Billions of dollars Indonesia stands to earn every year in climate change deals could be at risk if it fails to stamp out corruption in its forestry sector, long notorious for graft and focus of an ongoing investigation.
Norway is preparing to pay the first US$30 million of US$1 billion it agreed to give Indonesia in return for a commitment to preserve valuable forests, part of a UN scheme in which rich nations pay developing countries not to chop down trees.
“Our emission reduction potential from forestry and peatland is about 1.5 gigatonnes by 2030. So if the price of emissions reductions is around US$10 per tonne in 2030, then our potential revenue is US$15 billion per annum by 2030,” the head of Indonesia’s National Council on Climate Change, Agus Purnomo said.
However, considerable obstacles stand in the way. Indonesia’s lucrative palm oil, plantations and mining sectors say the moratorium on land conversion will hinder expansion and profits and the forestry sector has a legacy of mismanagement and graft.
“It’s a source of unlimited corruption,” said Chandra M. Hamzah, deputy chairman at the KPK anti-graft agency set up by Indonesian President Susilo Bambang Yudhoyono to combat corruption.
An Ernst and Young audit found that in the four years 1993 to 1994 and 1997 to 1998, Indonesia’s reforestation fund lost US$5.25 billion through systematic financial mismanagement and fraud. Anti-graft officials are concerned that the vast sums on offer under the UN scheme could lead to further corruption and theft.
Adding to concerns, a forestry official who helped negotiate the Norway deal and represented Indonesia at global climate talks last year is a suspect in a multimillion-dollar corruption case.
That’s one reason top reformers in the government say they are putting in safeguards to ensure that Norway’s funding isn’t misused.
Kuntoro Mangkusubroto, who heads of the president’s delivery unit and oversees implementation of the deal, said the money would be kept separate from the government budget.
The KPK has spent two years investigating allegations that forestry officials, lawmakers, and businessmen at a firm called PT Masaro Radiokom conspired to ensure the firm won a lucrative radio procurement project. The KPK estimated this led to state losses of at least 70 billion rupiah (US$7.75 million).
Wandojo Siswanto, one of Indonesia’s top negotiators at last year’s climate talks in Copenhagen and a member of the team that negotiated with Norway, was named a suspect in September last year, but has continued to work as a senior forestry department official. He is an architect of Indonesia’s laws on the UN scheme, Reduced Emissions from Deforestation and Degradation (REDD).
The KPK alleges that Siswanto, who was in charge of the radio procurement project, received a bribe of about US$10,000 from Anggoro Widjojo, a director of PT Masaro Radiokom, to ensure that the project was included in the department’s budget that year.
It says Siswanto awarded the contract directly to Masaro, instead of putting it to public tender as required by law. A travel ban was imposed on him last year after Copenhagen.
Siswanto insists he is innocent. He said that he found the US$10,000 in question on his table, and then called Widjojo to ask who the money was for, and what it was for.
“It was just put on my table. I was not brave enough to make a report to the KPK at that time,” he said, adding that he held onto the money for about four months, then gave it to the KPK.
“I never asked for that kind of money,” Siswanto said, adding that he didn’t think it was a bribe because it was given after the budget had already been arranged. “The money didn’t make me do something.”
Siswanto said his staff advised him to award the contract to Masaro without putting it to public tender.
“I was advised by my committee that it was conducted every year this way,” he said. “I need to prove I was just a victim of the situation.”
In an e-mailed statement, the Norwegian International Climate and Forest Initiative, part of the Norwegian environment ministry, said the US$1 billion climate deal was designed in such as way as to reduce the risk of corruption:
“It is an unfortunate fact that there are significant governance challenges, including issues of fiduciary management, in most tropical forest countries,” the statement said. “Clearly, dealing with these challenges is a priority.”
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