ECONOMY AND POLITICS OF CROSS-BORDER TIMBER TRADE IN HISTORICAL PERSPECTIVE – THE NUNUKAN/ AREA

Paper for the 2nd International Symposium of Journal Antropologi , 18-21 July 2001, Padang, Indonesia

By Krystof Obidzinski University of Amsterdam [email protected]

DRAFT – NOT FOR CITATION

Introduction

The goal of this paper is to discuss the processes behind the emergence and development of the informal timber economy in the province of East , Indonesia, with particular reference to the border areas with . Such a discussion seeks to go beyond the currently prevailing discussions about intentionality and criminality of illegal logging and aims to illustrate key structural force responsible, in my view, for fueling the informal timber economy in the area – i.e. the emergence of wide-ranging political utility of timber in the independent Indonesia as well as its strategic economic importance.

In recent years, the illegal logging problem in Indonesia has developed into a major national policy issue. Since 1998, the country has seen an explosion of such illegal activities, the output of which has been estimated to be nearly twice the official annual production of 30 million m3 from HPH (Hak Pengusahaan Hutan) concessions and industrial clear-cuts (ITFMP 1999; Scotland et al 2000). The illegal logging issue has come to be seen as largely a product of post 1998 reforms that resulted in the breakdown of law and order, decentralization that is mostly concerned with maximizing regional revenues and continuing economic crisis (Casson 2000; McCarthy 2000a, 2000b; Casson and Obidzinski 2001). However, the formation of the informal timber economy and clandestine cross-border timber trade in are not products of the recent past. This paper also seeks to draw attention to remarkable similarities between the ways in which the informal timber trade functioned nearly a century ago in what was then Dutch Southeast and how it continues to operate in the area today. The continuities are indeed striking, as manual extraction of timber can still be seen today the way it was done in the early 1900s. Even today, the teams of loggers still haul wooded sledges called kuda-kuda out of the forest with logs stocked on top, although mechanization is clearly replacing the manual labor. Besides operational similarities, there are also continuities in government policy regarding small-scale logging concessions, as at different points in time these have been viewed by government officials as both important for local economy but also wasteful and difficult to control. As a result, during economic crises the small-scale logging was to a varying degree sanctioned, whereas at times of recovery it was banned.

These continuities notwithstanding, the history of development of small-scale logging is marked by a number of key distinctions that fueled the growth of this sector particularly after the withdrawal of the Dutch from Indonesia. The distinctions in question are: expansion of international markets for tropical timber and the emergence of timber as both economic and political booty. These factors, absent in colonial times, have rendered timber indispensable and contributed to its sustained importance until today.

The paper consists of the following sections:

1 The first section focuses on the colonial period of the illegal timber trafficking. It explains the emergence of speculative timber enterprises near the border with the British between 1900 and 1930 as a result of relatively unregulated nature of timber exploitation in the Dutch Southeast Borneo and comparatively stricter control exercised over such activities in the British area. Better accessibility and transport infrastructure in North Borneo caused the districts in the northern part of Dutch territory to be the focus of such early logging enterprises.

The second part explains how the intensification of the manual logging (known in the colonial times as kuda-kuda in British North Borneo and bevolkingskap or opkoop systeem in Dutch Borneo) led in 1934 to the ban on bevolkingskap by Dutch authorities in favor of a system of forest concessions. The increasingly expensive and regulated environment of logging business in Dutch Borneo prompted wide utilization of sub-contracting by larger timber enterprises in the area that helped preserve bevolkingskap to some extent, despite the ban. Even though such informal logging by the locals continued, macro-economic limitations associated with timber trade at that time as well as its non-political nature were key factors preventing the informal timber economy in East Borneo and cross-border trade from expanding.

The third part focuses on the period of Japanese occupation and the subsequent re-entry of the Dutch between 1945 and 1949. The emphasis of this section is on the destruction wrought by the war period on the economy of East Borneo and on subsequent economic crisis that resulted in speculation and smuggling of various products, including timber.

In the fourth section, I discuss the effects of Indonesian domestic politics of federalism, parliamentary and subsequently guided democracy on the economy and exploitation of forest resources in East Kalimantan. As a result of considerable improvement in world tropical timber markets in the late 1950s, enduring economic crisis in Indonesia and emergence of timber as both a resource of substantial side- income for expanding civilian/military bureaucracies and a means for government officials to exercise political leverage, the status of timber had undergone a dramatic change from the pre-war period.

Section five analyses the critical period of manual logging boom between 1967 and 1971, known as banjir kap, when the official timber exploitation in East Kalimantan intensified tremendously and its informal dimension experienced similarly strong growth. While the causal factors for this process are the same as in the 1950s, their magnitude is incomparably larger. Growing demand for tropical timber in Japan and Asia’s emergent economies caused timber export to become a lucrative undertaking. Economic decline still gripping Indonesia at that time rendered timber a source of income of immense importance for dominant military as well as civil servants. These two factors endowed the banjir kap small concession policy with extraordinary potential for the exercise and consolidation of political power in the region by the newly established government.

Section six describes the processes in the 1970s, 1980s and 1990s that allowed the New Order power- holders to further solidify their political position and magnify economic wealth through the HPH concession policy and simultaneous ban on banjir kap. While banjir kap logging was officially outlawed in favor of HPH-generated political patronage and economic rents, in practice it continued to be indispensable not only in its traditional role of sustaining over-expanded civilian and military bureaucracies, but also as an important mechanism helping narrow the gap between the increasing capacity of timber processing industries in Indonesia and insufficient supplies of HPH timber.

The final section seven discusses the impact of the fall of the New Order regime in 1998 on the informal timber sector in East Kalimantan. The fall of Suharto marked the beginning of the process of chaotic liberalization and democratic reforms that led to legalization of small-scale logging concessions and their subsequent tremendous proliferation. As in the past, small-scale logging continues to be important economically to civil servants and security forces. However, it is increasingly oriented toward export

2 rather than domestic supply. Finally, small-scale logging concessions have regained and developed much further their political significance, as policymakers, from local to national, rely on them as a tool with which to generate support, reward allies and appease opponents.

1. The 1900-1930 unregulated nature of forest exploitation in Dutch Southeast Borneo and development of the informal timber trade in the northern part of the region

One of the key driving forces behind the emergence of the informal timber market between the northern part of Dutch Borneo and British North Borneo (today’s Sabah) before the Second World War was the different degree of political control and economic regulation affecting forestry enterprises in both areas. Whereas in British North Borneo the western regencies as well as the east coast boomed with plantation and forestry enterprises as early as 1880s, the Dutch territories south of the border constituted a comparative backwater – a situation that began to change significantly only in the 1930s. The relatively undeveloped state of the Dutch territory, known as northern Bulungan or Tidung Lands (Tidoengsche Landen), vis-à-vis British North Borneo and minimal regulation by the Dutch officials of entrepreneurial activities based on the extraction of natural resources was a major attraction for both domestic as well as foreign companies in the early decades of the 20th century.

The distinct political and economic histories of these adjacent territories stem from their considerably different geographical characteristics. The territory of British North Borneo (henceforth North Borneo) occupied an area of about 76,000 km2 on the northern tip of the island. Even though it was dominated by ragged mountainous terrain in the interior, its western, northern and eastern flanks were accessible by sea, thus enabling easy transportation. Northern part of Dutch Borneo, on the other hand, presented a decidedly different picture. The access was possible only from the eastern coast dominated by marshy deltas of the Sesayap, Sembakung and Sebuku Rivers that in their upper reaches were nearly impassable due to rapids. As a result, whereas the British North Borneo Chartered Company were able to initiate a variety of economic enterprises almost immediately after it had seized control of North Borneo in 1882, the Dutch had a much more difficult time achieving similar progress.

This is not to say that Bulungan was at that time somehow isolated or that it did not participate in regional trade. In fact, prior to as well as during the early years of Dutch control in the mid 1800s, Bulungan and adjacent sultanates of Gunung Tabur and Sambaliung in Berau had been an integral part of a dynamic trade network and tributary political system centered on the Sulu islands in the Southeastern Philippines1. However, such native networks of political interaction and economic exchange marked by shifting alliances, piracy and slave trade were progressively stamped out by British, Dutch and Spanish authorities2.

Such new state of affairs was cemented by the British-Dutch border agreement of 1892 specifying the territorial control of both countries in northern Borneo. This agreement allowed the British to concentrate fully on already booming economy in their territory. This boom was initially sustained by the growth of the tobacco plantation sector. It began in the early 1880s and by 1890 there were more than 60 tobacco estates scattered throughout the eastern part of the territory from Tawau to Sandakan, elevating tobacco to the position of the primary export commodity and the main revenue earner (Kaur 1994)3. This was in large

1 The Sulu sultanate also controlled much of the northern Borneo at that time. For a detailed discussion of the political and economic history of the Sulu sultanate, see Tarling (1978) and Warren (1981; 1998). 2 A thorough analysis of the Dutch government’s perception of such uncontrolled peoples and their (illegal) activities in the outer islands of Indonesia can be found in Tagliacozzo (1999; 2000). 3 Interestingly, during the initial years of the boom most of the tobacco exports were destined for the Dutch market in Amsterdam. Subsequently, export destination diversified to other European countries as well as the United States (ibid:13-14).

3 part made possible by the presence of relatively well-established marine transportation system that connected most of the coastal centers of production in North Borneo with the key buyer markets in Singapore and Hong Kong (ibid:10-11). With such system in place, North Borneo was able to whether the collapse of the tobacco economy in the 1890s by supplanting the shipments of tobacco with loads of timber as well as rubber from Sandakan, Lahan Datu and Tawau (ibid:16). The exploitation of timber in North Borneo was already an activity of considerable antiquity at that time, but it increased considerably towards the end of the 19th century4. The increase occurred as a result of the expansion of railway networks in China that created a rising demand for ironwood sleepers (John 1974:57). The valuable iron “timber was cut and (squared if necessary) by the indigenous people and Chinese workers and hauled by buffaloes or by manual means to the rivers where it was rafted to Sandakan Bay” to be subsequently exported (Kaur 1994:13). If in 1883, there was only one large company in the territory making timber the focus of its enterprise, “by 1886 there were five concerns involved in timber trade, two Chinese and three European in management: Koh Heen Co. and chop ‘Kong Watt’ both of Sandakan; the North Borneo Trading Company of Melbourne, E.E. Abrahamson and Company of Sandakan, and Mr. McLean, the lessee of a small Government sawmill” (John 1974:57). It was during those early years of ironwood boom that Sandakan emerged as a major timber center in North Borneo.

As the production of timber for export primarily to China through Hong Kong kept rising, the Company authorities in North Borneo began to consider ways to impose better control upon, and derive more income from, the taxation of the emergent timber industry. Indeed, since the onset of the ironwood export in the late 1880s, taxes on timber cut on the private land as well required export duty were both supposed to have been collected. However, collection of these fees was carried out on a declaration basis, rendering the system wide-open to fraud and abuse (ibid:58-59). In order to prevent or reduce such practices, the British colonial government passed a new “rationalizing” legislation in 1916 stipulating that royalty and export duty would be “assessed before the logs left the forest” (ibid:61). Such more stringent approach to the control of the forestry sector was in large measure a result of the influence of the American Forestry Service in the Philippines that was consulted at length by the British in the process of formulating the forestry policy in the early 1900s. This new policy initially did not have much effect on timber producers due to sustained demand for timber from China and attractive prices. However, once it became clear that the royalty fee was to be collected on all timber cut, whether used or not, this forced the operating enterprises to focus their activities on efficiently attainable quotas of timber and made them relinquish vast unused areas that they had held in reserve. This would have important implications for further centralization of the exploitation of timber in North Borneo in the 1920s.

For the time being, however, the growth in highly specialized hardwood (especially ironwood) trade continued. During the early years of the World War I, the first process of elimination of the least resilient companies had taken place as a result of transportation crunch. Whereas before the war, a dense network of marine transport was provided by German steamer lines based in Singapore, after the breakout of the war they were all forced to either withdraw or suspend operations. The resultant transportation vacuum was partially filled by the Japanese shipping lines (e.g. Osaka Shosen Kaisha), but shortages of shipping space could not be resolved in an instant. These shortages raised the costs of shipping timber to Hong Kong considerably, reducing the profits of main exporting firms and their sub-contractors5. Toward the of the war, however, the shipping limitations were offset by demand for hardwood logs in China rising still further, as well as by the fact that the Honk Kong currency, in which timber was paid for, strengthened

4 North Borneo timbers (and other forest products) were extracted primarily for the Chinese market. For a comparative case of antiquity of timber trade in other parts of the Southeast Asian archipelago (), see William Ascher (1998). 5 By the early 1900s, the Australian Borneo Company was defunct. In its place, a new Hong Kong based China- Borneo Company operated along with the North Borneo Trading Company, Koh Heen Co. and Kim Eng Watt Bros.

4 which was widely acclaimed as “a blessing for the timber trade” (John 1974:67). Subsequent to these developments, Borneo timber dominated the Hong Kong and Chinese markets.

In order to take a full advantage of these favorable market conditions, the BNBCC moved to consolidate the timber industry in the area. Following the example of the American timber operations in the Philippines, the company wanted to increase and mechanize production activities in North Borneo. It was faced with a daunting task in this regard, as without exception all logging was done manually employing the kuda-kuda system in which logs, or squared blocks of timber, were manually hauled out of the forest along wooden rail tracks to the riverbank for rafting downstream. With Hong Kong prices for Borneo hardwoods at their high, a multitude of small enterprises sprung up seeking to capitalize on favorable business conditions. The development in manual logging was particularly dynamic in the Tawau area where Japanese emigrants began establishing an agricultural colony toward the end of the 19th century (Fujio 1990; Shimamoto 1990; Osman 1998; Wong Tze-Ken 2001). As early as 1904, for instance, the BNBCC granted a logging concession to the Japanese company Asahu Shokai on the British side of the Sebatik island (Osman 1998:26)6. On the Philippines, on the other hand, extraction and processing of timber was much more mechanized (e.g. employing skyline logging systems) building on American logging practices from the Northwest of the United States. The BNBCC was determined to push for a similar progress and it did so by reducing export duty and royalty fees on those producers able to increase production and open processing plants (i.e. sawmills)7. Very few entrepreneurs possessed the capital necessary to think about the expansion of production or its mechanization. Nearly all medium and small producers (controlled mostly by the Chinese) were inclined to continue with the kuda-kuda system that was well-tested and most resilient to negative effects of timber price fluctuations. The only firms that tried to implement mechanization on operational basis were China-Borneo Company and North Borneo Timber Company established in 1916.

The NBTC was to become a major player not only through the intensification and mechanization of production, but primarily due to the exclusive control that it was given in 1920 over “all unalienated State Land” (John 1974:69-70). This put the remaining local timber companies under increasing pressure, forcing them to affect some consolidation and to raise production by intensifying kuda-kuda operations8. Responding to protests of favoritism and unfairness, the BNBCC limited somewhat NBTC’s exclusive mandate over timber resources by making available annual logging plots to lesser operators. However, this still constituted a rather limited space within which to conduct timber business. As a result, most of smaller timber operators found it much more profitable to work as sub-contractors for dominant companies rather than log small plots independently. By the late 1920s and early 1930s, the China-Borneo Company and NBTC were entirely dependent on sub-contracting of logging operations to smaller Chinese firms and the economic crisis of that time fully exposed the impracticability of mechanized logging ala Philippines. As a result, the manual system of kuda-kuda logging made a full comeback and it was wholeheartedly embraced by both the business and administrative authorities in North Borneo.

While mechanization of the timber sector in North Borneo before the Second World War was not particularly successful, considerable progress had indeed been made regarding the realization of centralizing policy objectives such as greater industrial consolidation, more effective taxation and intensification of production. This policy success created increasingly more interest among logging operators in North Borneo to explore business opportunities in the Dutch territory to the south.

6 This concession never came into production, however, as the leader of the enterprise as well as a substantial part of its Japanese labor force succumbed to tropical deceases and died. 7 At that time (1910s and early 1920s), nearly all timber that left North Borneo for Hong Kong was in the form of logs (John 1974:65). 8 The largest of those companies was Shing Kee Company.

5

1.1 First Timber Enterprises in Dutch Southeastern Borneo

Whereas the British in North Borneo were able to organize and stimulate their economy in a relatively short period of time due to compact area and its accessibility, the Dutch territory to the south was much slower in making similar progress. The bordering with North Borneo became officially tied to the Dutch after finalization of the contract of 1878 between the in Tanjung Palas and the Dutch Resident in Southeastern Borneo. The exact delineation of the border between the Tidung Lands constituting the northern part of Bulungan and British North Borneo was agreed upon in 1892. In 1907, the Sultan of Bulungan signed the short contract with the Dutch (Korte Verklaring) transferring to them all political and most of economic powers in exchange for stable income and a share of revenues from natural resources (Broersma 1927; Black 1985; Lindblad 1988). Subsequently in 1927, Bulungan became a self-governing district (zelfbestuur landschap) that allowed for greater local government decision-making in social, educational and economic affairs. While on the eve of the Japanese invasion in 1942 considerable economic development in Bulungan was indeed evident, the initial progress was slow.

While the British were busy boosting trade based on plantation industry already in 1880s, the Tidung Lands in Dutch Borneo to the south were still to large extent outside of effective control of the Dutch authorities. Although the Dutch officially controlled Bulungan since 1878 and, as a result, also Tidung Lands, this control was nominal at best. Although the sultan of Bulungan had his representatives posted in Malinau () in order to carry out administrative tasks, vast areas to the north stretching from the Kerayan highlands near Sarawak to the marshy deltas of the Sembakung and Sebuku Rivers in the east, were inhabited by scattered Dayak groups and saw only sporadic visits by the sultan’s envoys. While subsequent to the discovery of oil on the island of by the end of the 19th century political and economic development in the coast areas accelerated considerably, the grip on the interior remained tentative until the 1920s. Until then, the government administration in Tidung Lands was almost exclusively in the form of military patrols departing periodically from Kabirau (Malinau) or Tarakan to ensure security and tax collection in the area.

In those early years of the late 19th and early 20th century, the area of Tidung Lands was administratively divided into three sub-units of Sembakung, Kerayan and Mentarang that were patrolled along the rivers constituting the main communication arteries in the region (Militaire Memorie van de Tidoengsche Landen 1927). Up until 1920, the main problem that the administrators continued to face was the unfinished task of eliminating tribal warfare (Rijkmans 1916:9). Cross-border raiding by the Iban from the British territories and instances of headhunting continued to occur as late as 1915 (Becking 1919). The military-administrative patrolling of the area was initiated in 1907 when an infantry patrol detachment under the command of Capt. Fisher was first stationed in Malinau (Militaire Memories van de Tidoeng Landen 1931).

While the framework of political control in the interior was in the process of being established, the coastal areas saw rapid increase in trade and intensification of economic development. This had taken place primarily as a result of the discovery in 1899 of oil deposits on the island of Tarakan by a visiting Scottish geologist from North Borneo (Broersma 1927). In quick succession, a Tarakan based oil company (Tarakan Petroleum Matschapij) was formed in 1902 to develop the newly discovered deposits. The Tarakan oil company was eventually taken over by much larger and better capitalized BPM (Bataafsche Petroleum Matschapij) that proceeded to expand production by activating two oil fields (Tarakan I and II) in 1905 and adding another three within the next decade (Lindblad 1988). In 1924, drilling for oil began

6 on the neighboring island of by the Nederlandsch-Indisch Aardolie Maatschapij9. In the same year, the total oil production for the Tarakan area already reached nearly a million ton (Broersma 1927:245). Along with these developments offshore, surveys for oil deposits were intensified as well in the interior10 (De Jongh 1913; Broersma 1927:239). The development of strategically important oil deposits and the finalization of the task of pacification in the interior resulted in 1926 in the establishment of the main regional military garrison in Tarakan and a minor one in Malinau. This elevated Tarakan to the position of the center of economic, administrative and military control in the northern part of Dutch Southeast Borneo11 (Feldbrugge 1939:36; Broersma 1927:241). The growth of oil based industrial installations obviously required considerable amounts of timber for construction. The necessary timber resources were obtained by BPM from its logging concessions covering the entire area of Tarakan and Bunyu islands (Militaire Memorie van Tarakan en Boenjoe 1931).

However, before Tarakan became the center of oil industry in northern Dutch Borneo, it was also an important location for timber traders especially from North Borneo. As easily accessible coastal areas with rich stocks of ironwood in North Borneo became increasingly scarce and the available logging plots were subjected to increasingly stringent taxation measures, timber traders from North Borneo began looking for new timber supplies south of Tawau. In this regard, the islands of Sebatik and Nunukan, in addition to favorable transportation conditions, boasted rich stands of iron trees (Israël 1935). As a result, in 1901 Mr. J. Macdonald Cameron was the first to request timber concessions from the sultan of Bulungan. He was given an area of 100 square miles holding approximately 86,000 extractable trees that carried an annual payment to the sultan in the amount of 1200 guilders12 (Tectona 1916:408). However, the Dutch also wanted to take advantage of the demand for ironwood in China and were determined not be outdone by the British in their own territory. As a result, in 1904 a hastily established Houtexploitatie Maatschapij Noenoekan was granted concessions on the island of Nunukan as well as in the Simengaris River basin (tributary of the Sebuku River), pledging to pay to the sultan 160 guilders per each 5000 trees extracted (Van Braam 1914:619). Finally, in 1911 the Oost-Borneo Cultuur-, Handel- en Mijnbouw Maatschappij (East Borneo Plantation, Trade and Mining Company) was given 156,000 ha in exchange for a land rent of 15 cents per ha (total of 13117 guilders) and 10% of the production. However, all these enterprises never materialized due to the recurrent problem of lack of working capital (Tectona 1916:409). Under- capitalization was to continue to be the leading cause of business failures in the forestry both in the Dutch as well as British Borneo in subsequent decades.

For the sultan Jalaludin of Bulungan, these ventures represented a major opportunity to significantly boost his income with virtually no risks attached. As a result, he was understandably disappointed by the failure of these initial enterprises. However, he continued to encourage more and new such investment in hopes that some of it would eventually bore fruit. In 1912, for instance, the sultan engaged in an extensive communication by mail with the Magistarate in Tawau, Assistant Resident in Sandakan and even Governor General of Singapore about various issues relating to border security as well as possibilities to further develop trade ties (Hens 1921:14). Such sovereign contacts by the sultan with foreign powers did not sit well with the Dutch and they moved swiftly to take charge of the situation. In 1924, the sultan was

9 This company was subsequently also taken over by the Bataafsche Patroleum Maatschapij. 10 In the early 1920s, the Nederland Koloniale Petroleum Maatschapij began drilling for oil in Sadjau (southeast of ) and in the deltas of the Sesayap and Sembakung Rivers. 11 Until 1920, the main military posts in northern Dutch Borneo were in Malinau and Tanjung Selor, having two and four troop brigades respectively (Hens 1921:14). With the rise of Tarakan as the oil center, some forces from these two garrisons were transferred to Tarakan to guard the expanding oil production. While Tanjung Selor garrison remained very small after the reorganization, the other two military posts in Malinau and Tarakan were reinforced in 1935 with the 7th infantry battalion (Magelang) and the 3rd company of coastal artillery. In 1938, a new military hospital was built in Tarakan. Also in the same year, military detachments in Berau and Malinau were strengthened (Feldbrugge 1939:37). 12 Other sources date this concession at around 1910 (e.g. Van Braam 1914).

7 granted an annual salary of 8,000 guilders and a land rent on oil concessions of 2,600 guilders (Broersma 1927:237). His share of income from oil production in that year came to 20,000 guilders. The total revenue from the sale of forest products reached nearly 364,000 guilders that entitled him to a tjoekei (or tax) of over 36,000 guilders. Cumulatively, these fees came to constitute a considerable wealth at sultan’s disposal, rendering him one of the wealthiest monarchs in East Borneo13. The actual size of this wealth can be better understood if one considers the fact that 9,000 guilders of the population tax collected on approximately 40,000 inhabitants of Bulungan in 1924 was sufficient to cover salaries of all of sultan’s civil service that was extremely small in size (ibid).

It is interesting to note that in 1924 nearly 80% of the sultanate’s revenue from forest resources was generated from timber14 (ibid). In 1928, it seemed that this revenue would be increased even further as the American Timber Trade Company began intensive surveys in the area in order to open ironwood extraction operations (Tectona 1928:887-888). However, the enterprise did not proceed beyond initial surveys. Despite the fact that the aforementioned early concession ventures did not materialize beyond initial plans, trade in natural resources developed intensively (Broersma 1927:236). In 1921, for instance, the Resident of Southeast Borneo Hens recorded that timber extraction and trade were developing particularly intensively in the Sesayap-Sembakung River area, just south of the border with North Borneo (Hens 1921:14). The only means of transportation in and out of the area was by boats and small steamers that were operated by individual entrepreneurs or small trading companies, as until 1930 regular steamer transportation did not extend beyond Tarakan and Tanjug Selor15. As regular steamer line from Tarakan to Tawau was introduced in 1930, the informal traffic in people and goods between British and Dutch territories, such as timber and other forest products, was increasingly dynamic (Deeleman 1934). While some of the Chinese traders based in Tarakan were reported to have been going on business trips as far as Hong Kong (ibid), it is likely that far more went across the border to Tawau and Sandakan to make business arrangements with their countrymen in North Borneo, many of whom worked as logging sub- contractors for the leading timber firms such as NBTC, China-Borneo Company and Shing Kee Company. For such contractors, working in Bulungan (particularly in the aftermath of the economic crash in 1929) where timber trade was still relatively unregulated and inexpensive must have seemed attractive.

A similar view was likely held not only by Chinese sub-contractors but also by a burgeoning Japanese community in Tawau. The origins of the Japanese settlement in Tawau date back to the late 19th century when settlers from Japan and Formosa (Taiwan), supported by the Japanese government, began trickling into North Borneo with the aim of establishing a community based on plantation agriculture and fisheries (Fujio 1990; Shimamoto 1990; Osman 1998; Tze-Ken 2001). The support for the fledgling agricultural colonization scheme was eventually taken over by two leading Japanese industrial conglomerates – i.e. Nissan and Mitsubishi. Both of these companies moved energetically to establish extensive rubber and abaca plantation on the perimeter of Tawau. By 1917, Mistubishi had a well run Tawau Estate Ltd., whereas Nissan operated Tawau Rubber Estate16. In order to open areas for rubber plantations, the companies were given small timber concessions by the authorities of the North Borneo Chartered Company as well as licenses to export timber to Japan (Osman 1998:36). They operated on the same terms as other timber companies in that the timber they had extracted was subject to royalty and export fees. However, although the British were (at least initially) positively predisposed toward Japanese settlement

13 Although the total income of the sultan of was higher than that of his counterpart in Bulungan, the size of the Kutai sultanate was much larger. 14 In that year, the value of timber extracted in Bulungan was estimated at 285,000 guilders. 15 KPM (Koninklijke Paketvaart Matschapij, Royal Shipping Company) as well as BPM oil vessels the only providers of regular transportation. In 1930, the KPM lines of Surabaya-Tarakan and Banjarmasin-Samarinda- Tarakan were extended to include Tawau in British North Borneo (Deeleman 1934; Linblad 1988). 16 The Japanese were also very active in rubber plantation business in Dutch Borneo. According to Peter Post (1993), during the interwar period Japan’s Nomura zaibatsu was the largest producer of rubber in Southeast Borneo (ibid:135).

8 schemes in Tawau, they were at the same time determined to keep them out of the timber sector in as much as possible (John 1974:68). The British displayed a considerable amount of finesse in affecting this policy because overall (especially during the depression years of 1930s) they were eager to have Japanese settlers and entrepreneurs in the colony desperately short of skilled labor force (Osman 1998:34). This effectively left both the more numerous Chinese timber businesses as well as aspiring Japanese operators with the single option of working as sub-contractors for the dominant firms in North Borneo and seek for promising trade opportunities across the border.

1.2 The opkoop systeem and sub-contracting of logging as the main stimulus behind the informal timber trade in Dutch Borneo

The emergence in the 1920s of Tawau as the center of timber industry in British North Borneo (position until then held by Sandakan) was made possible as a result of significant contribution of cross-border supply linkages. By that time, the areas adjacent to Tawau were already stripped of the forest, making place for rubber and abaca plantations. As a result, the timber had to come from further away. In those early years of cross-border timber business, the procurers of the resource were mostly local Chinese (Tarakan, Tanjung Selor, Malinau), operating without direct involvement of the buyers in North Borneo. Small supplier companies operated in such a manner as well. For instance, the Samarinda Produce Company had an office in Bulungan and it was often contracted by the larger Borneo Produce Company based in Samarinda to procure consignments of timber and other forest products. The Borneo Produce Company was managed by a Japanese national Mr. Yamaka, with financing from the Japanese Mitsui company that in 1920s had considerable timber interests both in North Borneo as well as in the Philippines (Post 1993:154). The Samarinda Produce Company had a flotilla of boats and small steamers frequenting all major rivers north of Tanjung Selor, being one of many traders making cross-border calls.

In the 1920s, this system of trade was based on the opkoop systeem (buy-up system), also known as wildekap (wild logging) or bevolkingskap (logging by locals). This was a form of specialized exchange relations between upriver Dayak (or Malay) and downstream trading communities. Such exchange transactions usually involved town based timber exporters (houthandelaren-exporteurs), middlemen (tussenhandelaren) and contracted lumberjacks (kapploegen). These parties were interlinked by a system of advance payment either in kind or in cash for deliveries of timber within an agreed upon period of time – usually 3 months (Van de 1935; De Boer 1937:411; Ensing 1938:74). In essence, this manner of timber extraction was nearly identical to the kuda-kuda logging conducted by timber contractors in North Borneo as well as the panglong logging on the eastern coast of Sumatra17. From the beginning, the Dutch government officials reported all kinds of problems with such system of forest exploitation, the main ones being its wastefulness and unpredictability (Haan 1929; Suchtelen 1933:179). However, no abrupt changes were envisioned because “the timber trade, like all trade in the region, formed an integral part of the economic domain of the local ” (Post 1993:155). In addition, since forests in East Borneo at that time were far from being threatened by inefficient logging practices and since such practices were the only immediately feasible means of forest exploitation (Post 1991:285), the system was allowed to continue with hopes for its gradual intensification18.

17 For more on the panglong system of logging in East Sumatra during the colonial period, see Kerbert (1913) and Tijdschrift voor Economische Geographie 1930, pp.217-219, and Erman and Warman (1994). 18 It is interesting to note, however, that already in the middle 1930s the opkop or wildekap system of timber exploitation in East Borneo began facing shortages of quality timber in accessible areas of the Mahakam basin. In some areas of the Kutai district, for instance, loggers had to haul timber from as far away as 1 km from the bank of the river (Van de 1935:172).

9 This intensification came in the form of foreign finance operations in the late 1920s and early 1930s that resulted in even greater uncontrollability and unpredictability of the opkoop-wildekap system. Such developments eventually led to the introduction of the 1934 forestry regulation that prohibited buy-up schemes in logging business, requiring all timber extraction to be carried out through a system of registered concession and logging plots (kapparceelen)19. The move to such more regulated system of timber management was precipitated by the activities of timber operators that were extracting increasingly large amounts of timber for export, contributing very little to the local population and even less to tax revenues of the government20. The principal factor behind such intensification of the opkoop-wildekap system in the Bulungan area was the activities of the Nanyo Rongyo Kabushiki Kaisha company (hereafter NRKK) under the leadership of Mr. Ide Seiji. To a lesser extent, the operations of NBTC through its sub-contracting system also contributed to the promulgation of the legislature. In other parts of East Kalimantan, similar influence was affected by such key timber trading operators as Borneo Produce Company in Kutai, Yamaka enterprise in Pasir, Botex in Balikpapan, SMP coal mining firm in Berau and largest timber traders in Samarinda – i.e. Haji Abdulgani and Tan Kong Lian.

The history of Japanese timber operations in Dutch Borneo, especially those of NRKK, has been treated at length by Peter Post (1991:279-307; 1993) and Lesley Potter (1988) and therefore do not require further elaboration. For the purposes of this discussion, I would like to focus on the relatively less known formative period of NRKK operations and its impact on the wildekap system, before the company was forced to acquire an official concession in the Sangkulirang area nearer Samarinda21. In 1930 Mr. Seiji, acting on behalf of Tokyo based Oriental Development Company Ltd., had taken over a Japanese company Sumatra Lumber Exporting Co. in the panglong area of eastern Sumatra and in the following year he moved to the northern part of Dutch Borneo22 (Post 1991:286). Ide himself was based in Tarakan where he established a longpond in the village of Lingkas. However, most of his business activities were carried out along the Sesayap River where, with the sultan’s help, he eventually employed more than a thousand loggers23. The difference in Ide’s approach from previous opkoop arrangements was that he dealt with the Dayak loggers directly, without the use of (largely Chinese) middlemen, which reduced costs. Also, as surveys for subsequent Dutch timber enterprises would show, his selection of forest areas for logging was very appropriate24. As a result, production proceeded apace, reaching nearly 20,000 m3 a year (De Boer 1937:420). As Japanese ships were not allowed to dock in the port of Tarakan, local transporters as well as North Bornean ships were used to export timber to Japan. This increased costs, but also fragmented the visibility of the output of the enterprise, allowing most of it to leave the Dutch territory with virtually no taxation.

19 This regulation was implemented only in four key districts of South and East Borneo where timber exploitation was most advance – i.e. Kutai, Bulungan, Berau (Gunung Tabur and Sambaliung) and Kota-Waringin (Post 1993:156). 20 Thomas Lindblad (1988) explains the introduction of the stringent forestry regulation of 1934 for East Kalimantan as follows: “Regulation in logging had become urgent after a series of embarrassing incidents in the northeast. The Japanese Ide concern had begun large-scale logging along the Sesajap and Sebatak Rivers in Bulungan in 1932, thereby employing more than 1000 coolies. When reproached for not possessing any concessionary rights, the managing director, Seiji Ide, calmly asserted that he was just buying up timber from indigenous producers. Sultan Jalaludin of Bulungan and his associates were rumored to have coerced local Dayaks into signing up with Ide. Vast quantities of ironwood left Bulungan for Japan without any customs formalities tasking place. At length the Dutch admirality forbade shipments from the mouth of Sesajap”. (104). 21 On the NRKK operations in the Sangkulirang concession, see Fluyt (1935), ….. 22 All timber cutters in the panglong area of Sumatra, due to their export orientation toward Singapore, were totally dependent on timber demand driven by Singaporean economy. Once the depression took effect in 1930, many of the panglong loggers either went bankrupt or had to suspend operations. 23 Sultan of Bulungan was entitled to 10% of the value of timer (De Boer 1937:410). 24 Surveys by Richard, Lundqvist and others …..

10 The loss of government revenue from such more intensive form of bevolkingskap was the principal factor behind the subsequent campaign by Dutch authorities to regulate and eventually abolish the wildekap as the main form of timber exploitation. Whereas previously this type of logging was generally viewed as a smalltime economic affair left to the discretion of sultans, it suddenly became apparent that, if maximized, it could generate substantial wealth. Political and military considerations of Japanese operations precariously close to vital oil installations in Tarakan also played a part. Two additional reasons for the anti-wildekap stand frequently mentioned were excessive inefficiency of the system (timber cut vs. timber actually utilized) and its unfairness, especially for the loggers (Van Suchtelen 1933:181; Van de 1935; De Boer 1937:11). However, not all opinions on the subject were unanimous. At least initially, some Dutch observers were positively inclined to Japanese logging activities in northern East Borneo, noting that they constituted an important investment boost in the area beyond oil (Plasschaert 1934). Also, NRKK reportedly contributed nearly 100,000 guilders to the population in Bulungan, either in cash or in kind (Economisch Weekblad 1933:186). Such more positive outlook was quickly overshadowed by negative revelations about “imperialistic” labor policies of Ide with the support of the sultan, leaving little doubt where most of the aforementioned money had gone (ibid; Lindblad 1988:104). Ide tried to shed his increasingly negative image by relinquishing the lucrative buy-up business. In 1933, he even officially applied for forest concessions in the area and made efforts to ensure that there were no land or labor conflicts with the locals25 (Veling 1933). In spite of positive technical evaluation, NRKK concession requests in Bulungan were refused. The company was offered a choice of acquiring a larger concession in Sangkulirang (about 150 km north of the town of Samarinda) or no timber business at all. Ide chose to move south to the suggested concession area, which he would develop into the leading timber producer and exporter in East Borneo for the remainder of the pre-war period (Fluyt 1935; Economisch Weekblad 1937:2278-82; Potter 1988).

Concurrently with NRKK activities in Bulungan, another large-scale timber operator that was active in the area was the North Borneo Trading Company (Heteren 1934). The NBTC was granted an extensive area of over 220,000 ha along the Tikung and Simengaris Rivers, tributaries of the Sebuku River near the border with British North Borneo (Israël 1935; Moggenstorm 1937:257). Even though the company was officially operating as a concessionary, its logging activities were carried out through an elaborate system of sub-contracting that blurred the borders between opkoop and professional logging. The sub-contracting of the logging work to mainly Chinese operators became a preferred manner of conducting business, especially in the late 1930s, not only by NBTC but other major traders in timber industry. As the efforts at mechanization in the depression period of the early 1930s in North Borneo floundered, sub-contracting emerged as the most cost effective way to operate. By factoring in exploitation expenses into a contract covering a certain period of time, NBTC put itself into an enviable position of receiving timber from contractors at loading points in Tawau and Sandakan at a flat rate, thus being minimally exposed to prices fluctuations (John 1974:74). Such a system not only provided protection from price volatility, but also enabled the company to make considerable savings as a result of the fact that most of the direct costs associated with logging were borne by the contractors themselves. As a result, “[t]the North Borneo Trading Company worked with lower overhead costs, employing a smaller European staff in relation to the scale of output. […] The whole of the direction of production was in the hands of the contractors [that] appear to have been allowed a large degree of latitude in the commercial relationship, for they arranged sub-contracts and profit sharing arrangements on their own initiative” (John 1974:74).

This kind of logging system worked well in North Borneo and it was also used on the company’s concessions in the Dutch territory. From the operational standpoint, the extraction of timber was spatially confined. This was because the kuda-kuda transportation system did not penetrate further than 1.5 miles from the waterways. Only the most accessible and rich in timber areas were exploited (i.e. at least 4

25 He applied for concessions ranging from 1000 to 3000 hectares along the Ran, Salak, Malinau, Betuan and Bongara Rivers – all within the Sesayap drainage (ibid.).

11 commercial trees per acre). Finally, since all labor matters were in the hands of Chinese sub-contractors, those most often hired were Dayaks and Malays26 (Dijk van 1938:442-514). At the beginning of the 1930s, nearly 10,000 registered coolies from Dutch Indies worked in timber and plantation industries of North Borneo (Kahin 1947:54). Since the 3-year contract labor agreement was not renewed by the Dutch after 1930, by 1933 the official number of Indonesian laborers in North Borneo dropped significantly (ibid:58). Some of these workers went back to the Dutch territory to work in the NBTC concession area. Another pool of human resource that contractors could draw upon was North Borneo Chinese migrants and natives who moved south in the 1920s in order to avoid the mandatory work on the bridle paths27 (Kaur 1994:33). Finally, local Dayaks were also involved into arrangements with sub-contractors. All three types of laborers were employed on the basis of advance payments, or credit, that was gradually deducted from subsequently generated production. This system did not differ at all from, by then outlawed, the opkoopsysteem. Such loose structuring of work in sparsely patrolled border region allowed for considerable amounts of the production to trickle north through the border without any government control.

One of the most important mechanisms that enabled the sub-contracting system to function was its considerable reliance on the use of opium as part of advance payments or subsequent remuneration. According to Feldbrugge (1939), opium was available in Tarakan and was bought by the companies especially for Chinese coolies (ibid:42). This narcotic was also smuggled in from Tawau by sub- contractors and laborers on leave (Lundvist 1956).

2. The 1934 ban on the bevolkingskap, greater regulation of the forestry sector in Dutch Borneo and limited nature of the informal timber economy

Based on recommendations from the majority of Dutch foresters and administration officials, in 1934 the four self-governing territories in Southeast Borneo (Kutai, Bulungan, Gunung Tabur and Sambaliung) issued regulations banning fee-lance logging through the opkoop system in favor of stricter policy of logging concessions. This regulation, known as Houtaankap-reglement of 17 July 1934, required all prospective loggers to apply for official logging plots (kapperceleen) or concessions (houtaankapconcessies). It also imposed much higher taxes on timber, a minimum exploitation quota, a clear time-frame for the operations and specific legal penalties for violations28 (Anonymous 1936; Hahmann 1937; Soepardi-Wardi 1956:80-82). As a result, there was a rush, particularly in the Kutai district, to register logging concessions rather than risk legal reprisals and confiscations (Potter 1988:141- 2). The increase in small and medium size concessions in East Borneo in the second half of the 1930s was considerable (see Appendix 1 for details concerning kapperceelen and houtaankapconcessies in the area in 1938). This came as a result of improvement in the consumer markets particularly in Asia, where Japan and China, both key importers of tropical timber, were increasingly interested in other Bornean hardwoods (such as meranti and keruing) in addition to the hitherto dominant ironwood. However, this gradual diversification of consumer choices for timber was dampened by deteriorating political climate in the region (Sino-Japanese war). Such difficulties in timber marketing rendered the 1934 forestry regulation a considerable burden especially for smaller companies because they were hard pressed to meet the fixed

26 In theory, the matters of employment were subject to the supervision by the government’s labor officials (ibid). 27 Indentured labor was officially abolished in North Borneo in 1933 (Kahin 1947:59). 28 Kapperceelen (or logging plots) were the main target of this legislation, as it was anticipated that they would be the object of most applications by timber traders. A kapperceel was not to exceed 5,000 ha and it could be issued for a maximum period of 10 years. The authority to issue such licenses officially rested with the autonomous regions (zelfbestuur landschappen), but in practice any such licenses, if issued, had to be reviewed also by the Assistant Resident and/or Resident. Kaapperceelen were expected to be activated within a few months of issuing of licenses. In 1939, additional requirements associated with labor conditions and contributions to local adat communities were imposed (Soepardi-Wardi 1956:80-82).

12 production targets and tax quotas imposed by the regulation and at the same time find sustained markets. In spite of these difficulties, Dutch Southeast Borneo recorded a steady increase in timber production until the outbreak of the Japanese invasion in 1942 (De Boer 1937; Moggenstorm 1937; Israël 1938).

While in the first half of the 1930s there was a consensus among Dutch policy makers and foresters alike about the need for greater regulation and control of the forestry sector, a few years after the implementation of 1934 regulation, there emerged calls for greater flexibility in forest concession policy because it was discouraging enterprise (Van Dijk 1938). At precisely the same time, the British government in North Borneo moved away from fixed taxes and minimum production requirements in the direction of more liberal forest policy seen as more responsive to market fluctuations29 (ibid. 512-14). However, no significant modifications to the 1934 regulation were introduced before the outbreak of the war and, as a result, larger and smaller timber operators had to device ways to function in such environment.

In addition to the aforementioned NRKK and NBTC, two other larger timber operators became active in East Borneo at that time. These were N.V. Houtaankaap Maatschappij Noenoekan and the Cutch Corporation from the Philippines. Both companies aimed for intensive production and, especially in the case of Nunukan, on seeking out alternative markets. Such strategies produced mixed results. The Nunukan company constituted a join venture between KPM (Koninkiljke Paketvaart Maatschappij), NISHM (Nederlansch-Indische Steenkolen Handel Maatschappij), -China-Japan shipping company, VJHM (Vereenigde Javansche Houthandel Maatschappijen) and the sultan of Bulungan (Van Heteren 1937:2). It had considerable initial capitalization of 600,000 guilders out of which 500,000 was contributed by Dutch companies and the remainder by the sultan (Hahmann 1936). For the time, this undertaking seemed well planned and professionally managed. It covered an area of about 50,000 ha of prime concession area, surveyed and selected still at the time when NRKK’s Ide was buying up timber from native loggers30. The concessions consisted of several logging plots that had excellent accessibility conditions and rich stands of commercial timber31 (Het Bosch 1935:146-49). Nevertheless, the company struggled to meet the monthly target of 4,000 m3, attaining only about half of it during the first few years32. This was largely due to excessive overhead costs and the erroneous decision to open a large sawmill on the Nunukan island for which the machinery had to be imported from Sweden (Lindblad 1988:119). The key markets of Japan and China were interested in logs only, whereas the emerging customer demand for sawn timber in Europe and South Africa was still too limited to make such an investment profitable.

While the sawmill struggled, Lundqvist - Nunukan’s chief forester and the officer in charge of labor affairs – did his best to employ sub-contracting system ala North Borneo in order to boost log production. Lundqvist traveled frequently to the neighboring Tawau in North Borneo for supplies, hire new laborers and also to buy opium33 (Lundqvist 1956). Through Singapore buyers of panglong timber, he also

29 The British, in turn, were inspired by forest management practices by the Americans in the Philippines. The Philippine forestry was often considered by both British and the Dutch in Borneo as the example to imitate. 30 First forestry surveys in Bulungan were undertaken by Van der Zwaan (1927). This work was subsequently continued by Richard (1933) and a Swedish forester Eric Lundqvist (1933a, 1933b, 1933c, 1933d, 1933e, 1933f). Lundqvist would become one of the key managers of the Noenoekan enterprise in 1934. 31 The areas involved were as follows: the entire area of the Nunukan island (22,000 ha), 2 km wide belt of land running along the coast of the Sebatik island to the border with British North Borneo (5,600 ha), Sembakung and Malinau Rivers (22,400 ha) (Feldbrugge 1939:44; Gonggrijp 1939:732). 32 In addition to about 1,500 m3 of sawn timber produced since 1937 - see company reports by G. van Heteren 1936- 1939. The initial optimistic projections of producing 10,000 m3 per month (Hahmann 1936) proved impossible. 33 Most of the supplies were delivered from Tarakan a considerable distance away. This often caused delays. Also in Tarakan, the Nunukan company obtained its monthly supply of opium in the amount of 1.5 kg (Feldbrugge 1939:42). This, however, was insufficient, necessitating cross border trips for additional purchases.

13 contracted a group of loggers from the Indragiri area in eastern Sumatra (Hahmann 1936). The log production eventually attained a certain level of consistency, totaling 40,000 m3 and 45,000 m3 of timber in 1937 and 1938 respectively (Feldbrugge 1939:44). As was the case with NBTC concessions west of Nunukan, this production was chiefly the result of decentralized sub-contracting system in which mainly Chinese managers had production areas and labor units under their direct suprrvision. In his 1940 report, Lundqvist made the strongest case yet for decentralized manner of managing timber exploitation enterprises, suggesting that logging in Borneo would fare best if it relied on sub-contracting, accepted a system of partial/advance payments for logging, focused on raw log production and was labor intensive, instead of premature attempts at mechanization (Lundqvist 1940). As a result, sub-contracting was utilized intensively by all main timber operators in the pre-war Dutch East Borneo, thus sustaining a considerable amount of buying up from Dayak communities and other free-lance loggers.

In contrast to the Nunukan model, the Philippine Cutch Corporation (PCC) tried to use its own organizational schemes that in the end turned out unworkable. In 1936, the company was given an area of about 12,000 ha of mangrove forest stretching from the Sebuku River to the border with British North Borneo (De Boer 1937:243; Moggenstorm 1937:257). The company, based in Zamboanga in Southeastern Philippines, had a cutch factory and a year earlier it had begun looking for new sources of mangrove timber in North Borneo. The PCC relied exclusively on the imported Moro labor from Mindanao that was organized into work groups headed by mandoers, or foremen. There were numerous problems with Moro workers, as they predominantly came on short contracts of 3-4 months, thus necessitating an intensive and costly labor rotation34. This more “professional” system of direct employment and controlled production without sub-contracting did not prove to be efficient enough. Although production reached the monthly target of 1000 tons, it was not enough to offset the combined effect of royalty fees that the company had to pay, labor problems and weaker, at the time, financial standing of the PCC35. As a result, in 1938 the company closed its operations in Dutch Borneo.

Besides the leading companies above, there were smaller timber operators in the Tarakan-Northern Bulungan region who had based their work not on concessions (houtaankap concessies) but on logging plots (kapperceelen). In 1936, such smaller scale timber businesses were as follows:

Table 1. Small logging plots in the Tarakan/Bulungan area in 1935-1936. Kapperceel Holder Location Area/Ha H. Ali Pulau Tibi 600 Abdullah Pulau Pajau 3,720 Abdullah Pulau Tibi 3,030 Abdullah Sianjong 500 H. Saleh - 3,850 H. Saleh Tg. Keris 2,780 H. Ali Tg. Keris 4,950 19,430 Total Source: Moggenstorm, W.G. (1937) Memorie van Overgave van Residentie Zuider- en Oosterafdeling Borneo. Pp.257-8.

Such traders nearly always experienced shortages of capital and therefore almost invariably adhered to the sub-contracting model that enabled substantial savings. In Berau, for instance, the SMP company (Steenkolen Maatschappij Parapatan) acquired a 15,000 ha concession in 1935 for 10 years with which to

34 Moros were transported into the PCC concession area at the company cost through North Borneo and Tawau as the point of entry (Hahmann 1936). 35 PCC had to pay royalty fees ranging from 45 cents to 5 guilders per ton of timber depending on its diameter (Hahmann 1936). In 1936, company’s production reached 8,000 tons (De Boer 1937:424).

14 fulfill the need for construction timber (De Boer 1937:416-17). However, the company never engaged directly in logging. Instead, it carved the concession into plots for hout-aannemers, or timber suppliers, who acted as contractors and carried out the actual logging (Ensing 1938:97). The men that were employed as timber contractors had previously been buying up timber from groups of villagers hired to cut trees in the forest. The contractors subsequently adopted this system in virtually unchanged form for the purposes of working on the SMP forest concession, thus leaving room for the continuation of buy-ups, despite regulations to the contrary. Both traders and sub-contractors relied on, what visiting foresters and administrators indicated, were indeed loopholes in the implementation of the 1934 forestry legislature (Van de 1935). The village population was free to cut trees for their own use – such timber was exempt from any taxes. As a result, sub-contractors or even traders themselves would continue hiring natives to cut timber and if the latter encountered visiting Forestry or a Police officer (a highly unlikely prospect indeed), they would assert that timber was for subsistence use. According to government sources, traders became very adept in utilizing this scheme (Emanuel 1935:40).

In spite of a certain degree of manipulation and evasion by virtually all virtually all timber operators of the 1934 forestry regulation that banned the bevolkingskap, there is little doubt that overall this decree was relatively effective in term of generating more government income and enabling greater degree of control. The degree of informality in timber exploitation (evasion and/or manipulation) at that time was limited due to: 1) prevailing market limitations – although demand for Borneo hardwoods was developing not only in China and Japan but also in Europe, Australia and South Africa, war tremors in Asia and subsequently in Europe made the readily accessible consumer market a major concern; in addition, prices for timber, although improving, were by no means lucrative compared to the risks involved and investment necessary for exploitation of timber in relatively isolated areas; and 2) small government bureaucracy – numerically small (especially forestry officials), local government functionaries were career oriented and had little incentive to engage in profiteering from timber trade that was far from attractive. Perhaps most importantly, the bureaucracy was adequately paid and apolitical – two key elements that kept away the specter of timber becoming the provider for subsistence and institutional needs.

3. The Japanese Interregnum and the Re-entry of the Dutch – economic crisis in East Borneo and proliferation of timber smuggling

The war years of 1942-1945 had a debilitating impact on forest exploitation in East Borneo, setting back the official timber production to such a degree that it would take another two decades to reach the pre-war levels. However, the all-pervasive economic crisis during the Japanese rule and subsequent to their surrender created a stimulus for smuggling of timber for subsistence purposes. During the Japanese occupation, timber production in Borneo fluctuated, reflecting the initial immobilization of the infrastructure caused by the retreating Dutch and its subsequent repair by the Japanese. This process is illustrated by the fact that in 1942, only 6400 m3 of timber were produced in Borneo, whereas only two years later in 1944 this figure increased to 114,300 m3 (Fernandes 1946:57). All Japanese firms and traders active in Borneo before the outbreak of the war in Southeast Asia intensified their operations, particularly for export to Japan to support the war effort. The rise in timber extraction for shipping to Japan was particularly pronounced in West Borneo (ibid). In the Eastern part of the island, Japanese timber operators expended their activities, taking over Dutch and British logging enterprises. The medium and small local timber traders largely seized operating because under the command structure of wartime economy they were forced to deliver quotas of timber essentially with little or no compensation.

The effect of war on economic conditions in East Borneo was multiple. Nearly all mining and forestry enterprises that operated during the Japanese occupation were in the state of severe damage upon Japanese

15 surrender in 194536. Balikpapan oil refinery and oil pipelines required intensive repairs, making the goal of meeting the pre-war annual production levels of 1,000,000 m3 of oil a prospect of remote future (Economisch Weekbald 1946:220). Similarly, oil installations in Tarakan were seriously damaged, as only one third of pumping stations could be put to work, enabling an initial production of only 18,000 m3 of oil per month (vs. 120,000 m3 under normal circumstances). Situation in the coalmining sector was also gloomy. Berau coalmines first suffered from the Allied bombing raids against the Japanese37. In the last phase of war, the mines were purposefully damaged by the retreating Japanese, rendering short-term resumption of the production impossible38 (ibid:221). The coalmines of Oost Borneo Maatschappij in Kutai faired better, enabling an output of 30,000 tons a month beginning in January 1946, but labor problems and transportation difficulties constituted major obstacles.

The transport difficulties were caused by the fact that most of KPM liners that plied the routes along the coast of Eastern Borneo were largely withdrawn to North Africa and Australia during the war years (Le Coultre 1946:61-62). Only a handful fell into the hand of the Japanese and these were either destroyed or damaged beyond repair. The vessels taken to North Africa were used in combat and most of them were not usable after the war. Ships stationed in Australia were ready for immediate use but their number was very limited, thus causing the transportation crunch across the Indonesian archipelago.

The first year following the war in East Borneo was marked by painfully slow recovery of main industrial sectors, resultant limited employment opportunities, transport difficulties, rising rice shortages and increasing food prices. The performance of the region’s leading oil and coal industries did show slow signs of improvement. For instance, the oil output in Tarakan increased from 15,000 tons per month in 1946 to well over 20,000 in 1947. However, the combined production in Tarakan as well as Balikpapan still amounted to no more than 1/9 of the pre-war output (Economisch Weekblad 1947:721). The coal production in Kutai rose to 120,000 tons in 1947, nevertheless it was still less than half of what was produced before the war. In Berau, coal production was re-opened in the second half of 1946. However, by the end of the year the output reached only 3000 tons. The production rose sharply in 1947 reaching 3000 tons per month, which constituted a marked improvement, although still far below the prewar standards39 (Economisch Weekblad voor Indonesie 1947:56).

In comparison to slow but steady recovery in oil and coal enterprises, industrial timber exploitation in East Borneo faced more difficult prospects. The Japanese firms that produced the bulk of timber for export before the war obviously did not resume operations. The only large logging operations were associated with rebuilding of mining industries and the attempted reopening of the HNM (Houtaankap Noenoekan Maatschappij) in Bulungan40. In 1946, the timber production was a small fraction of the pre-1942 figures. Nunukan and Tarakan together produced just over 5000 m3 of mostly logs, Samarinda contributed 7000

36 Most strategic industrial enterprises such as oil and coal installations were immobilized by the Dutch on the eve of Japanese invasion (e.g. BPM refineries in Tarakan and Balikpapan). However, these installations were not totally destroyed. In some instances, e.g. Tarakan, damage inflicted by the Dutch was relatively slight, enabling the Japanese to resume oil production and processing within a month of gaining control of Tarakan in 1942 (Stanley 1998). 37 The same bombing raids against the Japanese in Berau destroyed the palace of the sultan in Gunung Tabur. According to the surviving members of the sultan’s lineage, apparently the Allies got false intelligence suggesting that Japanese were using the sultan’s palace as a shelter. The bombing destroyed most of the royal paraphernalia, the remains of which can be seen today in the houses of the surviving member of the royal family as well as in the local museum. 38 In 1940, Berau’s SMP (Steenkolen Maatschappij Parappatan) produced nearly 300,000 tons of coal, thus being a major contributor to the overall coal production in East Borneo (Le Coultre 1946:62). 39 This output would increase further to 5000 tons per month in 1948. Incidentally, coal production in Indonesia as a whole would not reach the pre-Warld War II levels until well into1970s. 40 From 1942 until 1945, NHM operated under Japanese management.

16 m3 (all sawn timber), while Balikpapan and Banjarmasin added 2000 m3 (Meel de 1947:272). This was a far cry from nearly 300,000 m3 in the late 1930s41. In the following year, the output from Nunukan increased to over 20,000 m3, but it was a lone undertaking that could not possibly fill in the void created by the absence of other enterprises42.

However, the small official timber production reported from various areas of East Borneo need to be understood within the context of economic crisis that the area was experiencing at that time. The timber production was indisputably far below the pre-war production, but at the same time it was more than what was officially declared. Gradually, officials began to realize that speculation and smuggling of various products by local population was rising as result of difficult postwar economic conditions. Most speculation was associated with consumables because these were in particularly short supply in East Borneo. Rice shortages were especially acute due to the transport crunch that imposed limits on imports. In 1947, food hoarding and associated price speculation was reported to be worst in Samarinda, Berau and Bulungan (Economisch Weekblad voor Indonesie 1947:86). As a means to alleviate declining income and lack of consumables, these same areas engaged in clandestine exports of timber. The shipments were transported by prahus (native merchant boats) to Makassar, Pare-pare and Donggala in (Meel de 1947:272). Interestingly, although the total timber output in 1949 was still considerably below the pre-war levels, the volume of the inter-island shipments was thought to have already exceeded that from the late 1930s (Powell 1951). In addition to the markets of nearby Celebes (Sulawesi), unreported timber shipments went to more distant destinations such as Surabaya in Java (particularly from Banjarmasin) and Tawau in the North Borneo territory.

In order to remedy this situation, the Dutch administration decided to create a venue for the local people to carry out, what was officially illegal timber smuggling activities, within some sort of legal framework. They decided to allow small-scale logging by the local population (bevolkingskap) and buy-up schemes by timber traders (opkoop systeem) that, even though outlawed since 1934, were thought essential in boosting local economy (Economisch Weekblad voor Indonesie 1949:24). The system of small-scale logging was made legal again because it reflected positively upon the Dutch government and it offered rural people an additional source of income to cover higher costs of basic consumables. In the Barito region, South Borneo, the response was encouraging as in 1948 small-scale loggers extracted around 90,000 m3 of timber (Economisch Weekblad voor Indonesie 1949:24). In East Borneo, results were promising as well, as in 1947 around 89,000 m3 of timber was produced43 (Economisch Weekblad voor Indonesie 1948:86). Considerable portion of that output still ended up in North Borneo and Java through clandestine channels.

In 1947, timber export was North Borneo’s second most important revenue earner behind rubber. However, timber export grew much faster than that of rubber. Rubber and timber had played the leading role in revenue generation for North Borneo already before the war. However, their individual contribution to the coffers of the territory changed considerably after 1945. Whereas in 1938, rubber produced about twice as much revenue as timber (4.7 million vs. 2.2 million – in Straits Dollars), in 1948 this relationship changed significantly in favor of rubber – i.e. 18.5 million vs. 3 million (Kahin 1947:54;

41 In 1940, all forest concessions in East Borneo (Nunukan, Berau, Sangkulirang and Balikpapan) produced 274,000 m3 of timber. 42 The pre-war manager of the Nunukan logging enterprise, Eric Lundqvist, returned to Indonesia in 1946 but never came back to East Borneo again. Instead, he was assigned the task of developing logging operations in West New Guinea. His life story is remarkable because until 1945 he remained in central Java where he managed to avoid detection by the Japanese by converting to Islam and living with his wife in a small hamlet, posing as a Sundanese. However, he had to evacuate to Sweden in 1945 once local revolutionary youth insisted that he was a Dutchman, or a Dutch collaborator, and threatened to kill him. He was reunited with his wife in 1946 and spent the rest of his working days in West New Guinea. See Eric Lundqvist (1955) In Eastern Forests. London. 43 This was in addition to nearly 33,000 m3 of sawn timber and almost 5 million sirappen, or ironwood roof shingles (10,000 sirappen is equal to about 20 m3 of timber).

17 Economisch Weekblad voor Indonesie 1949:1010). Even though the real revenue contribution of timber declined immediately after the Second World War, timber exports from North Borneo began to intensify rapidly in subsequent years in spite of the fact that all former Japanese logging companies were not active. The timber export from North Borneo grew by an impressive 145% between 1947 and 1948, heading mostly to China. Some of that timber originated in Indonesia, as NBTC reactivated its concessions through sub-contracting on the Simangaris River in the Dutch controlled Bulungan in East Borneo44.

4. The emergence of economic and political significance of timber trade in East Kalimantan between 1949 and 1967

The 1950s constituted a decade of political limbo and confusion resulting from persistent dualism between administrative structures erected by the Dutch and changes initiated by the republican forces. During those turbulent times, the economic matters in general, and forestry in particular, had been nearly completely overlooked. Active forest administration was not resumed in East Borneo until the end of 1950s when Japanese corporations first indicated interest in re-entering logging business in the region.

In its effort to develop federalism as a way to weaken republican drive toward independence, in 1947 the Dutch administration created the East Borneo Federation of self-governing sultanates comprising Kutai, Bulungan, Gunung Tabur and Sambaliung (hereafter EBF). In Borneo as well outside of it, these states were known as swapraja regions. The aristocratic families leading those sultanates hesitantly chose to side with the Dutch because the republican movement in their respective areas was poorly organized and, especially militarily, it did not pose a serious challenge to the Dutch45. The EBF was to have a democratic (in as much as possible) representative structure, crowned by the East Borneo Assembly that was chaired by the sultan of Kutai - Aji Muhammad Parisekit (Dachlan 1975). Below the East Borneo Assembly, at the district level, each of the aforementioned swaprajas established their respective assemblies46. However, their actual effectiveness remained very limited because they could be overruled by the Dutch resident47.

Following the recognition of Indonesia’s independence by the Dutch towards end of 1949, East Borneo (or Kalimantan Timur, as the region was increasingly being called) officially became a part of independent Indonesia on 10 April 1950. On the same day, the Indonesian government in Yogyakarta abolished the EBF as well as its subordinate assemblies in individual swaprajas (Soetoen 1971). Subsequent to this unification, for nearly the whole decade of the 1950s, Kutai in particular and East Kalimantan as a whole, suffered from political gridlock and economic limbo, as the region did not possess a functioning government due to the rivalry between surviving aristocratic forces and republican radicals. Following the inclusion of East Kalimantan into federal Indonesia, the region was administratively reorganized into three sawpraja territories: Berau, Bulungan and Kutai. Based on the government regulation (Peraturan Pemerintah) No. 39 1950, these three new administrative units were subsequently instructed to form temporary assemblies (DPRD-S, or Dewan Perwakilan Rakyat Daerah Sementara).

44 Timber-exporting companies that operated and managed to recover a portion of their pre-war production levels, such as the Nunukan enterprise and NBTC, seized operations upon the withdrawal of the Dutch from Indonesia in 1949. 45 See, for instance, Pemda Kaltim. 1981. The Storm of Mahakam in Capita Selecta. Tenggarong. 46 With the exception of Gunung Tabur and Sambaliung. Since these were relatively small sultanates, they jointly formed one representative assembly for Berau (Dachlan 1975:274). 47 Due to only nominal character of the EBF assemblies, INI supporters (Ikatan Nasional Indonesia) refused to participate in them.

18 However, due to increasingly strong anti-swapraja ferment among political organizations and parties in the area, the formation of such temporary assemblies was repeatedly blocked48.

It soon became apparent, however, that swapraja regions in East Kalimantan led by sultans and associated with them aristocrats could not be simply abolished. This was because the presence of the republican forces was limited to major cities, whereas rural areas were still very much under the influence of local aristocracies. This was a critical factor that swayed PNI politicians in Jakarta in the direction of co-opting aristocratic elites into the ranks of local leadership and bureaucracy. By doing so, the leading national party would be in a better position to have a strong showing at the 1955 parliamentary elections.

Such an approach became the main political agenda of PNI in the region, as the highest public figures in Kalimantan were instructed to press for cooperation of anti-swapraja forces with sultans49. In 1950, the resident of East Kalimantan, Roeslan Moeljoharjo, implored all parties not to predicate the existence of DRPD upon the status of swaprajas because it was not possible to abolish the latter off-handedly, and all efforts to do so were preventing democratic institutions from taking root in the area (merugikan perkembangan demokrasi di daerah ini sendiri)50 (Dachlan 1975:275). As opposing camps became more inclined to cooperate, the legal basis for the formation of the DPRD-S (PP No. 39 1950) was withdrawn, leaving East Kalimantan without any basis for political and economic governance.

The transition from the federal to unitary state in Indonesia in the early 1950s had important implications for the political situation in East Kalimantain by reaffirming the political role of aristocratic elites51. In spite of that, however, the rapprochement between the “old timers” and revolutionary republicans in East Kalimantan continued to be tenuous. In the absence of any functioning government structures in the region, in 1952 Achmad Arief, the acting resident of East Kalimantan, tried to create a kind of makeshift substitute for non-existent DPRD in the form of consultative/advisory body (badan penasehat) that would serve as a forum for discussion between political groups and parties. This initiative had little success either. In the following year, the dominant position of local aristocracy got an official stamp of approval (at least for the time being) as a result of the reorganization of swaprajas into special regions (daerah istimewa), based on the emergency regulation (Undang-Undang Darurat) No. 3 1953. Such special regions were to be administered by the traditional sultanate leadership that had been in effect since before independence. The positions of the head of daerah istimewa were to be automatically assumed by sultans, while other key subordinate posts were to be filled by individuals appointed by him without any direct role for DPRD in the whole process.

Following the elections of 1955, this centralized form of governance became somewhat more flexible with the implementation of the Regulation No. 14 1956 that stipulated the formation of DPRD with the participation by organizations and political parties based on their individual results from the 1955 elections. In 1957, East Kalimantan became one of three provinces (Tingkat I) covering the Indonesian part of the island of Borneo. In addition to East Kalimantan, Kalimantan Selatan (South) and Kalimantan Barat (West) were formed. In the following year, DPRD Kutai was constituted based on the 1958 local

48 The rallying call of the anti-swapraja forces in East Kalimantan at that time was: “moh DPRD, selama swapraja Kutai masih ada”, or reject DPRD so long as swapraja Kutai still exists. 49 The main political parties in Kalimantan Timur in the early 1950s were: Masjumi, PNI (Partai Nasional Indonesia), Nahdlatul Ulama, PSI (Partai Sosialis Indonesia), PIR-Hazairin, PK (Partai Katolik), PKI (Partai Komunis Indonesia) and PRI (Partai Rakyat Indonesia). 50 In contrast to Kutai, swaprajas Bulungan and Berau managed to form their own assemblies. However, these territories were much smaller and politically junior. 51 Commentaries of that time pointed to the fact that there was nothing to be gained from “witch hunts” and dissent. Interestingly, accounts of the history of sultanates predominantly emphasized the patriotic/nationalistic and anti- Dutch stance of various sultans long before independence. Such an interpretation of sultanates in Kalimantan Timur has been prevalent until today.

19 elections that cemented the dominant position of PNI52. Subsequently, Regulation No. 27 1959 transformed the remaining vestiges of the special (istimewa) regions in East Kalimantan into districts, or second tier regions (Daerah Tingkat II). In 1960, sultan Aji Muhammad Parisekit was relieved of his role as the head of the special Kutai region. He was subsequently replaced by Aji Raden Padmo who became the first Bupati of Kutai.

In 1960, over a decade after the independence, for the first time East Kalimantan had the basic, functioning governmental structure in place. This allowed more attention to be directed to the matters of economy and forestry, both of which were in the state of chaos. The forestry sector had only a minimal guiding structure and virtually no managerial oversight. The provincial Forestry Department (Dinas Kehutanan Kalimantan Timur) was not continued after the departure of the Dutch and did not exist until 1957. During that time, forest policy was limited to irregular survey visits by foresters from Bogor and the ministry in Jakarta. Given this state of affairs, it may be surprising that timber production in Indonesia during the early 1950s actually increased, especially the proportion of the so-called “wild timber” (tropical hardwoods) as opposed to teak or jati. In 1951, the total timber production was approximately 1,250,000 m3 that increased to nearly 1,7 million m3 a year later (Ekonomi dan Keuangan Indonesia 1954:373). In 1953, the total timber production in Indonesia rose further to 3.4 million m3 that was also the estimate for 1954. In 1955, the production edged up again to 3.5 million m3 (Anwar 1958:602). An important fact in connection to these statistics is that roughly 2/3 of that timber consisted of non-teak species from Kalimantan and Sumatra because teak forests of Java had been so severely over-cut during the Japanese interregnum that their subsequent productivity was very limited53 (ibid). Nearly all of the non-teak timber was produced by private enterprises in addition to some in which Forestry Department (after 1957) was involved. Finally, 50% of the production figures above originated from the “unrecorded production”54.

The exploitation system relied on basic continuation of the regulations from the late Dutch period. While in the late 1940s, the Dutch allowed for both concessions and well as small-scale logging by individuals (bevolkingskap) through kapperceelen, in the 1950s the Indonesian authorities continued with this policy. Given the political chaos in East Kalimantan at that time, there were no prospects for the establishment of large logging concessions. Foreseeing such a scenario, the authorities set a minimum concession size at 1,000 ha, permits for which were to be issued by local officials (camat, bupati). However, persons obtaining permits rarely, if ever, were directly engaged in logging. Similarly to the situation before the war, “[t]he entrepreneur usually does not manage the operation himself but deals on a contract basis for a fixed price per m3 of the logs delivered at a certain point. Under the contract conditions, also, an amount of food has to be supplied in advance of the operation that is to be deducted from the value of the delivered product. Sometimes sub-contractors are also used on the job. The forestry service collects timber the same way as private exploiters” (Anwar 1958:607-608).

The investment costs associated with opening up substantial logging enterprises in Kalimantan were continuing to be prohibitive and the political climate less than conducive. For a moment, the government

52 The DPRD Kutai of 1958 was comprised of 30 seats and had the following composition: PNI 8, Masjumi 6, NU 4, PSI 4, PKI 3, PIR-Hazairin 2, PSII 1, Purba 1 and Persatuan Daya 1 (Dachlan 1975:278). 53 The production of the panglong areas in Eastern Sumatra was estimated to be about 400,000 m3 annually, most of which was exported to Singapore. Following Indonesia’s independence, a considerable portion of the former panglong business in Sumatra continued unofficially, as Singapore’s demand for timber for reconstruction purposes skyrocketed. Yet, the official timber trade was hampered by the difficulties in reaching a trade agreement between Singapore and Indonesia (Far Eastern Economic Review 1953:556-7). The basis for the continuation of the exports by the panglong industry was the fact that chief financiers in this sector (tauke-tauke) resided in Sangapore, stationing their representatives throughout East Sumatra (Soepardi-Wardi 1956:148). 54 Unreported timber production was being included (roughly) into the official statistics. For instance, in 1955 the reported figure of 3.5 million m3 included 1.75 million m3 that was assumed to be the result of “informal production”.

20 in Jakarta toyed with the idea of wetland conversion for mega rice projects that would offset the waning of timber industries and declining operations of foreign mining companies55. Probably the largest such scheme was the plan to drain large areas of swamps adjacent to Banjarmasin in order to boost national rice production by the estimated 600,000 tons56 (Far Eastern Economic Review 1954:276). The project became an example of rare cooperation between Jakarta government and regional authorities, as Jakarta sent agricultural specialists for training courses in the United States, whereas the governor of South Kalimantan did his best to praise the potential of his province (Idak 1952). However, as was suspected from the beginning, such mega undertaking was well beyond the means of the young Indonesian state. As economic conditions deteriorated and political instability increased, the plan was shelved and was never realized.

In East Kalimantan, the worsening political and economic climate of the 1950s claimed its first casualties in the coalmining sector. In 1955, the SMP that struggled to resume mining after the war in heavily damaged mines in Teluk Bayur, Berau, decided to close operations due to liquidity problems and also as a result of mounting anti-Dutch sentiment in Indonesia. In a similar fashion, coal-mining firm Oost Borneo Maatschappij near Samarinda in Kutai withdrew as well, handing over its operations to an untested national company P.N. Tambang Batu Bara Mahakam57. In the midst of such gradual, yet steady decline, timber extraction by whatever means became the main income earning option for a large number of traders, government employees as well as common people. Between 1951 and 1960, the number of officially registered Indonesian nationals in North Borneo increased by 300%, indicating that the movement of people and goods across the border grew by leaps and bounds (Kaur 1994:47). It was the time of intensification of export oriented timber industry in British North Borneo, although the Philippines position as the dominant player in Southeast Asia was still far from challenged. The Indonesians flowing into the territory (officially as well as clandestinely) consisted mostly of unskilled laborers. However, there were also substantial numbers of traders who sought financial support in order to boost cross border timber operations58. The bordering towns of Nunukan on the Indonesian side and Tawau in North Borneo became the focal point of such business transactions.

Cross-border business of this kind became increasingly intensive and diverse following the nationalization of Dutch companies in Indonesia in 1957 and the imposition of the emergency in 1958. It emerged as the key source of personal as well as institutional income especially for the military and Police officers in East Kalimantan. They were the main beneficiaries of the state of emergency in Indonesia, mainly as a result of the introduction of the concept of dwifungsi into the military doctrine that provided justification for the involvement of the security forces in various kinds of social, political and economic activities. As a result of these developments, in the late 1950s and early 1960s, the politics in East Kalimantan underwent a

55 In spite of extensive repairs and renovations of oil and coal installations after the end of the Second World War, in the early 1950s the production in these key sectors was still running at only a fraction of actual capacity. The BPM refineries in Balikpapan, for instance, in spite of 6 years of repairs still did not have all of its well operational. Tarakan refinery wells that suffered the heaviest damage were also far below their production capacity of 36,000 tons of crude oil per month (Far Eastern Economic Review 1954:276). 56 This project was a forerunner of a much more grandiose in scale program undertaken by Suharto’s New Order government in the 1980s and 1990s, of converting over a million hectares of wetlands in Central Kalimantan into rice paddies. 57 P.N. Tambang Batu Bara Mahakam struggled mightily after the take-over of OBM coalmines in Kutai. In 1963, in a bid to stem losses, this government controlled company handed over exploitation activities to three contractors: CV Fadjar Timur, Usaha Nasional Penggalian Batu Bara Negara di Loah Ulung, and PT Bangan (Monografi 1969:57- 58). In 1971, the Mahakam coal mines were closed basically as a result of bankruptcy (Monografi 1972:97). 58 Just as the panglong system in East Sumatra was based on financing from Singapore, logging and export of timber from East Kalimantan to North Borneo depended on financial support from this territory.

21 swift transition from swaprajas, to more radical and nationalistic direction59. The bureaucratic ranks, expending steadily under the swapraja leadership within PNI during previous years, underwent a new round of growth, as various semi-military groups (pemuda and resistance organizations from 1945-49) put claim to what was denied to them by swaprajas. Virtually overnight, all major administrative as well as managerial posts in the province were either directly taken over by the military or given to people associated with it.

As bureaucratic and managerial ranks of the military personnel increased, the army as well as civilian authorities in East Kalimantan began suffering from reductions of their wages as a result of rampant mismanagement of nationalized industrial complexes and increasing inflation (Mackie 1961). This was also due to the fact that massive financial resources were diverted for the West Irian campaign60 This increasing financial scarcity combined with vastly improved prospects for timber exports on international markets, proved to be the formula that contributed greatly to the sustained growth of the informal timber sector61. The licenses for kapperceelen, or kappersil as such small concessions were also called, were issued by key local officials (military) for a fee per m3 to Chinese operators who either sub-contracted the work further to Bugis or Banjar traders possessing the labor force necessary for logging, or they hired village population directly to cut trees. It was still an entirely non-mechanical operation relying on the use of axes and conventional saws.

The growth of this system of timber trade signaled the potential that attracted attention of the Japanese timber importers who, until then were entirely dependent on supplies from the Philippines. In the second half of the 1950s, however, the Philippine government became increasingly adamant about having at least a portion of its timber exports to Japan in the form of sawn timber products or plywood instead of raw logs (Far Eastern Economic Review 1959:561). As a result, the Japanese Forestry Association decided to send a survey mission to Indonesian Borneo in order to assess the possibilities of developing alternative supplies of tropical hardwoods. The surveys results turned out very promising, presenting East Kalimantan as the largest and most accessible swath of tropical forest in Southeast Asia, studded with commercial hardwoods such as meranti and keruing. As a result, a group of 28 companies, including pre-war veterans of logging in the region such as Mitsubishi and Mitsui, decided to set up a joint company with the Indonesian government forestry firm Perhutani for the purposes of getting the timber venture in Kalimantan under way (Takita 1963). Such a join-venture was to be called the “Kalimantan Forestry Resources Development Cooperation” (henceforth KFRDC) and it was intended to operate on large scale. The project planned to open 21 offices throughout Kalimantan and invest up to 15 billion yen in developing logging operations. In East Kalimantan, the focus of operations was to be in the areas of Nunukan, Tarakan, Berau and Sangkulirang where half of the entire investment would be injected. Following the preparatory stage, the KFRDC, being an important part of the eight-year development plan 1961-1969, was envisioned to be able to produce around 1.6 million m3 of timber after seven years in operation (Pauker 1961).

The joint-venture’s operational results proved very different from expectations at the planning stage. To begin with, the undertaking never reached any of its intended targets. The operations were initiated in the northern part of East Kalimantan near Nunukan, Sesayap and Malinau, whereas in the late 1960s

59 The transition was essentially a pronounced turn to the political left. However, in East Kalimantan such left was constituted largely by increasingly radical elements within PNI itself. The latent influence of the swaprajas prevented PKI from making any serious headway in East Kalimantan. For a detailed analysis of these transitional years, see Magenda (1991). 60 It was a paradoxical situation indeed because the overall national spending on the military at that time was at its highest level ever. 61 By late 1950s and early 1960s, Japan was by far the largest timber consumer in the Far East, keen to import tropical hardwoods for the needs of its burgeoning economy.

22 preparatory activities were undertaken in Berau and Sangkulirang62 (Perhutani-F.D.C. 1965:1; Patter de and Visser 1979:23-24). The agreement between Japanese participating companies and Indonesia’s Perhutani stipulated that the entire financial and technological layout would be provided by Japan. Indonesia would keep most of the machinery, paying for it on deferred terms. The output was to be divided based on the principle of production sharing (PA) whereby Japan would buy 50% of timber at international prices (Panglaykim 1963; Thalib 1967; Manning 1971). Actually, Japan ended up taking 70% of what was officially produced because Indonesia, being unable to make regular payments on the equipment, it decided on gradually pay off the bill with timber. The key problem with KFRDC was that it was much more costly than expected and it produced far less timber than anticipated. By 1970, five operational units in East Kalimantan were annually producing 130,000 m3 of timber each for the total of 800,000 m3, merely half of what was planned (Patter de and Visser 1979:24).

While in the eyes of the shareholders and managers alike KFRDC was a failure, for local timber businessmen in East Kalimantan this undertaking proved to be a boon. The key reason for this was the unique position of Perhutani as a government company possessing the sole control of best production forests in East Kalimantan63. After its establishment in 1957, Perhutani took over all managerial and administrative tasks from Dinas Kehutanan Kalimantan Timur that was subsequently dissolved only after a year in effect. The stellar emergence of Perhutani as the monopolist of forest resources in East Kalimantan contributed to enormous expansion of independent timber extraction and trade in the area. Although officially Perhutani was responsible for issuing small concession (kappersil) permits to individual loggers for areas outside its own operations, in reality increasingly few loggers bothered to obtain any such documentation and there was nobody to stop them from cutting wherever they pleased. In fact, before the establishment of KFRDC in 1960, much of Perhutani’s own production came from sub- contracting work to such scattered logging teams.

This close association with small-time loggers continued after the establishment of the joint venture with Japanese companies. The Japanese drew up plans for intensive and mechanized timber exploitation in project locations. However, such large-scale extraction was undertaken along with intensive participation by the aforementioned local timber networks that were engaged in timber-trading operations to North Borneo and Java. Mechanized logging indeed constituted the operational basis for KFRDC, but large parts of exploited areas that were less accessible, and therefore more expensive to operate mechanically, were earmarked for manual kuda-kuda logging practiced locally (FDC/Ataka-Perhutani 1969). The involvement of local timber interests in the venture by no means occurred only on the basis of filling in where modern technology was lacking. Since the cooperation of local administration was necessary, and since the administration officials had a stake in small-scale logging, they had to be engaged in the project as well.

As the KFRDC production began in 1960 on the island of Nunukan and in the area of Sesayap and Malinau Rivers, almost immediately there was a lag in production. A factor that very likely contributed to this situation was the fact that at least a portion of the production found its way across the border to Tawau in North Borneo. Even though the Japanese offered to pay international market prices to Indonesia for their share of timber, these prices were less attractive once Indonesia’s credit obligations were factored in. On the other hand, only a short distance to the North in Tawau, timber buyers (increasingly from South Korea and Taiwan) were eager to get hold of the timber from Indonesia at much more competitive prices. It is not surprising, therefore, that KFRDC suffered from timber deficit caused to a considerable extent (although not exclusively) by such informal shipments for export. This trade became so lively and

62 Interestingly, this area was the precise location of the initial activities of Japan’s NRKK (Nanyo Rongyo Kabushiki Kaisha) in the 1930s, the largest timber company in at that time. 63 Perhutani’s position was powerful in theory, but in practice it exercised very little effective control over forest areas under its jurisdiction.

23 economically important that even the political and military tensions during Konfrontasi between Indonesia and the forming Malaysian state in 1963 did not cause much of a slow-down. This was despite the fact that the border between two countries was officially closed and military patrols of both sides patrolled the area (Magenda 1991:78). In fact, in 1963 as well as after, Sabah’s (that is how North Borneo was called after the departure of the British) economy boomed as a result of rising timber and oil exports (Kaur 1994:49). These timber exports received a marked boost in the form of unofficial supplies from Indonesia’s East Kalimantan. The situation with small-scale logging and timber trade became so wide- spread and uncontrollable that district authorities issued regional regulation (Peraturan Daerah) No. 9 1963 admonishing all parties external to Perhutani to acquire kappersils that were available for up to 1000 ha (Monografi 1968:16). In the following year, Dinas Kehutanan Kalimantan Timur was assembled again with one of the most urgent issues on its agenda being the elimination of what was referred to as penebangan liar or roofbouw – i.e. the problem of illegal logging (Monografi 1968:11; Monografi 1970:65).

5. The Banjir kap boom and the intensification of the informal timber trade

The attempt to regulate this widespread, yet unrecorded, logging in East Kalimantan through regulations and institutional means in the first half of the 1960s could not have born tangible results because it came at the time when economic crisis in Indonesia was at its worst. There were neither practical means to regulate kappersils, nor was there the will to take the regulation seriously. This was especially so since this system of exploitation and trade of timber to other parts of Indonesia and to Sabah became, quite literally, the lifeline for an array of people and institutions in the districts of East Kalimantan.

The economic and political utility of such small-scale logging gained further importance following the 1966 dissolution of Sukarno’s Guided Democracy and ascendance of the New Order government led by Suharto. The process of intensification of small-scale logging was added by anti-left purges undertaken by the military in all government institutions in the province. While the total number of people in East Kalimantan arrested and subsequently imprisoned as a result of the coup in September 1965 was low, it was sufficient to clear way for a total domination of the provincial government by the military64. In order to revive the moribund economy and begin consolidating political power in the regions, the Suharto government resorted to the following two-pronged approach: 1) formulation, in 1967, of the Basic Forestry Law (BFL) that gave the central government far reaching authority over the use of an estimated 140 million ha of forests in Indonesia and 2) promulgation of liberal investment laws, both domestic (PMDN, or Penanaman Modal Dalam Negeri) as well as foreign (PMA, or Penanaman Modal Asing). This new legal framework marked the beginning of a period of freewheeling and economic bonanza for timber entrepreneurs and their (largely military) supporters.

In early 1967, even before the implementation of the new investment laws, the Sebatik island shared by Indonesia and and the nearby Nunukan were already well known as areas with major concentration of timber smuggling activities (Monografi 1968:9-10; Monografi 1969:10-11). Most of this export and trade was fueled by the output of kappersils or konsesi rakyat that, based on the 1963 regulation, were limited to 1000 ha and had operational time of 1-2 years (see Appendix 3 for a list of

64 By the end of 1968, 235 persons were arrested in Samarinda and charged with association with either PKI, Gerwani, or both (RIMA 1968a:33). In the same period in West Kalimantan – 13 officers of the Tanjungpura Military Command in Pontianak were arrested in addition to an Assistant Police Commissioner and two Police Brigadiers (RIMA 1969:105). In other Kalimantan provinces arrests were more numerous. In Central Kalimantan, nearly 3,000 suspected communist sympathizers were detained from the end of 1965 until 1969 (ibid). In South Kalimantan, there were fears of a communist comeback due to strong leftist sympathies especially in the South Barito District (ibid; RIMA 1968b:31).

24 kappersils registered in East Kalimantan as a result of the regulation No. 9 of 1963). These registered logging plots totaled nearly 600,000 ha out of which 447,000 ha were in Kutai, 107,000 ha in Balikpapan/Pasir and 30,000 ha in Berau/Bulungan (Monografi 1968:16). The miniscule number of kappersils officially present in Berau/Bulungan at that time contrasts with the fact that the Berau/Bulungan area was simultaneously recognized as a major supplier of (unofficial) timber for export.

In the same year, first Indonesian companies took advantage of the more liberal domestic investment law and acquired large forest concessions for logging (HPH, or Hak Pengusahan Hutan). The composition of this very first group of concessionaries is revealing in many ways:

Table 3. Domestic HPHs in East Kalimantan in 1967 Company Area/ha PN Perhutani Unit I-VIII 507,000 PT Porodisa Trading & Industrial Coy Ltd.* 440,000 PT Budidjajawangi (Komando Korps Karya Angkatan Darat) 14,000 CV Djatikembang 200,000 PT Pilot Projek Berdikari 180,000 PT Komando Operasi Karya Angkatan Darat 100,000 PT Kayu Indonesia 70,000 PT Firma Kaltimex 60,000 PT Komando Korps Karya Angkatan Laut 60,000 PT Indomark 150,000 Total 1,781,000 Source: Monografi Daerah Propinsi Kalimantan Timur 1967, pp. 15-16. *PT Porodisa was a Philippine company, the very first foreign HPH concessionaire in East Kalimantan.

The table shows a direct involvement of the military in timber business at the outset of the large concession policy. This trend continued in the early 1968 with the entrance of PT Yamaker, also controlled by the armed forces, as the major operator of logging concessions along the borders with Malaysia (Monografi 1969:43). In 1969, the overt display of military activities in logging was augmented further by: 1) formation of the Police enterprise (B.U. Angkatan Kepolisian) that was given 100,000 ha; and 2) opening of the Regional Command’s enterprise (Puskopad Kodam IX/Mulawarman) that obtained 40,000 ha (Monografi 1970:74). Information on close cooperation between these companies, especially the ones positioned strategically near the border, provides clues as to the inflows of capital and outflow of timber that had taken place.

Although relatively small in size, the concession of PT Budidjajawangi was strategically located on the Sebatik island, a stone throw away from Malaysia65. This concession, in its early days called “Sebatik Project”, was led by Captain Agus Soemarlono (Perhutani-PanNusantara 1968:1-2). To the west, running along the border of Sabah, PT Yamaker had its concession area covering 200,000 ha. Wedged between the two was a cooperative undertaking of 100,000 ha between Perhutani and a Philippine sponsored company PT PanNusantara. The three companies worked very closely together, exchanging staff and joining surveys that were far removed from their own areas of operation. PT Yamaker was given its concession as part of cooperation (kerjasama) with Perhutani and very obviously it was looking for capital with which to begin large-scale exploitation. Perhutani, in addition to the long-standing association with the Japanese consortium, had already established business contacts with South Korean (Kaeng Nam) and

65 It is worth noting that forest cover on the island at that time was already severely degraded by former logging activities as well as due to intensifying agriculture by increasing numbers of villages inhabited by traders, fishermen and smugglers. This alone suggests that the company must have obtained timber supplies from other sources.

25 Malaysian (Sabah Timber) firms in this part of East Kalimantan, and thus it was in perfect position to serve as an intermediary (Perhutani-Kaeng Nam 1969; Perhutani-Sabah Timber 1969)66. These foreign forms provided the operating capital and they also did most of the logging operations. Lax transport possibilities out of the country (mostly to Japan) were ensured by the fact that the key timber transport route into Malaysia (and subsequently to Japan) was controlled by an active stakeholder – PT Budidjajawangi67. In 1971, in order render its military nature less visible, this company changed its name into PT. Sebatik Abadi (Monografi 1972:206).

The recorded export of timber for 1967 is shown in Appendix 3. Again, its reliability is dubious as from among the aforementioned companies only Perhutani is shown. It also provides details for only 17 firms operating kappersils, a small fraction of at least 600,000 ha that were in operation that year. However, such limitations of official records help illuminate one of the points of interest in this chapter – i.e. the growing magnitude of informality in timber business during this period.

With the introduction of the foreign investment law in the later part of 1967, logging and export of timber based on kappersils increased tremendously. This was due to the fact that the new legislature increased the allowable size of kappersils to 10,000 ha, rendering them much more attractive for industrial investors. Second, at this early stage of the New Order government, political conditions in Indonesia were still far from stable and therefore premature for large-scale investment. As a result, kappersils offered a much safer and relatively inexpensive means to obtain valuable tropical hardwoods for expending tropical timber markets in Japan, Korea and Taiwan. The dispersed nature of the concessions added to relative invisibility of trading activities, enhancing their attractiveness further. However, the main drawback of working through kappersils was unpredictability of production due to the dependence on weather/water conditions and problems with timber standardization and quality. Such timber trade was a precise replica of the opkoop systeem/bevolkingkap from the Dutch times and a continuation of the kapperceel business from the 1940s and 1950s because, as was the case in the past, it essentially constituted buy-up schemes based on advance payments and subsequent deliveries68. As a result, the banjir kap boom, as the 1967-71 period in the development of small-scale logging in East Kalimantan came to be known, can be seen as a continuation of the long-established logging tradition, albeit in much more intensive form, both economically and politically (Manning 1971; Ruzicka 1979; Peluso 1983). In 1968, kappersils grew to a total of 256, covering nearly 800,000 ha (Monografi 1969:41). Unregulated timber trafficking visibly intensified, as reflected in official concerns about the economic outlook of the province (ibid:68). In 1969, this area increased further to more than 1.2 million ha. At the same, the number of both foreign as well as domestic companies already possessing, or in the process of applying for, HPH concessions increased to 27 for a total of 5.5 million ha (ibid:68-75). During this period processing of timber by privately owned sawmills began rising as well, although orientation toward extraction and export of logs remained far more dominant.

With the improving economic conditions and more stable political situation in Indonesia by 1970, the dominant Japanese timber buyers became increasingly inclined to invest larger sums into more intensive forestry ventures, as it was obvious that banjir kap would not be able to sustain high quality timber supplies and timely deliveries demanded by international markets. This trend caused the growth of kappersils in East Kalimantan to plateau in the late 1969, after which time they gradually declined in numbers. HPHs, on the other hand, went on a steady increase, especially after the implementation of the

66 PT PanNusantara had a joint venture undertaking with Perhutani in the Sekatak River area, whereas Kaeng Nam and Sabah Timber in the Malinau area. Both areas are in close proximity to the aforementioned military concessions. 67 PT Budidjajawangi was also involved with Perhutani in a joint logging project in the Sekatak River area, northern Bulungan (Monografi 1971:83). 68 Banjir kap for the first time made an extensive use of chainsaws, although manual saws and axes still remained in use.

26 Provincial Regulation No. 114 in 1971 that imposed a ban on banjir kap in favor of mechanized logging. This regulation was nearly identical to the Houtaankap-reglement of 1934 that banned bevolkingskap, as both legislatures argued against inefficiency, wastefulness and uncontrollability of manual logging, while praising the benefits of industrial intensification. However, the main difference between the two was that while in 1934 macro-economic limitations on the marketing of tropical hardwoods and non-political nature of timber as a source of income were both effective in keeping informal timber trade under control, by 1971 the economic and political status of timber was dramatically different, as it emerged as a source of windfall profits and a tool to generate political patronage. This is particularly apparent in the fact that the ban coincided with the sweep of the 1971 national elections by Suharto’s GOLKAR Party (Golongan Karya) that gave him a free hand to rule the country. With his political position consolidated, the next goal pursued by Suharto and his entourage was to steer the flow of wealth generated from natural resources in their direction. Hence, the consolidation policy of the early 1970s in the forestry sector.

It would be completely mistaken, however, to assume that the emergence of large-scale HPH industry in East Kalimantan subsequent to 1971 put an end to banjir kap by effectively eliminating the small-scale logging sector that developed over the preceding decades. One strategy that some companies from within the small-sale sector adopted was to seek mergers, or at least create appearances that this was indeed the trend. This process is clearly illustrated with the data on HPH applicants in East Kalimantan in the late 1971. Beside large foreign investors such as Weyerhauser and Kayan River Timber Products, there were dozens of small local companies whose holdings ranged from a mere 1000 ha to 40,000 ha, well below the minimum HPH requirement of 50,000 ha (Monografi 1972:80-84). Yet, officially these companies were in possession of HPH licenses. It is clear that they were allowed time to find a way to consolidate, or to have their operations extinguished through a natural process of legal and economic incompatibility. After all, the ban on banjir kap was initially announced as a temporary measure (sementara), indicating that there would be possibilities for small timber operators to find a niche within the new environment69. Just how long this consolidation process would last apparently was dependent upon connections between the companies and forestry officials responsible for HPH licenses. In 1976, for instance, small companies of CV status still held HPH licenses in the district of Berau and they were as numerous as large concessionaries of PT type (Tim Monografi Daerah Berau 1976:12).

Other, far more common, response to the ban on banjir kap was simply to continue small-scale timber extraction and trade clandestinely, since in any case it had been conducted in such a manner already for a long time. This strategy essentially did not require any particular adjustments, aside from better coordination between the logging operators (tauke or cukong), security apparatus providing protection and forestry officials supervising the forest areas in question. Considering the crucial role that banjir kap played over the years for the scores of lower and middle level government officials in the districts, both as an income earner and as a source of political patronage, it was unrealistic to expect that this system could be dissolved overnight. The small-scale logging would not go away also because of subsequent macro- forest management policies instituted in the 1970s and 1980s that aimed at generating rents on unprecedented scale through rapid expansion.

6. Transformation of small-scale logging into a “shadow timber economy” in East Kalimantan between the 1970s and 1990s

When timber is locally undervalued, its international prices are high, demand is sustained, and trade networks ubiquitous and able to bend the rules through scores of government officials economically and politically dependent on this resource, no amount of legislature or policing can prevent timber smuggling

69 Such a transitional period also allowed for official taxes to be collected throughout 1971 from (by then already illegal) kappersil operators (Monografi 1972:119).

27 from taking place. This was precisely the case in East Kalimantan in the early 1970s when the province entered the period of “HPH timber boom” (Roeder 1973a, 1973b; Goldstone 1974). In 1973, international prices for key hardwood species of meranti peaked at US $ 75 per m3 and the timber investment was pouring into the region (Dixon 1974; Daroesman 1979; Ruzicka 1979a; Peluso 1983). East Kalimantan accounted for approximately 25% of Indonesia’s production forests at that time, but during the 1970s it produced approximately half of all timber exported out of the country. The statistics for this period are indeed impressive. “Some 15 million ha of concessions, virtually the entire area of East Kalimantan’s productive forests, were granted in the period 1967-76, the great majority of them during 1970-73” (Daroesman 1979:47). The volume of timber exports increased dramatically from 300,000 m3 in 1968 when first mechanized operations began, to early 10 million m3 in the peak year of 1979 and it was estimated that 1979 export volume generated over US $ 1 billion in government income. Employment opportunities grew as well. If in 1972 large scale timber industry in East Kalimantan employed 12,000 people out of which 5,000 were foreigners, by 1977 the total number doubled to 24,000 but the number of foreign workers was reduced by half (ibid:50).

This spectacular growth of HPHs occurred for two reasons that also had direct implications for the entrenchment of clandestine timber economy in the province. First, the profits from logging were unlike in any other economic sector. Logging was an extremely profitable operation as in 1972, for instance, “the gross profit of the big concessionaries [was] estimated to be in the range of 30 to 40 percent and in some cases even considerably more” (Koehler 1972:108). This profitability was made possible by very liberal regulation of the logging industry, as companies enjoyed very low taxes that allowed them to capture most of the value of the resource for distribution or their own use. Some estimates suggests that during this period, the Indonesian government officially captured no more than 20% of the actual value of timber that had been extracted, or even less (Ruzicka 1979b). In short, the timber boom was the source of windfall riches for those who were in position to participate in it70 (Ramli and Ahmad 1993).

Another factor fueling the aforementioned timber boom was the inability and/or lack of commitment by the Indonesian government to properly manage and supervise such burgeoning industry. There were numerous regulations that the concessionaries were required to follow, including the preparation of 1, 5 and 20 year management plans, utilization of the selective cutting system and replanting. In addition, the companies were not allowed to sub-contract logging work and were expected to locally process 40 % of their log output by the seventh year of operation (Daroesman 1979:48). By 1980, virtually none of these rules saw even a semblance of implementation. On the one hand, the common disregard of these regulations was caused by the discrepancy between the small size of the Forestry Service in East Kalimantan (Kanwil, or Kantor Wilayah) and the sheer size of the forest area that they were responsible for. For instance, in 1977 the Forestry Service in the province numbered “800 employees, of whom 300 were administrative and 500 technical although only about half of these were available for fieldwork” (ibid). On the other hand, however, even if the Forestry Service had adequate manpower and resources, their decision-making authority was extremely limited, as they would have to go not only against all regional administrations whose key leaders (mostly military) were interested in preserving the status quo, but also against the superiors in Jakarta who wielded most of the executive power relating to forest policy (Sacerdoti 1979a, 1979b; Jenkins 1980; Saman et al 1993). As a result, it was much wiser and profitable to follow the events rather than try to anticipate and control them.

70 This was particularly the case for Indonesian “silent partners” that participated in large logging enterprises of that period. It was virtually a requirement in the early 1970s for international companies planning to acquire a forest concession in East Kalimantan to join forces with well connected individuals or organizations (mostly military) in order to secure the necessary permits. In such ventures, the only function of Indonesian “partners” was supplying the concession permits, while the corporate side would engage in actual operations. With virtually no investment, such “silent partners” enjoyed fantastic rates of return. This business pattern has continued in Indonesia until today.

28 Such uncontrolled state of affairs worked also to the advantage of small-scale loggers that continued from the banjir kap period and sought ways to benefit from the combination of factors that promised windfall profits from timber business at that time. Initially, as timber exports skyrocketed in 1972 and 1973, small- scale operators found themselves in trouble as markets were saturated with high quality mechanically extracted logs from which buyers could select the best sort. In this situation, non-mechanical production had no place for competition at all. However, circumstances began to change in 1974 and 1975, as oil price increases and subsequent economic recession in major timber consuming countries took a heavy toll on large concessionaries in East Kalimantan, putting nearly half of them out of business (Goldstone 1974a, 1974b, 1974c). When the price of Indonesian timber fell to US $ 25 per m3 in 1974 silencing bulldozers in the forests of East Kalimantan, small time operators moved in to reclaim some ground, but it was nevertheless extremely difficult because import activity was at a near standstill.

Following the recovery of the timber market in 1975, the prices quickly rebounded and production returned to the previous highs (Awanohara 1976; Coggin 1976; Jenkins 1976; McDonald 1976). However, in the second half of 1970s, the Suharto government (with increasingly visible participation of his key confidant on timber issues – i.e. Bob Muhammad Hassan) became impatient with continuing raw log exports and lack of any meaningful development in timber processing sector (Lauriat and Sacerdoti 1977; Jenkins 1977; Bohlander 1978). Perhaps most importantly, nearly all companies active in logging were still controlled by foreign interests and even though they distributed a portion of rents to their Indonesian partners and decision-makers, the time was clearly coming for Indonesian hosts to take full charge.

They clearly moved in that direction in 1978 by increasing the tax on log export by 10-20% and simultaneously reducing the export tax on processed and partially processed wood by 5% (Zach 1978). There was also a continuing push for a transfer of majority control to local (Indonesian) shareholders following the Presidential Decree No. 20 of 1975 that 51% of equity should be transferred to Indonesian partners after 10 years of company operations (Sacerdoti 1979c). Naturally, there was resistance among foreign management of the concessionaries to such transfers because logging business was extremely lucrative and proposals for transfers of shares in such circumstances were viewed as going against the good corporate standing.

Large corporations, such as ITCI (a joint venture between Weyerhaueser and Indonesian military’s PT Tri Usaha Bhakti), dragged out the whole process as long as possible in hopes that a compromise could be arranged. However, there was to be no compromise. The consolidation of the timber industry by Indonesian partners was proceeding apace and there was little hope to stop it71. The factor that proved decisive in prompting an exit of foreign timber companies from Indonesia was the Three Ministers Decision (Surat Keputusan Bersama Tiga Menteri) of 1981 making export licenses for logs dependent upon evidence that investment in processing (plywood) industries has been made (Barr 1999:127). To most foreign concessionaries, it did not make economic sense to invest in such industries in East Kalimantan because they were too expensive to build and had no chance of being competitive with highly efficient plywood producers in Japan, Korea and Taiwan. At most, the companies were willing to develop the sawmill sector. However, Indonesian officials viewed this as unsatisfactory. Eventually, however, with finances supplied by state banks state the completion of the consolidation process in timber industry in East Kalimantan was accomplished by placing it under control of Indonesian entrepreneurs.

Following the withdrawal of multinationals, Indonesian timber companies that committed themselves to developing plywood industries began facing multiple pressures. First, the consolidation process was a highly arbitrary one because it required access to state financing and it required a realignment of concession holdings in favor of those adjacent to plywood processing centers. This, in turn, required

71 For a comprehensive discussion of this consolidation process, see Chris Barr (1999) Discipline and Accumulate: State Practice and Elite Consolidation in Indonesia’s Timber Sector 1967-1998. M.Sc. Thesis, Cornell University.

29 connections to, and support from, key figures close to Suharto (notably Bob Hasan). Second, the economic recession of the early 1980s lowered the international prices for plywood and forced many of Indonesia’s newly independent plywood producers into a near bankruptcy. Finally, with the ban on log export to take effect in 1983, medium and smaller concessionaries without processing facilities rushed to enter into partnerships with key plywood producers. This process of consolidation led to the emergence of timber conglomerates in Indonesia - such as the Kalimanis Group, Barito Pacific Group, Kayu Lapis Indonesia, Djadjanti, Alas Kusuma etc. – that eventually came to possess large capacity plywood plants and hold millions of hectares of forest concessions.

However, this consolidation process had also important implication for the continuation of the informal timber sector in East Kalimantan. Very often, consolidation arrangements between plywood producers and concession holders were of the production-sharing nature, meaning that only part of the timber logged by the concessionaire would be actually processed. A substantial part of the logging output would still be exported while the raw material deficit for the mills would be filled by “local contractors”. This came as a result of the increasing preference by plywood producers to rely on non-HPH timber, because the concessionaire timber was much more expensive than the informal one. Such local contractors not only provided for plywood mills but also continued an intense involvement in clandestine export of timber, particularly to Sabah, Malaysia. According to official reports, in 1987, for instance, the Nunukan/Tawau border area between Indonesia and Malaysia was plied by about 150 boats daily – all without any documentation and with many of such vessels hauling rafts of Indonesian logs to Malaysia (Kanwil Dirjen Perhubungan Laut 1987).

The spectacular success of the Indonesian plywood producers in overcoming early difficulties in the formative period of early 1980s is evidenced by the fact that by the beginning of the 1990s, Indonesia’s plywood exports increased nearly 900% from 1.25 million m3 in 1982 to 8.96 m3 in 1991 (Barr 1999:193). However, this astronomical growth was not at all the result of corporate competitiveness or efficiency. There are clear indications that inefficiency associated with extraction and processing of timber actually increased following the log export ban and expansion of timber processing industries in Indonesia. Timber royalties and reforestation fees continued to be extremely low. A clear illustration of this fact is that “[a]t the beginning of the 1990s, the forest fees imposed by the government on the companies exploiting the forests were only US $ 16 per m3 of wood, while the State of Sabah in Malaysia charged US $ 100 per m3” (Firman 1999:112). In essence, this kind subsidization of the plywood sector with nearly free timber resources allowed for tremendous growth, but at the cost of high inefficiency and disastrous consequences for the forest environment.

One of the main drawbacks to this expansion process has been the emergence of the persistent gap between the processing capacity of Indonesian timber industries and available raw material supplies. In the 1980s, the growth of the plywood industry was accompanies by similarly strong development of the sawmill sector and, since early 1990s, of the pulp and paper industry. Similarly to what was the case with the HPH boom in the early 1970s, the development of these timber-processing industries became a phenomenon largely out of control of the Forestry Department officials72. The combined effect of the development of these sectors following the Apkindo expansion model created the lasting feature of Indonesia’s timber industry – i.e. wide disparity between the processing capacity and raw material supply. By the middle 1990s, this disparity reached the level of absurd proportions, as the processing capacity of nearly 70 million m3 had only 30 million m3 of raw material that could be officially supplied by HPHs. By

72 This growth took place in spite of the ban in the early 1990s on new sawmills in all of Indonesia, except Irian Jaya. Plywood factories were required to be connected to HPHs and have a clear raw material supply plan. As was the case with forestry regulations before, these too went largely ignored. New sawmill businesses continued to open and, in spite of being termed illegal or wild (liar), they nevertheless enjoyed tacit support from local administrations. Fictitious representation of the connectedness between plywood plants and HPH concession has been rife as well.

30 the end of the 1990s, the processing capacity continued to increase, nearing 80 million m3 with the officially available supplies unchanged from previous years, or actually declining (ITFMP 1999).

Since timber processors have not been sitting idle during those years, it is obvious that they have been obtaining increasingly large quantities of timber from unofficial sources. In the late 1980s, analyses of such informal extraction of timber estimated that “at a minimum, 2 million cubic meters of wood [were] being taken out of protected forests, conversion forests and reserve areas each year” (Vitikiotis 1989, cited in Smith 1992). This was very likely a small fraction of the total amount of timber extracted, also unofficially, from production and limited production forests. An indication of this came in 1997 with the widely publicized case of cross-border timber smuggling in which a Tawau based company Syarikat Raspand Sdn Bhd was caught with over 3,000 undocumented logs in January of that year (New Straits Times, 21 June 1997). The impounded logs constituted only 1/7 of the total shipment from Indonesia carried out clandestinely by the Able Shipping Sdn Bhd on behalf of a Japanese importer Shinko Kaiun Co Ltd (New Straits Times - 19, 21, 30 January 1997). The legal proceedings in this case were inconclusive and were eventually dropped. There was little doubt, though, that such massive amounts of timber for informal export were supplied by the main concessionaire bordering with Sabah – PT Yamaker.

Throughout the 1980s and early 1990s, the Indonesian official timber industry was moving in the direction of ever-greater intensification of production under increasingly centralized and monopolistic controls aimed at capturing most of economic rents for the elite in Jakarta. The imbalances between industrial capacity and official raw material supply were solved by rampant use of timber from unofficial sources. Thus small-scale logging operators found a niche by filling in a part of timber supplies that were lacking.

This system had multiple advantages for the ruling elite in New Order Indonesia. The informal timber sector not only helped supply raw material at prices far lower than HPHs, but it was also of considerable political significance. It served as an implicit reward for civilian and military bureaucracies’ political loyalty and obedience. Since local government officials in East Kalimantan had to rely on unofficial incomes in order to supplement their insufficient salaries, they indirectly had to “respect the system” and contribute to its stability. With the growth of extractive industries such as logging and mining in East Kalimantan, the size of the civil service in the area increased as well. While in the second half of the 1980s, attempts were made to reduce the predominance of military officers in key administrative positions in the province, such reductions were relatively insignificant. The overall size of the bureaucracy continued to expend, albeit at slower pace that in the 1970s and early 1980s. For instance, while in 1992 the city of Samarinda had just over 1,500 civil servants within local government structures (thus excluding central government offices), by 1998 this number increased to 2,000 (Samarinda Dalam Angka 1999).

7. Post 1998 intensification of small-scale logging and its re-legalization

With the fall of Suharto’s New Order government in 1998, a process of democratization-oriented changes ensued in Indonesia with significant consequences for the informal timber sector. The fall of Suharto marked the onset of the Reformasi movement aimed at uprooting the paternalistic, collusive and nepotistic structures of political and economic life in Indonesia. Decentralization of such economic and political powers became the centerpiece of this movement toward a thorough (total) renewal of the country.

In the second half of 1998, with Reformasi increasingly vibrant, Muslimin Nasution, who at that time was the Minister of Forestry and Plantations, initiated what was thought would lead to a more just and equitable management of forest resources. The Ministry issued instructions (PP No. 62/1998 and SK Menhutbun No.677/1998) allowing communities residing in or near forest areas to be actively involved in

31 managing forest resources (including timber) through cooperatives, work groups, associations etc73. Such communal involvement in forestry was viewed as potentially positive development. From the political standpoint, it was a necessary step aimed at appeasing increasingly assertive resource rich districts and regions in Indonesia. Regarding ecological and economic aspects of such policy, what was expected from the communities were low impact extraction activities, primarily of non-timber forest products (NTFPs). This would both increase the well being of those communities, give them access rights that they deserve, as well as result in a form of stewardship that would benefit forest conservation needs.

This formula did not work out as expected. In effect, it set off a chain of events that created a venue for the clandestine bajir kap logging to regain a measure of legalization. It became evident that rural communities were not going to be content with NTFPs, but they were after ownership rights to traditional forest areas as well as equal standing vis-à-vis HPH concession holders regarding extraction of timber. This sentiment was strengthened by subsequent legislature devolving elements of authority to manage forests from central government to provinces and districts (PP No. 6 1999, SK Menhutbun No. 310/Kpts- II/1999, SK Menhutbun No. 317/KPTS II/1999). The key element of this first step towards decentralization was endowing Governors and Regents with the authority to issue permits for small forest concessions. This in essence constituted a re-instatement of earlier legislature from the 1960s on local timber utilization through kappersils (or kapperceelen in the Dutch period). The governors were allowed to grant concessions of up to 10,000 ha, whereas Regents up to 100 ha. The small forest plots granted by Regents came to be known as HPHH (Hak Pemungutan Hasil Hutan, or license to collect forest resources)) and IPPK (Izin Pemungutan dan Pemanfaatan Kayu or license to extract and use timber). HPHH was designed for NTFPs and non-mechanized timber extraction, whereas IPPK was to provide legal means for opening up, or clearing, small forest areas for community plantations74.

Within weeks of putting these policies into effect, a stream of applications for HPHH and IPPK permits flooded Regents as well as Forestry Branch offices throughout East Kalimantan. The immense economic opportunity and potential of small forest concessions become obvious if one considers the following comparison:

Table 4. Comparative profitability of industrial concessions (HPH), small concessions (HPHH and IPPK) and illegal logging HPH HPHH IPPK Illegal logging 3 Timber price (US $ per m of 100 100 100 55 1 logs) Taxes: Felling/extraction/transport yes yes yes no permits (SKSHH) Reforestation (DR) 16 16 no no Central government tax 7 7 no no (PSDH) Local government tax no yes yes no

73 Subject to approval and coordination by local authorities. 74 HPHHs as a means for individuals or communities to exploit forest for timber have actually been in effect since 1970. The HPHH concept was introduced based on the Government Regulation No. 21 1970 that was officially described as a pro-community legislation, enabling the common people to benefit from forest resources (menyediakan kesempatan bagi masyarakat daerah untuk ambil bagian dalam pemafaatan hutan ). In practice, however, district governments were discouraged from issuing HPHH licenses by burdening them with numerous fees payable to the Ministry of Forestry as result of HPHH activities. This in essence amounted to inflicting a loss on, already low, self-generated district incomes. (Saman et al 1993:68-70).

32 2 (Retribusi) Informal payments 20 20 20 18 3 Extraction 20 5-16 16 5 Total Cost 63 48-59 41 23 Net revenue 37 41-52 59 32 Investment Large Small Small Very small Bureaucracy Extensive Limited Limited None (district level (district level only) only)

Notes: 1. The above log prices are based on the industry standard – Red Meranti. It must be remembered that profit margin for HPHH/IPPK and illegal logging are very likely still higher, given the fact that they concentrate on choice timbers for export such as Ulin, Bankirai, and Kapur which can fetch price much higher than Red Meranti. 2. Local government tax rate varies. 3. Extraction costs vary in accordance with extraction techniques employed. HPHH economic performance is shown both when logging is done manually (conceptual ideal that rarely happens) and mechanically (which is by far most often the case). HPHs and IPPKs rely only on mechanical extraction of timber.

The realization of the value of the forest by communities resulting from lobbying by scores of timber agents (cukong or tauke) scouring rural areas coincided with the introduction of the 1999 Forestry Act which tenuously acknowledged adat, or customary rights, to land/forest areas. This has brought to completion a qualitative change in the perception and valuation of the forest by rural communities from “source of subsistence” to “source of wealth”. Following the introduction of the 1999 Forestry Act, there had been a rush of land/forest claims in rural areas. Simultaneously, a lot of emphasis had been placed on border delineation of claimed locations.

The mapping and inventorying done for by NGOs as well as research institutions (e.g. WWF) has played an important, although perhaps unexpected, part in the re-emerging system of community or individual small logging concessions. Inventories and maps prepared as important tools for resource/land use planning and conservation, have in effect become baseline documentation for joint venture agreements to open newly established community forests for logging.

Opting for joint ventures with logging contractors for a fee per cubic meter has become a dominating option in utilization and management of community forests. In Berau district, IPPK permits increased from virtually none in early 2000 to more than 30 by the middle of that year for a total of over 11,000 hectares. Towards the end of 2000, there are more than 50 approved applications and on average 5 new ones are issues every month75. In Pasir district, currently there are 27 IPPKs, but this total is likely to rise sharply in the near future as most of community forest areas already have legal standing and communities actively pursue the logging option. In Malinau district, where only half a year ago there were no IPPKs, currently there are nearly 150 in operation. In West Kutai, there are 220 IPPKs and nearly 50 HPHHs at the moment. In Kutai Kartanegara, there are over 200 IPPKs and around 50 HPHHs. This is indicative of the intensity of the trend as well as its scope. Although precise statistical data are lacking, cumulatively

75 Latest estimate places the total of licenses in the district in excess of 100. Four northern districts combined (Nunukan, Malinau, Bulungan and Berau) have up until now issued approximately 500 HPHH/IPPK licenses (Suara Kaltim, 19 February 2001).

33 the resurgence of small concession logging already involves hundreds of thousands of hectares of the forest.

Perhaps the strongest factor supporting the re-emergence of small concessions has been the general decentralization euphoria that engulfed districts and provinces. Prior to 1998, provincial and district governments (and especially local people) were limited to clandestine operations that, although profitable, carried a certain risk of reprisals. Democratization process initiated by the Reformasi in 1998 changed this situation entirely and once the opportunity presented itself in the form of decentralization, the “marginalized parties” were set to take full advantage of it. The advantages of working through HPHH/IPPK system and the substantial economic benefits that this system can deliver have cumulatively become an irresistible attraction to timber traders, civil and military government officials in the region as well as common people (rakyat). IPPKs are not only as (or more) profitable as formerly illegal operations, but it also allows for the timber business to be conducted with a degree of legality and, as a result, less bureaucracy and lesser “unofficial expenses”. The main beneficiaries of the IPPK system are Regent Offices and District Forestry Service, as it costs approximately US $ 1500 to secure an IPPK permit for 100 hectares76. On the other hand, security forces (POLRI and TNI) find their share somewhat reduced.

In addition to economic interests in small logging concessions by businessmen and bureaucratic institutions, HPHs have also been eager to participate by disaggregating their production operations and sub-contract some of the logging work to IPPK operators. The Reformasi period has been the time of increasing insecurity for HPH concession holders. Besides mounting criticism that HPH system is a wasteful and destructive remnant of the New Order regime, the concessionaires have also found themselves under pressure to pay compensations, settle grievances and resolve land disputes. As a result, it makes a lot of sense to them to do business through the IPPK system that is both very profitable and accepted by all parties. This provides yet another example of historical continuity with logging operations in the past – e.g. subcontracting of logging work by large timber enterprises to houtaannemers during the Dutch times and Perhutani’s partial reliance on kappersils in the 1960s.

The cross-border timber trade in Nunukan-Tawau area has been increasingly lively in this context, in spite of (or perhaps because of) the fact that in 1999 the long-standing forest concession of PT Yamaker was withdrawn and handed over to Perum Perhutani. While the decision to cancel Yamaker’s logging license was motivated by apparent mismanagement and rampant illegal trade activities by the concessionaire, subsequent to this disciplinary action the situation in this border region not only did not improve, but actually worsened (Kimman 2000). Perhum Perhutani was in no position to monitor large and remote concession area that was quickly de facto taken over by local operators with connections to Indonesian security forces and Malaysian firms in Sabah interested in developing the cross-border timber business further. In the officially abandoned concession, Malaysian firms constructed unofficial roads that reached as far as 25 km into Indonesian territory in order to connect Indonesian resource base with Malaysian processing and shipping centers (Asnawie 1998). The involvement of local military and civilian apparatus was made clear in 2000 when operation Wibawa by Indonesian military, designed to sweep the border area with Sabah and round up perpetrators, was leaked and ended in a fiasco. The Indonesian timber from the border area continues to be sent in large quantities to Tawau, a town that currently hosts approximately 50 integrated timber-processing complexes. Although already desperately short of raw timber, the processing capacity of the Tawau based timber industry is set to receive a major boost in the near future in the form of the Kalakaban Pulp & Paper plant that is to be opened in 2003 in the village of Kalakaban – about 100 km west of Tawau. The plant, to be built at the cost of US $ 2 billion, will have the capacity of 500,000 tons of air-dried pulp that will require about 1.5 million m3 of raw timber annually. With no fiber

76 This unofficial fee varies depending on the quality of timber stock in the area in question. In West Kutai district, IPPK/HPHH licenses have been known to command prices of up to US $ 5000 per 100 ha (Suara Kaltim, 28 February 2001).

34 plantations in sight, this project will likely open a new dimension in the cross-border timber trade – i.e. it will create demand for 2nd and 3rd grade timbers that until now have been largely neglected.

In addition to economic importance for various stakeholders, there are local/regional political forces that are in favor of smallholder concessions in East Kalimantan. At the province/district/sub-district level in the region, the civil servant hierarchy is increasingly aware of the need to secure public (and locally present corporate) support, which is quickly becoming a pre-requisite for career in a public office. Generating such support by issuing, or helping arrange, permits for small logging concession has become a very effective, and therefore common, strategy. Furthermore, allowing HPHH/IPPK concessions to flourish has also been used by local authorities as a means to keep people’s (rakyat) focus on economics, subsistence and earning a living, rather than on potentially destructive political movements. Besides local political significance, small concessions also play part in securing future electorate support for political parties.

Summary and Conclusions

The purpose of this paper was to show that the informal small-scale timber sector in East Kalimantan and the cross-border timber trade with Sabah are not new or recent phenomena. Rather, they are of much greater antiquity, or time depth, than commonly thought. Even though continuities in the manner in which small-scale timber enterprise in East Kalimantan has been conducted over the years are evident and can be traced through time, they are nevertheless associated with important changes in macro-economic timber market conditions, as well as in localized perceptions of economic and political value of timber. Understanding the relationship between the two is important for historically grounded comprehension of the current state of the informal timber sector and timber trafficking in East Kalimantan.

As indicated, the informal timber trade in East Kalimantan dates to the beginning of the 1900s at which time relatively unregulated nature of the forestry sector in Dutch Southeast Borneo vis-à-vis British North Borneo and rising demand for ironwood spurred growth in speculative timber exploitation ventures based on buying up (opkoop) of timber from local or native loggers (bevolkingskap). As a result of the intensification of such opkoop-bevolkingskap system of logging in the late 1920s and early 1930s, a ban on free-lance logging was imposed in 1934 requiring all timber exploitation to be carried out within the framework of logging plots (kapperceelen) or concessions (houtaankapconcessies). The ban per se was only partly successful, as it was undermined by evasive sub-contracting practices that kept free-lance logging alive. However, this informal sector was severely circumscribed by macro-economic limitations associated with timber trade before the Second World War, high risks involved in such enterprises, rather ordinary profits as well as limited in numbers and apolitical regional bureaucracies.

The war rooted crisis that gripped East Kalimantan until the 1950 caused growth in cross-border as well as inter-island smuggling of timber from East Kalimantan mainly for subsistence purposes. The revocation of the 1934 ban on free-lance logging in 1947 spurred timber production in the region and informally added to rising timber exports in North Borneo.

The status of timber as a subsistence earner changed dramatically after Indonesian government took full control of the country from the Dutch in 1949. Even though timber was increasingly important due to economic stagnation in Indonesia and the specter of prolonged crisis in the 1950s at the same time as Japan began radically expanding imports of tropical timber, its emerging political utility in sustaining fragile regional political institutions and coalitions emerged as a new dimension.

During the subsequent decades of 1960s and 1970s, the economic and political value of timber in East Kalimantan rose to unprecedented levels. It continued to be an increasingly key source of personal as well

35 as institutional incomes in the crisis years of the early 1960s, with rising involvement of the security forces in the cross-border timber trade with Sabah that boomed despite Konfrontasi. In the late 1960s and early 1970s, small-scale logging was at the peak of its economic significance and political utility as a key element in the reward-control mechanism of the newly established New Order government. Being economically lucrative and politically indispensable, small-scale logging saw considerable intensification, both in terms of the size of logging plots as well as increasing mechanization (chainsaws). Subsequently in the 1970s, informal logging became officially marginalized in favor of large-scale intensification, but its firmly established multi-dimensional significance allowed it to persevere. It not only survived HPH domination of the logging industry, but it grew continuously as a result of economic rents available from timber exports, as well as due to its role as a supplier for the ballooning timber processing sector in Indonesia the 1980s and 1990s.

In recent years, the informal timber extraction and trade in East Kalimantan experienced tremendous expansion, far beyond its heyday in the late 1960s and early 1970s. With the removal of the New Order repressive structures and controls after 1998, the ensuing chaotic and uncontrollable process of democratization highlighted the political utility of access to timber yet further and it left unchanged the structural dependency of various government bureaucracies on unofficial incomes. The cross-border timber trade is booming, it is becoming highly mechanized and it is expected to surpass the currently estimated annual total of 100,000 m3 in near future, as regional autonomy takes root.

APPENDIX 1 – Kapperceelen in East Borneo (present East Kalimantan). Sources: Van Suchtelen (1933), Israël (1938) and Ensing (1938).

APPENDIX 2 – Kappersils in East Kalimantan in 1967 based on the Regional Regulation No.9 of 1963. Sources: Monografi (1967)

APPENDIX 3 – Export of timber out of East Kalimantan in 1967 by enterprise. Source: Monografi (1967).

APPENDIX 4 – Kappersils in East Kalimantan during 1968-71 based on the 1967 laws on domestic and foreign investment. Sources: Monografi (1968), (1969), (1971).

REFERENCES CITED

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