few doctors:
health care and clinics are inadequate especially at the
village and district level. The university only started a
medical school two years ago. The head of BAPEDA, Mr. H.
Fathan A. Rasyid told us that, "Most doctors come from
Java, stay for two years, then go back." There are too few
teachers and many do not wish to work in remote areas.
Many tribal peoples do not complete basic education. We
asked businesses in the local Chamber of Commerce (KADIN)
what KADIN was doing to attract investment. KADIN told us
that most companies were interested in trade in
agricultural products such as pepper, fruits, rubber and
cocoa. The market is too small for many companies, KADIN
members acknowledged. Malaysian companies take raw
materials from the province and process them over the
border. "We have rubber plantations but no manufacturers
of rubber products," one member told us. On the positive
side, the retail and services sectors are growing.


Ecotourism Just Getting Started
--------------


16. (U) The Deputy Bupati in Putussibau Yosef Alexander,
WWF and others noted that lack of infrastructure was also
impairing the development of ecotourism. Flight
connections and ground transportation are unreliable.
Facilities and equipment are poor. WWF is training some
local people in water safety and rescue for potential
future white-water rafting business, but getting the
equipment is difficult, they noted. WWF is targeting
international tourists and working with a travel agency in
Germany. Part of the problem is that during Europe's prime
vacation months in summer, Kalimantan is covered in choking
haze. Still, local officials and NGOs, even churches, have
been trying to develop home-stays and eco-lodges,
handicrafts for sale to tourists, even a challenging cross-
Borneo trek. Kapuas Hulu regency and WWF have also
developed a website, www.kompakh.org, to offer tours and
provide more information about the area.

Requests for Donor Assistance
--------------


17. (SBU) BKSDA, conservation officials and NGOs requested
USG and donor assistance for the following. We have not

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vetted these requests with other donors to see what has
already been planned or provided. It is also not clear how
much budget assistance the West Kalimantan authorities have
requested from the central government for these priorities.

A) Increased monitoring of cross-border timber transit;
Certification of wood for export and domestic markets;

B) Training of local people and authorities;

C) Water systems and watershed management;

D) Alternative employment for local people (i.e.
handicrafts instead of trafficking endangered species);

E) Equipment for combating peat and forest fires;

F) Compensation for conservation, perhaps via a carbon
trading or other mechanism.

G) Assistance with Heart of Borneo conservation efforts.

HEFFERN