43
6 THE IMPLICATION OF WOOD PRICE CHANGES ON
DEFORESTATION IN INDONESIA
This chapter tries to answer the question “how is the implication of wood price changes on deforestation in Indonesia” as the main objective of this study
using regression analysis. First, it is started with the estimation of potential deforestation in Indonesia, and then it continues with the explanation on the result
of regression analysis, which emphasizes the variables that have statistically significant effect on deforestation. Finally, the last part is the conclusion, which
summarizes the interpretation of the result of regression analysis, including the benefits and drawbacks of the model, and the policy implication as well.
6.1 Potential Deforestation in Indonesia
Although it is generally believed that the rate of deforestation, particularly in tropical countries, increases over time, but the actual number of deforestation
rate is still debatable among the institutions, such as between governments and international organizations. This ongoing debate is related to the differences in
defining what „deforestation‟ is. εost governments simply consider deforestation as changes in forest areas, without calculating the degradation of forest quality
such as biodiversity, density and structure, biomass stocks, and other ecological services. Even with the simple definition, some institutions sometimes publish
different number of deforestation rate based on their techniques of measurement. Thus it may lead to the problems of data validity on deforestation issue. However,
since the introduction of Geographic Information System GIS, the changes forest area are commonly calculated using GIS with the aid of satellite.
Nevertheless, the publication of those data is still limited. Considering this situation, this study does not calculate the real deforestation rate, but investigates
the number of potential deforestation which may occur. This study estimates the rate of deforestation by observing the number of
distortion between the actual production and annual allowable cut. Annual allowable cut is the amount of timber can be legally harvested during a period of
44 time within a defined area, which changes every year and may differ from one
area to another area. The number of annual allowable cut is determined and published by the Ministry of Forestry of Indonesia annually.
Figure 9 Annual allowable cut 2004-2007 in Five Main Islands Source: Ministry of Forestry of Indonesia, 2008
Based on the observed data during 1978-2007 from the Ministry of Forestry of Indonesia, as shown in the figure 10, this study estimated the negative
distortion during 1978-1980, and then continuously existed from 1993 until 2007 which implied the presence of over-harvesting activities of timber. This situation
may be an indication of illegal logging activities, which is quite difficult to calculate accurately since there is no official report for that. This finding is not
surprising due to the increasing demand of wood products both within the country and from world market during these periods. On the other hand, it is generally
reported that timber becomes scarcer due to the increasing destruction of global forest. From the economic perspective, this supply-demand imbalance will drive
loggers to harvest more timber to gain more benefit from the market. Consequently, it will lead to increase deforestation rate at the end of the day
unless a sustainable forest management is applied.
1000000 2000000
3000000 4000000
5000000
Sumatera Kalimantan
Sualwesi Papua
2004 2005
2006 2007
45 Figure 4 Distortion from Annual Allowable Cut 1978-2007
Source: own calculation based on data from Ministry of Forestry of Indonesia
6.2 Model Selection
