Government Failure

Deforestation can be attributed by the insufficient efforts by the Indonesian government to enforce regulations. Although moratoriums have put implemented, however the corrupted Indonesian government renders the environmental policies futile. Corruption in Indonesia most probably originated at the top of the government; where well placed rent seekers (people who accept illegal payments, bribes and political favours) including ex-President Suharto formulated policies resulting in the creation of rents.  Low-level government officials were also motivated to accept bribes as they receive very low salaries and are often demoralised and poorly motivated.

These corruptive practices limits the effectiveness of current regulations such as the restriction of the number of new concessions given to firms to deforestation, as forest concessions will be allocated to hose who offer the highest bribes, with the forest rent allocated between bribers and the bribed.

Moreover, an audit in 1998 found the amount lost to misappropriated reforestation fees alone to be in excess of $5.5 billion for the preceding five years. There also appears to be widespread irregularities in reporting both supply and industry production by the ministry, suggesting deliberate under-reporting to hide illegal harvests. Fund misappropriation reduces the amount of funds put into reforestation, which limiting the the effectiveness of the governmental efforts.

In addition, Indonesian forest royalties were set very low, allowing the private sector to capture high value ‘superprofits’. This encourages firms to log rapidly because of superprofits, exacerbating the rate of deforestation.