Indonesia’s natural forests continue to disappear at an alarming rate. Earlier reports suggest deforestation in Indonesia was occurring at a rate of 1.5 million hectares per year (Walton and Holmes, 2000). At this rate, Sumatra would lose its lowland forests by the year 2005, while those in Kalimantan would be gone after another five years (World Bank, 2001). A more recent report placed the deforestation rate even higher at 2 million hectares annually (FWI/GFW, 2002). The latest report from the World Bank suggests that 2.1 million hectares of forest were lost every year in the period between 1990 and 2000...

Banking and finance policies capable of supporting sustainable forest management should provide incentives for banks and other financial institutions to review their corporate lending carefully and behave based on serious consideration of risks. Prudential regulations such as the legal lending limit and capital adequacy ratio (CAR) introduced by the Bank Indonesia were aimed at encouraging banks to adopt a more risk-based approach to corporate sector lending. Such policies should prevent banks from lending to high-risk companies such as those with no secure wood supply source, those having problems with local communities, those damaging the environment, or those involved in illegal...

The first three years of the financial crisis were a collaborative period for Indonesia’s civil society and its international donors. It was the first time NGOs could speak freely about their concerns on forestry. It was also the first time that the Ministry of Forestry was forced to recognize illegal forestry activities, overcapacity of the forest industries and other structural problems within the forestry sector. The CGI forum made the Indonesian government recognize the role of inter-ministerial cooperation in tackling forestry issues. To implement the eight forestry reform agendas, the Minister of Forestry needed the support and involvement of other...

This chapter discusses the FSPC debt restructuring policies, IBRA’s interpretation of the policies, and the settlement policy for corporate debts and financial obligations of bank shareholders. As discussed in Chapter Three, the FSPC did not issue a special debt policy for forestry companies and conglomerates. It issued general debt restructuring policies for all non-performing loans under IBRA and for all financial obligations of shareholders. However, the FSPC also made specific debt settlement policies for the top fifty debtors and all bank shareholder settlements.

The FSPC categorized debtors into categories A, B, C, and D. Table 4.1 provides the summary of...

IBRA and the Indonesian government allowed the Eka Tjipta Widjaja family to remain in control of APP Indonesia companies, even though they had not fully repaid their debts to the government. The sale of APP debts reduced the debt amount owed by the Eka Tjipta Widjaja family to the government. Based on information available to the public, the family still owed USD 634 million to the Indonesian government. APP paid USD 225 million cash in June of 2002 and transferred the ownership of 18% of BII worth USD 177 million. IBRA sold APP Indonesia debts worth USD 880 million for...

When it was established in 1998, IBRA was equipped with professional staff, well trained in banking, finance, accounting, and law. The staff were provided with good salaries and equipped with far-reaching authority to assure they would deliver debt policies and settlements that were most beneficial to the country. Given IBRA’s lack of expertise in forestry, IWGFF attempted to provide some input on debt settlements related to forestry-based companies. This study shows not only how IBRA failed to address these forestry issues, but also how it failed in its responsibility to protect the interests of the Indonesian government and the general...