Regulatory Capture by Corporations, Liberalization of Industrial Forest Sector and Deforestation in Indonesia

Abstract

This study was motivated by the proliferation of forest management businesses for industrial interests. The issuance of the Industrial Plantation Forest policy has benefited pulp and paper corporations, which can be observed from both the rapidly increasing amount of production and the area used under corporate land management, which has even exceeded the amount of land used as regulated by existing regulations.There were three problems that this study seeks to address. Firstly, how had the Industrial Plantation Forest policies during the administrations of President Susilo Bambang Yudhoyono and Joko Widodo impacted P.T. Riau Andalan Pulp and Paper and local communities. Secondly, in what ways the policy had caused deforestation, especially on peatlands. Thirdly, how had the state, as the policy maker, maintained the social life of the communities to reduce conflicts that would disrupt production, particularly in Riau.   This study show that the industrial plantation forest policies had benefited pulp and paper corporations, that rely on wood as raw materials, by providing various facilities and subsidies from the government. Susilo Bambang Yudhoyono's administration issued a lot more policies that benefited corporations than Joko Widodo's administration. Meanwhile, Joko Widodo in its first period administration attempted to make amendment by making a moratorium policy that temporarily suspended the issuance of new forest and land management permits. In addition, the Joko Widodo administration also introduced a social forestry policy that allowed communities to own forestry management land. However, during the second period of his administration, forestry policies, again, had benefited corporations, especially with the issuance of the Job Creation Law which gave rise to many protests from the public.Fred Block’s in his book “the Revising State theory” to the conclusion that the business community has a strong influence on the formation of state policy and that business people seek government’s assistance to support their profit-seeking activities through various policies. The policies are in the form of trade protection, subsidy programs, tax benefits, punitive treatment of strikers, contracts from the government, and so on. However, Block also believes that other than providing support to corporations to accumulate capital, the government must also maintain social stability both as a protection for business confidence and because the government wants to maintain its power. Social forestry policy, for example, is aimed at reducing social conflicts by providing access to communities with cultivated land to improve their welfare.