VZCZCXRO6385
RR RUEHCHI RUEHDT RUEHHM
DE RUEHJA #1672/01 1661054
ZNR UUUUU ZZH
R 151054Z JUN 07
FM AMEMBASSY JAKARTA
TO RUEHC/SECSTATE WASHDC 5129
INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHKO/AMEMBASSY TOKYO 0548
RUEHBJ/AMEMBASSY BEIJING 4120
RUEHBY/AMEMBASSY CANBERRA 0830
RUEHUL/AMEMBASSY SEOUL 4072
RUEAIIA/CIA WASHDC

UNCLAS SECTION 01 OF 06 JAKARTA 001672 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR EAP/MTS AND EB/IFD/ODF 
TREASURY FOR TFCA - BERG 
DEPARTMENT FOR OES/IET and OES/ETC 
 
E.O. 12598: N/A 
TAGS: SENV EAID ECON TBIO ENRG ID
SUBJECT: WEST KALIMANTAN - DWINDLING FORESTS AND 
INFRASTRUCTURE CHALLENGES 
 
REF: 05 JAKARTA 11316 
 
¶1. (SBU) Summary:  West Kalimantan's abundant forest and 
fresh water resources are under threat from logging and 
plantation companies, though the government has recently 
cracked down on some illegal loggers.  The majority of 
tribal peoples in the province rely on forest resources for 
a livelihood, including fresh water fish from the largest 
lake ecosystem in Southeast Asia and the country's longest 
river, the Kapuas.  Land clearing by burning continues to 
choke the region with haze during dry season, making the 
Pontianak airport unusable and destroying the rich peat of 
coastal areas, important for water conservation.  The 
province has low education and human development levels, 
inadequate health care, and poor infrastructure.  Severe 
electricity shortages mean constant rolling blackouts, 
while costly diesel generators keep the lights on.  West 
Kalimantan officials and non-governmental organizations 
(NGOs) are seeking to diversify the province away from 
logging into more sustainable growth areas, but lack 
funding to compete with the $7 billion plantation and 
logging businesses.  Cross-border smuggling of endangered 
species continues, but international and local NGOs are 
providing direct assistance for flora and fauna 
conservation, as well as educating local people to protect 
forest resources.  Eco-tourism is just getting started but 
faces infrastructure challenges.  Provincial officials and 
NGOs are enthusiastic about the Heart of Borneo initiative, 
but forest-dwelling ethnic groups want compensation for 
conservation.  Donors have already provided a great deal of 
assistance, but additional community development and 
conservation programs are needed to sustain what remains of 
the province's dwindling forest resources.  End Summary. 
 
Profile of a Province 
--------------------- 
 
¶2. (U) West Kalimantan's has population of 4.2 million 
occupying 146,000 square kilometers, Indonesia's fourth 
most sparsly populated province.  It is home to several 
ethnic groups described collectively as Dayaks, 95% of whom 
live in and around forested areas and national parks, 
relying mainly on forest resources for their livelihood. 
The Santarum Lakes are the largest fresh water lake 
ecosystem in Southeast Asia, over 100,000 hectares in rainy 
season, connecting to several huge rivers.  The Kapuas is 
the largest river in Indonesia (1,143 km) and important 
transportation waterway.  The province's important water 
resources are under threat from logging and plantation 
activities.  West Kalimantan is relatively poor, and its 
per capita income rose above $1,000 in 2006 for the first 
time since the financial crisis. 
 
Forest Resources Dwindling 
-------------------------- 
 
¶3. (SBU) In 2003-04, Indonesia had the highest rate of 
deforestation in the world at 2.5 million hectares per 
year.  One recent media report described Indonesia as 
"losing a soccer field of forest every minute."  West 
Kalimantan's is an example of this: its rich forests have 
been much diminished in the past two decades.  Much of the 
9.4 million hectares of forest are heavily degraded or gone 
and logging concessions have claim to nearly a third of it. 
A USAID contractor and expert on Kalimantan forest issues 
told us that labeling forest as "protected" or 
"conservation" mean very little in practice.  For example, 
of the "Nature Reserve" forest classification, only 68,681 
of 259,585 hectares or 26% are actually primary forest. 
The rest is secondary forest, degraded or deforested.  "A 
label does not bring any protection.  It is how it is 
managed that is important.  In some cases, so-called 
'protected' forests are losing trees more rapidly than non- 
protected areas."  The stunning rainforest of Betung 
Kerihun National Park is 800,000 hectares, but its buffer 
zone is reportedly under threat from a logging concession, 
according to the World Wildlife Federation (WWF). 
 
-------------------------------------------- 
Table 1: West Kalimantan Logging Concessions 
 
JAKARTA 00001672  002 OF 006 
 
 
-------------------------------------------- 
 
Logging (HPH) (1)        1.5 million hectares 
Industrial (HTI) (2)     1.6 million 
--------------------------------------------- 
TOTAL                    3.1 million hectares 
 
(1) HPH is a concession for selective logging of primary 
forest. 
 
(2) HTI is a concession for planting and harvesting 
industrial timber.  HTI can be clear cut if replanted. 
 
Jobs Disappear with the Trees 
----------------------------- 
 
¶4. (U) Over the past two years, provincial GDP growth rates 
have lagged significantly behind Indonesia's national GDP 
growth rates, due largely to a decline in the forestry 
sector.  Forestry as a percentage of provincial growth has 
declined considerably, from 5.2% in 2002 to 1.5% in 2006. 
Bank Indonesia (BI) and other officials we spoke with 
attribute this to the loss of forest resources as well as 
the government crackdown on illegal logging.  An estimated 
25-30,000 jobs in sawmills were lost in 2006.  "One sawmill 
collapse cost 18,000 jobs," Pontianak Mayor Buchari 
Arrahman told us.  Services, trade and retail jobs have 
replaced some of these jobs, but unemployment remains about 
7%, lower than Indonesia's national average.  As forestry 
declines, plantations are gradually contributing more to 
growth, increasing from 7.9% in 2002 to 8.9% in 2006. 
 
Legacy of Bad Policies and 
Enforcement Challenges 
--------------------------- 
 
¶5. (SBU) Officials from the regional Ministry of Forestry 
office (BKSDA) told us that bad policies going back to the 
early 1990s contributed to the loss of a great deal of 
forest, including precious hardwoods.  Some were replanted 
with faster-growing eucalyptus.  Illegal mining, including 
illegal gold mining with mercury, also did a lot of damage 
to the ecosystems.  The provincial authorities are in 
charge of policing the protected forest areas, but the 
central government is in charge of the national park areas. 
Just in Betung Kerihun National Park alone, 30,000 cubic 
meters of wood has been taken illegally to Malaysia.  The 
forested areas are just too big for guarding, we were told. 
Small ports are used for exporting tropical hardwood and 
buyers are everywhere: in Europe, Asia and North America. 
"Some of the companies get a stamp in Malaysia, showing it 
is Malaysian hardwood, when in fact it came from 
Indonesia," one official told us.  The Indonesian armed 
forces (TNI) is helping to stop illegal trade, but only at 
formal border crossings. 
 
¶6. (SBU) The HPH logging concession permits were at the 
regency (kabupaten) level after the 1997-98 crisis, but 
were badly managed in a chaotic land grab.  The Ministry of 
Forestry in 2001 removed the regencies authority over 
concessions and cancelled many logging permits in 2002. 
Regencies can still propose them, but the Ministry of 
Forestry has the final approval authority.  Professor 
Heruyono Adimasputro, a professor of Agriculture and 
Forestry at the University of Tanjungpura noted that of the 
three levels of forest -- low, middle and high - the 
lowland forest of the province is mostly gone.  (Note: The 
lowland and peat swamp forests include some of the most 
important biodiversity and habitat for orangutans and other 
wildlife.)  After the Ministry of Forestry cancelled 
logging concessions in 2002, Adimasputro told us, no one 
was monitoring the situation.  "Outsiders came in and 
logged illegally, but enforcement is better now," he noted. 
A USAID forestry expert concurred, telling us, "I am aware 
of no successful moratorium on logging in Southeast Asia. 
It generally brings more problems."  Adimasputro also 
believes that 75% of the money from illegal logging ends up 
in Jakarta.  "All that new property construction in Jakarta 
is paid for by these forests," he said.  Some of the Bupati 
or regency heads are also part of the problem.  "They 
 
JAKARTA 00001672  003 OF 006 
 
 
figure it is too late to conserve, so they might as well 
exploit what's left." 
 
Cross-Border Smuggling 
---------------------- 
 
¶7. (SBU) Cross border smuggling of Indonesian forest 
resources into Malaysia's Sarawak state, which shares a 
long border with West Kalimantan, is also believed to be a 
major problem.  Along with timber, rare species of birds, 
fish and mammals routinely disappear over the border into 
Malaysia.  Indonesian officials complain that the Sarawak 
state government officials are involved in some of this 
smuggling.  Commonly trafficked items include exotic birds, 
lizards, rare freshwater fish such as the arowana, and 
orangutans.  Mr. Maraden Purba of the Conservation Office 
of BKSDA said that some orangutans are trafficked by sea to 
Thailand.  "They give the males alcohol and then stage a 
fight for shows," he said.  Some of the timber and animals 
are transported by river and therefore harder to intercept. 
"Everyone is paid off.  It's a problem of money," lamented 
one official.  Professor Adimasputro confirmed: "If people 
are paid to conserve and replant, they will go for it. 
They are looking for income.  They no longer want to live 
on plantation products.  Everyone wants a cell phone, a 
motorcycle, a television."  WWF agreed, "Alternative 
livelihoods are crucial: there are not enough police or 
authorities to stop the trade in rare species," they told 
us. 
 
Flora and Fauna Conservation Efforts 
------------------------------------ 
 
¶8. (U) The World Wildlife Foundation (WWF) and other 
conservation NGOs are working with local authorities and 
forest-dwelling people on a variety of projects to assist 
conservation.  Professor Adimasputro said the same thing 
noting, "In the United States, national parks only have 
plants and animals living in them.  Here, nature reserves 
are for animals but national parks sustain the livelihoods 
of several ethnic groups."  WWF programs include: 
community-based development; habitat management; education 
and awareness campaigns.  Conservation officer at BKSDA 
Maraden Purba emphasized that the most important thing for 
conservation is to get local people inside and in the 
buffer zones of forests empowered and working together. 
 
¶9. (U) WWF works with seven forest-dwelling ethnic groups 
to conduct awareness campaigns about conservation via 
"mobile cinema," teach methods of organic farming and 
alternative job creation.  There are considerable disputes 
over fish resources.  Local people have been using small 
gauge nets, which are not allowing fish to get to 
reproductive age.  Outsiders are coming in using poison or 
electric shock to kill fish which the locals rely on.  WWF 
has worked closely with local government officials to help 
mediate these disputes.  WWF is also facilitating 
replanting projects in many areas which are in most danger 
of erosion and degradation from logging activities.  WWF 
also runs education campaigns about endangered species. 
"Some people just don't know," Hermayanti Putera of WWF's 
West Kalimantan Program told us.  "One sawmill owner had 
three baby orangutans, but handed them over when we 
informed him it was an endangered species."  It also works 
with tribal peoples to reduce killing and trafficking of 
endangered birds including the ceremonially important 
hornbill.  Project managers from another NGO we met with, 
the Riak Bumi Foundation (Yayasan) said they were helping 
local people to market wild honey from the rainforest, 
paying a traditional group of honey hunters.  They plan to 
team up with another NGO to create forest patrols with 90 
local people, starting in 2008. 
 
Haze: Annual Environmental Disaster 
----------------------------------- 
 
¶10. (SBU) Regarding the annual problem of haze, heavy 
pollution from the burning of forest and peat to clear land 
for farming every dry season, BKSDA officials showed us a 
map indicating most of the coastal area north and south of 
 
JAKARTA 00001672  004 OF 006 
 
 
the provincial capital of Pontianak consists of peat. 
Roads outside the capital are in poor condition.  "It is 
hard to get the fire fighting equipment in," one official 
told us.  Burning is also the cheapest land clearing 
method.  Professor Heruyono Adimasputro noted that the peat 
is 15 meters deep in some areas and is crucial for water 
conservation and management. "Once the peat is gone," he 
said, "we'll have terrible flooding in Pontianak and other 
coastal areas."  The province has 16 fire fighting unites 
with 240 trained personnel, which are also helping to 
conduct public awareness campaigns.  (Note: The USG, Asian 
Development Bank and other donors have provided extensive 
training, technical assistance and other aid for fire 
prevention and response to Indonesia for over a decade, 
much of which has not been utilized or consistently 
implemented.) 
 
Heart of Borneo 
--------------- 
 
¶11. (U) We discovered a lot of enthusiasm for the "Heart of 
Borneo (HOB)" initiative during our trip.  "Progress and 
interest is faster than we expected," Hermayanti told us. 
WWF had an HOB display for a festival at the provincial 
museum in Pontianak.  Local officials said they hoped it 
would bring more attention and resources to the 
conservation efforts in the area.  The head of BAPEDA 
recognizes the importance of the program, and advised us 
that the local people want compensation for conservation. 
"People from Kapuas regency come here and ask, 'where is 
the compensation?'"  He hopes the central government and 
interested donors will help provide resources to local 
people to patrol the protected area and develop alternative 
sources of income.  Members of the Riak Bumi NGO expressed 
concern about upcoming January 2008 elections for Governor. 
(The incumbent governor will end his term on January 13, 
2008.)  "We have not seen any of the five candidates make 
strong statements about conservation.  Their policy on HOB 
is unclear.  If the new Governor allows plantations north 
of Santarum Lakes, that ecosystem is finished and HOB will 
be irreparably damaged." 
 
Severe Infrastructure Problems 
------------------------------ 
 
¶12. (SBU) BAPEDA officials told us that the province's poor 
infrastructure was a severe impediment to human development 
and overall growth.  Rasyid said that money from logging 
Kalimantan went to Jakarta and was not reinvested in the 
province.  "Most timber companies have now collapsed, and 
we're left to clean up the damage," he complained.  Erosion 
from illegal logging has silted up Pontianak harbor so the 
draft is only 5-6 meters: no ships larger than five-tons 
can enter.  "We need at least one major international 
seaport with deep draft," Rasyid said.  He noted that a 
Japanese businessman seeking to export the province's fast 
growing and remarkably refreshing aloe vera chinensis, had 
to send it through Tanjung Priok port near Jakarta, rather 
than from Pontianak.  Since Pontianak airport often cannot 
be used during haze season (3-5 months), BAPEDA would like 
to construct an alternate airport at Bengkayang to the 
northeast, which would serve three regencies.  (Comment: 
This would be treating the symptom and not the cause, and 
also provide procurement opportunities for GOI officials.) 
 
¶13. (SBU) Rasyid noted that the province's long-term road 
network plan requires Rp 15 trillion ($1.7 billion), but 
the central government's budget allocation (DAU) for the 
province through the Ministry of Public Works is only about 
Rp 1 trillion ($110 million).  BAPEDA complained that the 
province's tax revenue paid into the central government is 
not coming back to the province in a large enough budget 
allocation.  BAPEDA official Memet Agustiar said, "The 
province cannot borrow for infrastructure.  We hope to 
eventually issue sub-sovereign bonds."  Agustiar said they 
were working with Nikko Securities in Japan to create an 
investment fund for the province.  The mayor of Pontianak 
told us that the water supply was an urgent need.  Illegal 
logging and burning of peat has also led to the 
contamination of the fresh water supply with brackish water 
 
JAKARTA 00001672  005 OF 006 
 
 
in dry season.  BPKP head Hari Setiyadi also told us that, 
"Nothing that PDAM (the state water authority) supplies is 
drinkable, and many areas get no water supply at all." 
 
Constant State of Rolling Blackout 
---------------------------------- 
 
¶14. (U) BI officials told us that due to the province's 
poor infrastructure, prices for fuel and other goods in 
remote villages are much higher than in Pontianak.  For 
example, a liter of premium gasoline costs Rp 4000 ($0.44) 
a liter in Pontianak, but Rp 7,500 ($0.83) in Putussibau, 
one of the eastern regencies.  The price of electricity is 
much higher in West Kalimantan than on the Java-Bali grid. 
Installed capacity is only 200 MW and demand is much 
higher.  "The province is in a constant state of rolling 
blackouts," BI told us.  "Every building spends several 
thousand dollars on a generator.  A medium-sized home can 
spend $50 per month on diesel fuel."  Pontianak is right on 
the equator, but despite the intense sunshine for twelve 
hours a day, there was not a solar panel to be seen 
anywhere.  "There was no incentive to invest when diesel 
fuel was subsidized.  Now maybe it will be time to think 
about other energy sources," BAPEDA officials told us.  The 
Mayor of Pontianak Buchari Arrahman also seeks solar energy 
investment.  "We're an equator city.  We need solar power 
and a laboratory to study the climate here." 
 
Formidable Development Challenges, 
More Private Investment Needed 
--------------------------------- 
 
¶15. (U) BI and Planning Office (BAPEDA) officials told us 
that the education level and human development index for 
the province is still low.  There are too few doctors: 
health care and clinics are inadequate especially at the 
village and district level.  The university only started a 
medical school two years ago.  The head of BAPEDA, Mr. H. 
Fathan A. Rasyid told us that, "Most doctors come from 
Java, stay for two years, then go back."  There are too few 
teachers and many do not wish to work in remote areas. 
Many tribal peoples do not complete basic education.  We 
asked businesses in the local Chamber of Commerce (KADIN) 
what KADIN was doing to attract investment.  KADIN told us 
that most companies were interested in trade in 
agricultural products such as pepper, fruits, rubber and 
cocoa.  The market is too small for many companies, KADIN 
members acknowledged.  Malaysian companies take raw 
materials from the province and process them over the 
border.  "We have rubber plantations but no manufacturers 
of rubber products," one member told us.  On the positive 
side, the retail and services sectors are growing. 
 
 
Ecotourism Just Getting Started 
------------------------------- 
 
¶16. (U) The Deputy Bupati in Putussibau Yosef Alexander, 
WWF and others noted that lack of infrastructure was also 
impairing the development of ecotourism.  Flight 
connections and ground transportation are unreliable. 
Facilities and equipment are poor.  WWF is training some 
local people in water safety and rescue for potential 
future white-water rafting business, but getting the 
equipment is difficult, they noted.  WWF is targeting 
international tourists and working with a travel agency in 
Germany.  Part of the problem is that during Europe's prime 
vacation months in summer, Kalimantan is covered in choking 
haze.  Still, local officials and NGOs, even churches, have 
been trying to develop home-stays and eco-lodges, 
handicrafts for sale to tourists, even a challenging cross- 
Borneo trek.  Kapuas Hulu regency and WWF have also 
developed a website, www.kompakh.org, to offer tours and 
provide more information about the area. 
 
Requests for Donor Assistance 
----------------------------- 
 
¶17. (SBU) BKSDA, conservation officials and NGOs requested 
USG and donor assistance for the following.  We have not 
 
JAKARTA 00001672  006 OF 006 
 
 
vetted these requests with other donors to see what has 
already been planned or provided.  It is also not clear how 
much budget assistance the West Kalimantan authorities have 
requested from the central government for these priorities. 
 
A) Increased monitoring of cross-border timber transit; 
Certification of wood for export and domestic markets; 
 
B) Training of local people and authorities; 
 
C) Water systems and watershed management; 
 
D) Alternative employment for local people (i.e. 
handicrafts instead of trafficking endangered species); 
 
E) Equipment for combating peat and forest fires; 
 
F) Compensation for conservation, perhaps via a carbon 
trading or other mechanism. 
 
G) Assistance with Heart of Borneo conservation efforts. 
 
HEFFERN