The Human Rights Consequences of Illegal Logging and Corruption in Indonesia’s Forestry Sector

“Wild Money”

The Human Rights Consequences of Illegal Logging and Corruption in

Indonesia’s Forestry Sector

Summary 1

Methodology 6

Recommendations To the Government of Indonesia 7

To Indonesia’s Major Trading Partners, including China, Japan, Malaysia, South Korea, the

United States, and the European Union  9

To Indonesia’s International Donors, including the World Bank, Australia, the European

Union, and the United States  9

I. Background: A Brief Overview of Indonesia’s Forestry Sector 10

Decentralization of Forest Control 12

II. Indonesia’s Missing Timber 14

Wood Gap Analysis 15

III. Indonesia’s Missing Timber Revenue 19

West Kalimantan: A Forest-Rich, Revenue-Poor Province  23

IV. Anatomy of Corruption in the Forestry Sector 25

Corruption in Forest Management Agencies 25

Corruption within Law Enforcement 28

Corruption in the Judiciary 28

Illegal Logging in Ketapang, West Kalimantan 29

V. Forest Reform and Anti-Corruption Efforts to Date  31

The Anti-Corruption Commission: Progress and Threats  32

VI. Human Rights Impacts 39

Failures of Justice  39

Failures of Transparency  46

Funds for Essential Health Services Line the Pockets of Illegal Loggers and Corrupt Officials 53

West Kalimantan: Booming Forestry Industry but Lagging Health Spending  58

The Right to Health under International Law 60

Equal Access 62

Women’s Right to Health 62

VII. International Ramifications  64

Enforcing Banking Regulations and Recovering the Proceeds of Corruption 64

The US Lacey Act 65

Voluntary Partnership Agreements with the European Union 67

Carbon Offset Markets  68

VIII. Appendix: Methodology for Estimating Timber Revenue Loss 71

Royalty and Reforestation Fees  71

Transfer pricing 73

IX. Acknowledgments 75