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Incentive and Financial Policy for Accelerating

the Establishment of Timber Plantation on Degraded Land and CFM for Sink Enhancement

Many of degraded lands in forest area are claimed by community. When permit for using the land has been granted to an entity, conflict on the land normally emerges between the entity and the communities. For this reason, private entities prefer to use forested land in forest area for timber plantation or peatland as these areas normally have no or less conflict (no community claim on the land). Ideally, the government should issue permit on safe and conflict-free (clean and clear) forest areas. However, in most cases this is not the case, and the permit holders have to solve this land conflict problem. Level of conflict varies between regions, and social cost that has to be covered by the permit holder in the establishment of plantation will also vary. The high social costs prevent the permit holders to establish plantation. In this regard, the government needs to create incentive system for permit holders in handling this land conflict problem, and the types of the incentive may be varied depending on level of conflicts. The incentive could be in the form of reducing or exemption of administration/retribution fees for certain period of time depending on level of conflict. With this incentive policy, establishment of timber plantation in degraded land can be accelerated, and the dependency on natural forest for supplying wood will also reduce.

In managing the land conflict issue, the MoF also implements CFM program.

The program gives access and right to communities to use the forest area or formalize/legalize the use of the land by the community. The communities have to apply for getting the permits (HTR, HKm, village, and Adat forests). However, the process for getting the permits is too complex for communities, and it is also a lengthy process. Without any assistance from their partners, communities are mostly unable to have the permits. Financial support from the government to communities in implementing the CFM is also available via BLU-P3H (General Services Agency). The amount of funding available for supporting the CFM is also huge, i.e., over a billion of USD. However, the absorption of fund is also very low, less than 1 %. Simplifying the process of getting permit and accessing fund from the BLU-P3H will also be crucial for accelerating the implementation of the CFM. As mentioned above, up to now the realization of the CFM program is far from target (see Table 9.4).

Acceleration of the ecosystem restoration program which will have significant contribution to sink enhancement also needs incentive from the government. Incentive in the form of reducing administration/retribution fees for certain period or exemption from some of administration/retribution fees is recommended.

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