Since the collapse of Soeharto’s New Order regime in May 1998, Indonesia’s national, provincial, and district governments have engaged in an intense struggle over how administrative authority, and the power embedded in it, should be shared. From early 1999 through roughly the middle of 2002, this struggle was characterized by a process of rapid and far-reaching decentralization.

During this period, considerable degrees of administrative and regulatory authority were transferred from the national government in Jakarta to the country’s provincial, district (kabupaten), and municipal (kota) governments. This transfer of authority occurred across broad segments of the nation’s economy and sharply redefined...

In the forestry sector, Indonesia’s decentralization process has occurred after three decades of highly centralized control over forest administration and intense timber extraction under Soeharto’s New Order regime. When the New Order government came to power in 1966, however, commercial timber extraction in the vast hardwood forests of Indonesia’s ‘Outer Islands’² existed on only a very small scale, and the central government held little authority to administer forests in these regions. The Soeharto government moved quickly to secure the state’s legal-regulatory control over the nation’s forests with the introduction of the Basic Forestry Law in 1967. After a brief period...

The Asian monetary crisis first hit Indonesia in July of 1997, and by the end of that year, the Indonesian currency rupiah had lost 70% of its value. This led to skyrocketing inflation, massive job losses, and ultimately, failure of the nation’s banking sector. The depth and enduring nature of the country’s economic instability sharply undermined the domestic political legitimacy of Soeharto’s New Order regime, which had presented itself as the ‘engine of economic development’ since the late-1960s. In May 1998, following several days of violent civil unrest, President Soeharto was forced to resign after 32 years in office.

The...

To a very significant degree, Indonesia’s decentralization process was driven by the demands of regional stakeholders for a greater share of the fiscal revenues associated with natural resource extraction activities in their jurisdictions. Through the New Order period, a substantial majority of the taxes and royalties generated by timber extraction, mining, and oil and gas production in Indonesia flowed to the national government in Jakarta. However, since the fall of Soeharto in 1998, officials at both the provincial and district levels have engaged in a tug-of-war with national policymakers to secure a greater portion of these revenues. They have argued,...

During the New Order period, Indonesia’s forestry sector was heavily oriented towards commercial timber production and export-oriented wood processing. In 1967, shortly after Soeharto’s rise to power, the government officially designated 143 million ha as Forest Estate and made much of this area available for commercial logging. Over the ensuing three decades, the MoF allocated some 652 timber concessions, known as HPHs, covering an aggregate area of 69 million ha (CIFOR 2004). From the late-1970s through the late-1990s, Indonesia’s HPH-holders formally harvested between 20 million and 30 million m³ of timber annually. Indonesia exported large volumes of unprocessed timber until...

Land and forest tenure are perhaps the most contentious and sensitive issues with respect to state-society relations in Indonesia. At the national level, land tenure, especially in areas that fall within the boundaries of the officially designated Forest Estate, is a particularly difficult issue. Although Law 22/1999 on Regional Governance devolved a large part of government authority to the regions, its implementing regulation, Government Regulation 25/2000, still allows the Ministry of Forestry great power and authority to, among other things, designate the status, boundaries, and function of forests (Thamrin 2002). The revised decentralization laws of 2004 have not significantly changed...

Over the last two decades, a growing number of countries have implemented processes of decentralization, shifting significant elements of administrative authority and responsibility away from highly centralized states. Few countries, however, have implemented decentralization as rapidly or with as far-reaching transfers of authority to regional and local governments as Indonesia has since the late-1990s.

Indonesia’s decentralization process gained momentum in the months following the collapse of Soeharto’s New Order regime in May 1998. It was driven, to no small degree, by the demands of stakeholders in the nation’s natural resource-rich regions, who vociferously called for a greater share of the...