Lessons from Indonesia’s Reforestation Fund

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Presentation by Ahmad Dermawan,
Center for International Forestry Research,
Lessons from Indonesia’s,
The 14th International Anti-Corruption Conference,
Thursday, 11 November 2010,
Queen Sirikit National Convention Center, Bangkok, Thailand

Published in: Economy & Finance, Business
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Lessons from Indonesia’s Reforestation Fund

  1. 1. Lessons from Indonesia’s Reforestation Fund<br />Ahmad Dermawan<br />14th International Anti Corruption Conference (IACC)<br />Bangkok, 11 November 2010<br />
  2. 2. Climate change and REDD+<br />REDD+ offers an opportunity to create new revenue flows by protecting standing forests and rehabilitating degraded forests<br />However, many of the most likely recipients of REDD+ funds do not have a positive track record in the governance of public financial management<br />
  3. 3. Source: Transparency International<br />
  4. 4. Lessons from Indonesia’s Reforestation Fund<br />Financial management and revenue administration<br />Capital subsidies and accountability<br />Corruption and fraud<br />Transparency and accountability<br />
  5. 5. Financial management and revenue administration<br /><ul><li>Until 1998, the Fund was managed outside state budget, with limited reporting
  6. 6. Transferred partially to regions since 2001, but regions have limited capacity to manage it</li></ul>Influx of REDD+ funds could place new pressures on institutions that have demonstrated limited capacity for financial management and governance<br />
  7. 7. Capital subsidies and accountability<br /><ul><li>During 1990-1999, approximately $1 billion of the Fund was used to support timber plantation development
  8. 8. Most subsidy recipients did not fully plant their plantation sites, and have not fully repaid their loans</li></ul>Since these companies may apply for REDD+ projects, tit is important to carefully consider implications if REDD+ participants fail to meet obligations<br />
  9. 9. Corruption and fraud<br /><ul><li>Some recipients of subsidies ‘marked up’ their investment costs or overstated their planted areas
  10. 10. Since 2001, corruption related to the Fund has become decentralized</li></ul>Donors and investors will want assurances their money will be managed accountably. If not, they may shift investments to countries with better financial management and governance<br />
  11. 11. Conclusions<br />Strong management capacity is needed. If REDD+ funds are not managed effectively, the ability to achieve carbon reduction targets will be undermined, and REDD+ payments will not flow<br />Keeping track records of actors involved in REDD is necessary to avoid irresponsible actions<br />Strengthening and mainstreaming anti-corruption initiatives is key to making REDD+ work. REDD+ ‘readiness’ should strengthen Anti-corruption actions<br />MRV principles should also be applied to financial management and governance, not just carbon emission reductions<br />
  12. 12. Sources<br />Barr, C., Dermawan, A., Purnomo, H. and Komarudin, H. 2009. Financial governance and Indonesia’s reforestation fund during the Soeharto and post-Soeharto periods, 1989–2009: A political economic analysis of lessons for REDD+. Occasional paper no. 52. CIFOR, Bogor, Indonesia.<br />Wertz-Kanounnikoff, S., and Angelsen, A. 2009. Global and national REDD+ architecture: Linking institutions and actions. In Angelsen, A. with Brockhaus, M., Kanninen, M., Sills, E., Sunderlin, W. D. and Wertz-Kanounnikoff, S. (eds) 2009 Realising REDD+: National strategy and policy options. CIFOR, Bogor, Indonesia.<br />Transparency International. 2010. Corruption Perception Index 2010 Results. http://www.transparency.org/policy_research/surveys_indices/cpi/2010/results<br />
  13. 13. www.cifor.cgiar.org<br />www.forestclimatechange.org<br />

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