ECONOMY AND POLITICS OF CROSS-BORDER TIMBER TRADE IN HISTORICAL PERSPECTIVE – THE NUNUKAN/TAWAU AREA Paper for the 2nd International Symposium of Journal Antropologi Indonesia, 18-21 July 2001, Padang, Indonesia By Krystof Obidzinski University of Amsterdam [email protected] DRAFT – NOT FOR CITATION Introduction The goal of this paper is to discuss the processes behind the emergence and development of the informal timber economy in the province of East Kalimantan, Indonesia, with particular reference to the border areas with Sabah. 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 East Kalimantan 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 Borneo 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 North Borneo 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 New Order 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