CHAPTER TWO
JAMES M. BIRKELUND
TRADING AWAY FORESTS: INDONESIA AND MALAYSIA
Introduction
International trade is no longer solely an issue for economists.
As nations become more integrated in a global market, there is a growing
consensus that trade has a powerful effect on all areas of society and
the environment. Recent developments in the international political
arena have only just started to take into account the environmental
ramifications of trade policies.
Although international trade by itself is not a direct cause for
environmental degradation, it can profoundly affect patterns of natural
resource consumption. In the case of Indonesia and Malaysia, the
tropical timber trade has been an influential factor in determining how
these countries manage their forests. Not only are the forests being
logged for international interests, but the process of logging opens the
way for other factors causing forest depletion and environmental
degradation in Indonesia and Malaysia.
The Importance of Tropical Forests
The tropical forests in the Indo-Malaysian region contain some of
the world's highest levels of biological diversity. Indonesia alone is
estimated to contain 25 percent of the world's fish species, 17 percent
of the bird species, 16 percent of the reptile and amphibian species, 12
percent of the mammal species, and 10 percent of the flowering plant
species (Ministry of Forestry, 1993). Consequently, there is a strong
global environmental movement to protect the forests and maintain the
ecological systems that support these diverse life forms. There is also
a growing concern that tropical forests should be preserved because they
act as natural consumers of carbon dioxide and help prevent global
warming. At the local level, the forests play other important roles in
preventing soil erosion, protecting watersheds, and maintaining
micro-climatic conditions.
Economically, the Indo-Malaysian region contains an especially
valuable source of tropical timber from the dipterocarp tree species.
The dipterocarp produce hardwood with a high commercial value, and the
trees grow tall and straight making them easy to cut into long durable
planks. The forests in Indonesia and Malaysia contain high percentages
of the dipterocarp trees.
The Dynamics between Commercial Logging and The Forests
The demand for timber on the international trade market provides
a direct incentive to log trees for profit. As a result of logging,
there is also a high level of secondary damage to the surrounding
vegetation. Within any forest there are numerous trees that have no
commercial value either because they are too small or because they belong
to unprofitable species. The potential for the forest to regenerate
after logging depends heavily on the methods of logging extraction and
the extent of vegetation left to regenerate itself. Industrial timber
companies generally use heavy machinery to take out valuable trees and to
establish roads for transporting equipment into the remote areas of the
forests. A fair amount of vegetation is destroyed just in the process of
getting the logging equipment to the location of the trees. Once there,
companies pay little attention to the felling techniques used to cut the
trees and as a consequence large trees often fall on and harm the
surrounding vegetation. Studies conducted by the International Timber
and Trade Organization (ITTO) estimate that 60 percent of vegetation not
directly logged is severely damaged or destroyed as the result of logging
practices (Collins et al., 1991).
Another effect of industrial logging practices is to provide
locals with the means to enter otherwise remote areas of the forests.
Once the logging companies have left an area, settlers often use the
roads to go in and stake land which has already been cleared of trees for
agricultural purposes. Settlers also clear additional land beyond the
areas exploited for timber. Thus, the logging practices can be seen in
conjunction with agriculture as the first step in permanently removing
trees in many of these areas which do not have a chance to recover once
the logging companies have moved on.
Historical Background
Before the timber trade, the Southeast Pacific was almost
completely covered with tropical rainforests. With few exceptions, the
large-scale deforestation of Malaysia and Indonesia did not begin until
the 1960's and early 1970's respectively. At this time, multinationals
from the United States, Europe, and Japan invested heavily in this region
and traded timber back to their home countries. Initially, the
governments in both the home and host countries encouraged foreign
investment in these tropical forests. As shown in Graph #1 and Graph #2,
large-scale logging and the export of unprocessed timber (roundwoods)
rose steeply during the 1960s and 1970s.
GRAPH #1
GRAPH #2
Commercial logging and the timber trade was beginning to provide
a steady income for Malaysia and Indonesia. Oil remained the most
profitable export good, but following the Oil Crisis in 1973 both
countries started looking for ways to increase their foreign export
earnings. Along with utilizing natural gas deposits, these countries
targeted the timber industry for development. The governments in
Indonesia and Malaysia began charging more for the forest concessions
they gave to logging companies. In addition, they also increased the
percentage of domestic firms that received these concessions. By the
late 1970s, Indonesia had started to restrict foreign investment to
promote the growth of their domestic timber industry. Realizing
additional profits could be retained by exporting processed timber
instead of roundwood, Indonesia banned the export of logs in 1980. This
resulted in a domestic increase in the production of sawnwood and panel
forest products (Graph #1). In response to international pressures,
Indonesia lifted its ban on raw log exports in 1992 (export data after
1991 is unavailable). In Malaysia, the government also attempted to
restrict log exports by raising tariffs in the 1980s. However, unlike
Indonesia, the Sabah and Sarawak regions of Malaysia continued to rely on
the export of unprocessed timber and the overall roundwood exports in
Malaysia have steadily increased to the present time (Graph #2).
Although attempts to restrict log exports were not as successful in
Malaysia as compared with Indonesia, the Asian bloc of countries
increased secondary timber production steadily from the 1960s to the
1990s. While the percentage of roundwood and sawnwood exports
fluctuated, the percentage of wood-based panels skyrocketed from 41
percent in the 1961 to 90 percent in 1990 (Table 1).
TABLE #1
Exports of Timber Products as a Percentage of Production in Tropical
Countries (%)
1961 1970 1980 1990
All Tropical Countries
Industrial Roundwood 15.6 27.1 18.2 11.1
Sawnwood 15.3 17.3 16.2 12.0
Wood-based Panels 34.0 33.0 32.5 69.4
Tropical Africa
Industrial Roundwood 23.8 23.3 16.3 9.5
Sawnwood 32.1 28.5 12.7 12.3
Wood-based Panels 34.0 33.0 28.6 21.9
Tropical Central and South America
Industrial Roundwood 1.6 1 0.2 0.2
Sawnwood 14.7 13.6 6.9 3.9
Wood-based Panels 34.0 33 15.3 19.4
1961 1970 1980 1990
Tropical Asia and Oceania
Industrial Roundwood 22.2 44.2 33.4 20.4
Sawnwood 11.9 18.5 24.5 117.5
Wood-based Panels 40.5 39.9 49.4 89.7
Source: FAO (1992) in Barbier et al. (1994).
Despite the variations in the unprocessed versus processed timber
exports, the international trade of timber products as a whole has
steadily increased from the 1960s to the present day.
Economics- The Driving Factor
As shown in Map #1, the distribution of tropical rainforests is
found primarily in South America, Africa, India, and Asia. The regional
view of Indonesia and Malaysia shows that both these countries are
heavily endowed with tropical rainforests. Following David Ricardo's
basic economic theory of comparative advantage, Indonesia and Malaysia
would be well advised to sell tropical forests (which they have in
abundance) on the international market in exchange for other goods and
services. Modern economics has since expanded on the theory of
comparative advantage, but there remains an underlying economic incentive
for countries in the tropical areas to trade timber.
While in practice the tropical hardwoods exported from all of the
developing countries only account for 3 percent of the total wood removal
from these countries, in certain areas such as Malaysia, it is estimated
that 68 percent of all wood removal enters into the world trade market
(Collins et al., 1991). More specifically, of the 25 million cubic
meters (mn cu m) of tropical hardwood logs exported worldwide in 1986, 19
mn cu m came from the Sabah and Sarawak regions of Malaysia; seventy
percent of the world trade in sawn hardwood came from SE Asia; and
Indonesia is now the world's largest tropical plywood producer (Ibid.,
1991).
Another worldwide study compiled by Barbier et al. (1994)
measures the amount of forested land in tropical countries and the
percent of area being deforested annually (see Table 2).
TABLE #2
Tropical Forest Resources: Status and Changes in thousands of
hectares
Area % of Area
Deforested Deforested
Land Forest Area Annually Annually
Area 1990 1981-90 1981-90
Latin America
Brazil 845,651 347,000 3,200 0.92
Peru 128,000 73,000 300 0.41
Bolivia 108,439 55,500 60 0.11
Venezuela 88,205 42,000 150 0.36
Colombia 103,870 41,400 350 0.85
Guyana 19,685 19,300 3 0.02
Suriname 15,600 15,200 3 0.02
Ecuador 27,684 12,300 60 0.49
Africa
Zaire 226,760 103,800 200 0.19
Congo 34,150 21,100 22 0.10
Gabon 25,767 20,300 15 0.07
Cameroon 46,540 17,100 80 0.47
Central African Republic 62,298 3,600 5 0.14
Equatorial Guinea 2,805 1,200 3 0.25
Asia
Indonesia 181,157 108,600 1,315 1.21
Malaysia 32,855 18,400 255 1.39
Philippines 29,817 6,500 110 1.69
Source: Schmidt (1990) in Barbier et al. (1994).
Asia as a region suffered from the highest rate of deforestation
throughout the 1980s with Indonesia, Malaysia, and the Philippines having
the highest rates per country. To some extent these percentage
statistics are more meaningful when there is a large total area of
tropical forests in the country. And indeed, Indonesia is second only to
Brazil with a total of 109 million hectares (mn ha) of rain forests.
Combined with Indonesia's 1.21 percent rate of deforestation this results
in a loss of 1,315,000 ha of rainforests every year (Barbier et al.,
1994). In order to understand why Indonesia and Malaysia are being so
heavily deforested, it is necessary to look at the importance of forest
products to their national economies.
In 1989, the industrial forest sector in Indonesia and Malaysia
accounted for 3-6 percent of the total gross domestic product, and forest
based exports accounted for between 10 and 16 percent of the total
exchange value of all exports. In comparison, the industrial forest
sector in most countries with tropical forests was less important and
averaged below 2 percent of the total gross domestic product of these
countries (Barbier, et al., 1994). An explanation for the heavy logging
in Indonesia and Malaysia is the presence of the valuable dipterocarp
species of tree. Furthermore, this region has the highest density of
tropical forests in the world (see Map #2), and it is relatively easy for
companies to realize profits and reduce transportation costs when trees
are located close to each other. Both of these factors combine to make
Indonesia and Malaysia the two leading countries in exports of forestry
goods by a large margin over most other tropical countries, many of whom
are net importers of tropical forest goods (Table 3).
TABLE #3
Forestry Products in Selected Countries- Thousands of US Dollars
Imports Exports Net Exports
Tropical Africa
Cameroon 35,412 99,833 64,421
Central African Rep. 468 29,994 29,526
Congo 4,500 106,087 101,587
Ivory Coast 27,200 236,147 208,947
Gabon 3,655 136,774 133,119
Kenya 23,594 4,054 -19,540
Liberia 1,942 78,264 76,322
Madagascar 8,546 534 -8,012
Malawi 8,085 1993 -6,065
Nigeria 33,083 1,680 -31,403
Tanzania 15,700 1,539 -14,161
Zaire 3,666 17,032 13,366
Zimbabwe 5,765 4,169 -1,596
Tropical Central and South America
Costa Rica 40,020 21,895 -18,125
Cuba 193,411 1,847 -191,564
El Salvador 21,800 2,725 -19,075
Guatemala 69,410 18,326 -51,084
Honduras 137,921 31,061 -106,860
Mexico 403,605 13,884 -389,721
Nicaragua 10,566 2,569 -7,997
Panama 76,979 3,988 -72,991
Bolivia 4,060 22,160 18,100
Brazil 299,402 1,750,981 1,451,579
Columbia 104,056 20,060 -83,996
Ecuador 157,834 24,373 -133,461
Paraguay 13,055 24,971 11,916
Peru 104,914 2,558 -102,356
Tropical Asia and Oceania
Hong Kong 1,752,273 705,535 -1,046,738
India 290,967 16,337 -274,630
Indonesia 330,157 3,069,199 2,739,042
Laos 200 10,251 10,051
Malaysia 483,372 3,040,884 2,557,512
Myanmar 4,721 148,084 143,363
Philippines 173,662 123,119 -50,543
Singapore 747,548 663,302 -84,246
Thailand 1,002,371 101,551 -900,820
Fiji 7,804 22,775 14,971
Papua New Guinea 5,504 115,500 109,996
Source: FAO (1992) in Barbier et al. (1994).
Indonesia is now the leading exporter of processed tropical hardwoods.
In 1992 Indonesia's timber industry was worth 4.6 billion US dollars;
much of this went to directly employing 2.5 mn people in the timber
industry as well as 1.2 mn people in complementary or related businesses
(Ministry of Forestry, 1993). By 1983, Malaysia accounted for 58% of
the total global export of tropical timber (Cronau, 1993), and in 1988,
timber overtook petroleum as Malaysias main export commodity, valued at
3.6 billion dollars (Davis and Henley, 1990). Both Indonesia and
Malaysia are prime examples of countries that rely heavily on timber
exports to support their national economies.
Exports and Deforestation
The qualitative relationship between exports and deforestation is
captured in Graph # 3.
GRAPH #3
While this only includes roundwoods, there is a strong correlation
between the increase in roundwood exports and the decrease in forested
area from 1961 to 1979. The notable drop of exports in the early 1980s
corresponds with the sudden ban on raw log exports in Indonesia and, to a
lesser extent, on the higher export tariffs on raw logs in Malaysia. The
total exports of forestry products, including panel wood and sawnwood,
has continued to increase steadily throughout the 1980s to the present.
Therefore, while the data on exported sawnwood and panel wood is not
available, the relationship between deforestation and exports is very
strong if all forest products are considered.
It should be noted that a direct quantitative relationship
between the exported amount of wood (in cu m) and the associated
deforestation of land (in ha) has not been calculated. This is a very
difficult relationship to establish for several reasons. As mentioned in
the section on the dynamics between commercial logging and the forests,
not only are trees removed for direct use, but approximately 60 percent
of the surrounding vegetation is destroyed. Secondly, logging operations
are seen as part of the process enabling local people to gain access to
closed forests and destroy additional forests for agriculture. And,
finally, because of the wide practice of illegal logging, the true number
of exported logs is likely to be much higher than the officially reported
measurements. Logging rules are commonly disregarded and illegal exports
are common. For example, between 1986 and 1990, the Primary Industries
Minister Lim Keng Yaik of Malaysia reported that four states exceeded
their logging quotas by as much as 300 percent (Lumpur and Tsuruoka,
1991). According to a study conducted in Indonesia by Skephi, a
non-government environmental organization, "timber transportation
documents are commonly reused two to five times, which would mean that
unreported logging in some areas may range from 100 to 400 percent over
the volume of reported logging" (US Embassy, 1994). Because of the wide
range of associated uncertainties, it is not possible to calculate a
quantitative relationship between exports and deforestation in Graph #
3.
Even with missing data, the overall growth of roundwood exports
is best characterized by a linear trend that, if it continues, would
reach over 40,000 cubic meters by the year 2010 (see Graph #4).
GRAPH #4
This worst case scenario would have devastating effects on the remaining
tropical forests in this region. Furthermore, even if roundwood exports
remain at current levels, the tropical forests will still continue to
disappear at an alarming rate. Domestic and international trade policies
will be the critical factor in determining whether forest exports
increase or decrease in the upcoming years.
Forests in Transition
Having established some relationships between exports and
deforestation, it is useful to think of the interaction between the two
in terms of a forestry transition. William Drake describes the concept
of transitions in Towards Building a Theory of Population-Environment
Dynamics: A Family of Transitions (1993). To paraphrase briefly, the
idea behind transitions is that societies are especially vulnerable to
change in critical time periods which depend in part on the state of the
population in these societies. Moreover, government policies can act to
alleviate the problems associated with these critical time periods. When
a sector, such as the forestry sector, enters a transition period it
undergoes rapid change before returning to a stable state; the forestry
sector in Indonesia and Malaysia is doing just that. According to Drake,
if we can recognize transitions, we can proscribe policies to help reduce
the negative aspects of the transition and influence the final
equilibrium state.
Applied to this paper, the theory of transitions explicitly
recognizes that there is a dynamic relationship between deforestation and
the tropical timber trade. This relationship started in the 1960s and is
continuing today. Judging from the continued rates of deforestation and
forest exports in Graph #4, the forestry transition is far from over. In
regards to population trends, Indonesia and Malaysia reached their peak
growth rates in the mid 1970s and mid 1960s respectively (see Graphs #5
and #6).
Since then population growth rates have declined and are expected
to continue declining into the 21st century. However, because the birth
rates and death rates in these countries have both fallen at relatively
the same speed (see Graphs #7 and #8), the total population in these
countries continues to rise rapidly.
GRAPH #5
GRAPH #6
GRAPH #7
GRAPH #8
Thus, the population transition is not yet over and is expected to
continue into the 21st century. Modernization provides an indirect link
between population changes and increased timber exports. As modern
medicine acted to promote the decline in death rates / birth rates, the
modern market system acted to promote improvements in the economy, trade,
and technology (all three are necessary to exploit timber resources).
Commercial logging in Malaysia began in the 1950s about ten years before
population growth rates reached a maximum, and commercial logging began
in Indonesia in the 1960s about ten years before its maximum population
growth rate. The same technological and economical advances that spurred
the logging industry also preceded the beginnings of the demographic
transition. The direct link between the demographic and forestry
transition is easily found by examining the dynamics between logging and
deforestation. There are two major connections:
1.) As the total population rises, landless peasants become more
numerous and it becomes more difficult to stop them from contributing to
deforestation as they follow logging operations and convert forested land
into fields for agriculture.
2.) As the total population rises, there is increased pressure on
the national economy to sustain more people. In the short-term, this
pressure can be partly alleviated by supplementing national incomes with
an increase in the exports of forestry goods. This in turn increases
deforestation.
The effects of the timber trade on deforestation began with
Indonesias and Malaysias exposure to the Western capitalist market
system. Furthermore, the exposure to Western medicine prompted the
demographic transition which has magnified the problems between the
timber trade and deforestation in these countries. In order to
effectively get through the forestry transition, Indonesia and Malaysia
need to concentrate on getting through their demographic transitions as well.
The Missing Element- Reforestation
Until deforestation begins to level-off and approach
reforestation, the forestry transition will not reach a stable state and
logging operations will continue to deplete the tropical forests in this
region. At some point, the forestry transition will reach an
equilibrium. Where this equilibrium is partly dependent on the ability
of governments to implement reforestation management.
There is very little data on the reforestation of the tropical
forests of Indonesia and Malaysia. Much of the available information is
from the forestry departments of the governments and can be notoriously
unreliable. In 1990, the worldwide extent of plantations in the tropical
areas was estimated at 43.9 mn ha, or less than two percent of the total
forested area of 1,715 mn ha (Barbier, 1994). According to the World
Resources Database (1994-1995), Indonesia and Malaysia respectively had
8,750,000 and 116,000 ha of plantations in 1990 and were adding to
plantations at a rate of 474,000 ha a year in Indonesia and 9,000 ha a
year in Malaysia. Considering the average annual deforestation rate in
the 1980s was 1,315,000 ha in Indonesia and 255,000 ha in Malaysia (see
Table 2), the rate of reforestation to deforestation is less than 25
percent in Indonesia and less than 10 percent in Malaysia. The forestry
transition will not be complete until the rate of reforestation equals
the rate of deforestation.
One drawback to reforested plantations is they often consist of
only one species of tree. Sometimes this is not even an indigenous
species. For example, the Eucalyptus tree from Australia is a
fast-growing valuable timber that is often chosen to replace native
trees. Plantations do little to preserve the biological diversity of the
traditional forests and can destroy the soil and water table as well. It
is therefore highly desirable for these countries to focus not only on
reforestation, but also on preserving the integrity of the original
forests. Indonesia and Malaysia should attempt to move their logging
efforts from areas of primary growth to reforested areas of secondary growth.
Domestic Policies
In the 1983 United Nations Conference on Trade and Development,
the International Tropical Timber Organization (ITTO) was created to
address the problems between trade and tropical forests. Indonesia and
Malaysia are both members of ITTO and have committed to the goal of
sustainably managing all tropical forests by the Target Year 2000. This
leaves the domestic governments with the task of balancing the short-term
interests of the economy and logging companies against the long-term
interests of the future economy and environmentalists. The governments
in Indonesia and Malaysia would like to improve the economic efficiency
of the forestry sector without increasing the raw material growth of
inputs or over-cutting the tropical forests. In the past, one strategy
pursued to promote this goal is to add economic value to their forests by
restricting roundwood exports and processing lumber into secondary
products before exporting it on the international trade market.
There are several problems with the strategy to export processed
lumber. While on the one hand it may be effective at adding monetary
value to wood products before selling them, it also requires the
countries to restrict trade on raw log exports. Initially it might be
expected that by cutting out foreign sales of raw logs the deforestation
rates might go down. However, as seen from the 1980 ban of log exports
in Indonesia, deforestation rates were not reduced. Roundwood production
remained steady while sawnwood and panel wood production rose rapidly
(see Graph # 1). From an economic perspective, trade barriers decrease
the market value of raw logs for the domestic wood processing
industries. When the price of logs goes down, domestic companies can
purchase greater numbers of logs and this could actually cause an
increase deforestation. According to the World Bank, Indonesia's ban in
log exports pushed the price of domestic logs to half the world level and
resulted in over-cutting and over-investment in secondary wood production
in Indonesia (Schwarz, 1992a). When a natural resource loses market
value it becomes less valuable to protect as a long-term source of
income. The second point made by economists is that because domestic
industries are shielded from competition with foreign wood processing
companies (foreigners cannot buy raw material from these countries),
export restrictions cause inefficiencies. According to Marina Whitman,
an international trade professor at the University of Michigan,
international competition is essential for promoting the most efficient
production of goods on a global level. Trade restriction have proven
unreliable for decreasing deforestation and can hinder the development of
efficient domestic industries. This runs contrary to the governments
overall objective of increasing efficiency and maintaining the levels of
raw material consumption.
Another problematic domestic issue is the abuse and corruption
that undermine the enforcement of logging regulations. The governments
in Indonesia and Malaysia are notorious for accepting bribes and showing
preferential treatment to logging companies with personal connections to
powerful officials. Enforcement of national logging rules is poor at
best. As noted earlier, the illegal export of raw logs is also
widespread. The governments need to make a firm commitment to stopping
corruption and enforcing their own logging regulations.
Finally, the domestic policies for granting timber concessions to
logging companies need to be reviewed. Typically the governments grant
timber concessions to logging companies for relatively short periods of
time -- approximately 20 years. This encourages companies to take as
much as they can from the forest before they lose their timber
concessions. It takes 35 to 40 years for dipterocarp trees to re-grow
to commercially valuable sizes. Therefore, the companies are not
expected to get a second harvest from any particular concession (Schwarz,
1991). There is little concern by business for the future productivity
of their forest concessions.
International Policies
Until recently, the international political structures affecting
deforestation in Indonesia and Malaysia were mainly due to market demand
in other countries. Companies in industrial nations would purchase
tropical timber for their own hardwood processing and subsequently sell
products to consumers in industrialized nations. Although this continues
to be the case, in the past two decades, a number of new political actors
(international organizations) have started to put pressure on Malaysia to
sustainably manage its tropical forests.
Internationally, the response to concerns over the global
destruction of tropical forests have led some foreign countries, such as
those in the European Union, to impose trade restrictions-- import
tariffs or non-tariff barriers on tropical forest products. In 1986, the
European Union imposed restrictions on the import of tropical wood.
These restrictions required timber to be "certified" from "sustainable
forests". Most of the logs exported from Indonesia and Malaysia can not
meet these requirements (Tasker and Ai, 1994). If implemented on a
global level, trade sanctions could theoretically limit the amount of
forestry products exported from Indonesia and Malaysia and potentially
reduce deforestation rates. However, as the demand for trees goes down,
the forests become less "economically valuable", and much of the
financial impetus for sustainable management disappears. According to
Alastir Fraser, a Briton working with Indonesia's Ministry of Forestry,
"It would be tragic if trade stopped. The forests would become less
valuable and there would be less incentive to protect them" (Schwarz,
1992b). Foreign trade restrictions can distort the true economic value
of the forests in to these countries. Instead of reducing deforestation,
foreign trade restrictions in the long-term could decrease the economic
incentives to preserve the forests. Admittedly, some policy makers are
not convinced trade restrictions are a cause for environmental damage and
would argue that Indonesia and Malaysia make more money from restricting
log exports and selling secondary wood products instead.
However, even if trade restrictions were effective at reducing
deforestation, the General Agreement on Tariffs and Trade (GATT) is
slowly working to phase tariffs and other trade restrictions out of the
global economy. In 1992, the lift in the ban on log exports in Indonesia
was partly the result of pressure from the GATT. Thus, it would be
difficult to coordinate a world-wide trading ban on forest products
produced in this region. This would go against the predominantly free
trade atmosphere currently advocated in international politics and the GATT.
In the place of trade restrictions, the GATT is promoting
multinational trade agreements that involve all countries. In the
Uruguay Round of GATT negotiations, environmental issues have become
increasingly important in discussions, although substantial global
environmental regulations have not been established. As it relates to
Indonesia and Malaysia, the obvious advantage of multinational agreements
over unilateral trade restrictions is to take into account the views of
both importing and exporting nations. This does not necessarily mean
environmental protection. But, environmental solutions for reducing
deforestation could be framed by GATT in an economically and socially
beneficial system for both Indonesia and Malaysia with international
support. This might entail international financial support to implement
management programs that provide viable alternatives to using old growth
forests. Management programs that focus on reforestation and
intensification of land that has already been deforested. This would
reduce the pressure to log old growth forests. ITTO is an example of an
international organization that has encouraged developed nations to
co-operate with developing nations with the common goal of promoting the
sustainable management of tropical forests. The World Bank is currently
looking at a proposal to employ a foreign company to help Malaysias
government monitor logging operations. However, to really have an
impact, international organizations need to make stronger commitments to
support these countries in their attempts to curb the current problems of
deforestation. GATT, ITTO, and the World Bank have not yet had a big
effect on deforestation rates in Indonesia and Malaysia.
Conclusions
Although the international timber trade is undoubtedly an
important part of the economies in Indonesia and Malaysia, it is
difficult to quantify the exact relation between exports and forest
deforestation. Given the limitations of data, the relationship of
exports to the forestry transition is captured in Graph #3. There are
two major areas affecting the forestry transition in these countries: the
demand for exports and the lack of reforestation. In effect, if exports
continue to increase or even remain at constant levels without improved
rates of reforestation, the forests in Indonesia and Malaysia will
rapidly disappear.
There are several domestic policies that should be advanced to
reduce deforestation rates. Because of the geographical, environmental,
demographical, and political similarities between Indonesia and Malaysia,
both countries are in very analogous positions and should follow the same
general strategies to prevent deforestation. First, they should remove
any remaining restrictions on the export of raw logs. This will provide
the economic conditions that favor the most efficient use of timber goods
on a global level. While the domestic industries may lose money in the
short-run, in the long-run the country will benefit from utilizing its
resources more efficiently. If these countries continue to restrict
timber exports, they will face retaliation measures from the
international community and the GATT. Trade retaliation could harm the
other important sectors of their economies including oil and natural gas
exports. In addition, the domestic governments need to cut down on
corruption and improve enforcement of the current logging regulations.
This will involve a financial commitment to enforce logging rules and a
moral commitment by government officials to decline bribes from powerful
logging industries. And finally, the current terms of granting
short-term forest concessions should be increased to provide an incentive
for companies to start reforesting and sustainably managing the forests.
Changing the policies for granting logging concessions is beneficial to
all parties involved and should be relatively easy to implement.
Finally, Indonesia and Malaysia both need to work on controlling
population growth. If populations continue to increase rapidly, their
will be pressures to use deforested land for agriculture instead of
reforesting it for future timber production.
From the international level, countries need to move away from
unilateral restrictions and work towards developing common forest
management goals. ITTO is a step in the right direction, but
negotiations could start to include mechanisms for enforcement as well.
The GATT, while still a long-way from having an international enforcement
arm, could provide this service sometime in the future. To be
pro-active, the international community needs to provide more financial
aid to these countries to help with the costs of sustainably managing
forests. It is also possible to develop a set of internationally agreed
upon forestry practices, whereby the demand for forestry exports could be
reduced to what can be provided consistently over generations. The
sooner this agreement is reached, the more tropical rainforests will be
left when the forestry transition is over.
As a whole, this paper serves to reinforce the importance of the
relationship between international trade and the forests of Indonesia and
Malaysia. Hopefully future studies can provide additional data to
support the general policies proscribed here and provide more specific
guidelines for the domestic governments and international community. The
relationship between trade and the environment is still an evolving study
with many unanswered questions.
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