Rival Transnational Networks, Domestic Politics, and Indonesian Timber

Journal of Contemporary Asia Forthcoming, 2010 Vol. 40, Issue 3,

Paul K. Gellert Department of Sociology 911 McClung Tower University of Tennessee Knoxville, TN 37996 Tel. 865-974-7023 Fax. 865-974-7013 E-mail: [email protected] Abstract: Scholars interested in the promotion of “good governance” and those interested in transnational advocacy networks (TANs) both are concerned with the potential power of external actors to alter domestic political structures. This article analyzes the networks promoting neoliberalisation and democratic practices in Indonesia’s forestry sector as rival transnational networks. The analysis finds that the Asian crisis and collapse of the Suharto regime provided a political opening for alliances between the two rival networks that helped to bring down the ruling oligarchy in timber, but the power of domestic oligarchs controlling the sector remains strong. In brief, there are limits to the power of both external networks viz-a-viz domestic power relations. Given the financial resources and constraints on NGOs, they may be unable to alter the deep structures of capitalist accumulation and distribution based in Indonesia’s forest resources. Keywords: governance, politics, transnational networks, international financial institutions (IFIs), nongovernmental organisations (NGOs), Indonesia

INTRODUCTION: EXTERNAL POWERS AND “GOOD GOVERNANCE” REFORMS IN INDONESIA Two important but separate strands of literature analyze the relation between external or transnational power and domestic power. One set of scholars critically examine the ways in which neoliberalism is imposed on peripheral states from outside. Much of their emphasis has been on the imposition of structural adjustment via lending from international financial institutions (IFIs) such as the IMF and the World Bank (Woods, 2006; Goldman, 2005; Peet, 2003; Glassman and Carmody, 2001). An important component of this external imposition in recent years has been the emphasis on “good governance” (Hamilton-Hart and Jomo 2003; Robison, 2009, 2006). A second set of literature focuses on the growth of non-governmental organisations (NGOs) (Eldridge, 1995; Weller 2005) and, especially, their creation of transnational advocacy networks (TANs) (Keck and Sikkink 1997; also Khagram et al. 2002; Heyzer 1995). These scholars laud the power of outsiders to bring organised pressure to bear on closed domestic political systems through networks forged between blocked domestic actors and external allies. The normative contrast, however, between the two sets of scholars on the role of external power is stark. Critical scholars of neoliberalism bemoan the power of USdominated IFIs to impose hegemony and economic policy orthodoxy on weak, peripheral states. Most scholars of TANs, by contrast, are enthusiastic about the prospects of outside pressure to bring about positive or humanitarian change in undemocratic regimes of the periphery. These are broadly described positions disguising internal complexities, to be sure. One should not take them to mean that neoliberal scholars have been supportive of existing domestic political structures since both sets of scholars often seek

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more politically progressive alternatives. Neither should one assume that transnational network scholars are naïve about the potential power asymmetries (Sikkink, 2002) or even neo-colonial character of external network members. Yet, without much recognition of the fact, both sets of scholars are concerned with the ability of external powers operating through transnational networks to alter domestic political power structures. This article seeks to examine the insights that might be gained by pairing the two perspectives in an analysis of political, economic, social, and environmental change in the world’s periphery. To do so, I focus on Indonesia’s forestry sector. I consider two rival transnational networks, one in favor of neoliberal governance reform and the other democratic governance. These networks have vastly different memberships and resources. One might expect that the neoliberal globalisation network would achieve its aims of thorough reform of general economic policies whereas the democratic governance network would achieve marginal victories in focused sectors or issue areas, at best. Ironically, as this article demonstrates, there are numerous ways in which both networks can be blocked or thwarted by domestic power structures. Domestic structures may endure, despite the lack of networked support for their persistence beyond the nation-state’s boundaries. Or, alternatively, one can think about the support of global capital for the combinations of authoritarian politics and liberal economics (Rodan, 2006; Robison, 2009). To be sure, at critical conjunctures political opportunities are opened, and the power of domestically dominant groups can be challenged. The 1997-98 Asian financial crisis presented just such an opportunity to challenge the power of the dominant

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oligarchy in Indonesia and especially its hold over the nation’s important forestry sector. Yet, as Aspinall and Mietzner (2008) argue, the IMF’s role in challenging Suharto’s political leadership was perhaps unintentional. Moreover, after a brief period of challenge to its power, the domestic oligarchy re-grouped itself within a new political regime that is procedurally democratic. This paper begins with a discussion of the potential to be gained from examining transnational advocacy networks and the global promotion of neoliberal goverance agendas in tandem. Then, I turn to the foundation of Suharto’s New Order and its responsiveness to external forces while building the politico-bureaucratic oligarchy that dominated its timber sector for three decades. Third, I examine the political opportunity that the Asian financial crisis of 1997-98 afforded to a variety of groups and organisations. The NGOs interested in social and environmental justice issues were particularly conflicted about the opportunities that the crisis created. The resistance of domestic political groups to the attempts by different networks of external actors to alter their bases of power contributed to the partiality and arguably failure of governance reforms promoted by both the neoliberal globalisation network and the democratic network. In relation to both networks, these groupings continue to maintain more entrenched structures that would require broader political mobilisation to overturn. GOVERNANCE REFORM AND RIVAL TRANSNATIONAL NETWORKS Governance reform and activism would seem to be strange partners on the road towards improving Indonesia’s forestry sector. Governance reforms have generally been imposed on peripheral states through austerity measures and conditionalities of IMF-led structural adjustment programs. They are predominantly neoliberal in their orientation,

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following the precepts of the Washington Consensus policies. In the critical literature on neoliberal governance reform, the emphasis is on unequal relations of power within the world-system between IFIs, backed by the hegemonic power of the United States, and peripheral nation-states undergoing processes of adjustment (Glassman and Carmody 2001; Wade and Veneroso 1998; Walton and Seddon 1994). By contrast, transnational advocacy networks (TANs) have mostly worked to circumvent and challenge the power of states. Gay Seidman’s (2007) book on activism focused on transnational corporations argues that activists themselves tend to dismiss states. More forcefully, Tania Li (2007: 275) asserts that most development interventions aiming at participation and empowerment “pay astonishingly little attention to the character of ruling regimes.” Keck and Sikkink’s (1997) now-classic formulation of TANs includes both non-governmental organisations and state actors, but in its numerous applications, scholars have tended to downplay or ignore the actions of states as part of these networks. TANs have worked from ethical positions to raise new issues, alter policies, and influence states and their institutions. Typically, TANs advance the cause of human and social rights, and more general democratic goals. Unlike the first set of scholars, the focus is rarely on governments and financial interests solidified in international financial institutions. Rather, it is on the inchoate, reactive and creative social movements composed of non-governmental actors who put pressure on governments, conceived of as separate from them.1 In drawing this distinction, there is a normative bias towards “activism” and against either inactive or recalcitrant states. In fact, both neo-liberal governance reformers and social justice advocacy networks operate transnationally, and both bring external power to bear on domestic

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political structures and organisations. Both try to bring pressure on domestic state regulators and to obtain the cooperation of domestic capital (corporations). Yet, they differ in membership, sources of power and resources, and their need for domestic allies to achieve their goals. The neoliberal governance reform network is quite obviously more powerful; has more monetary resources at its disposal, as well as the capacity to withhold such resources; and is based in dominant economic ideologies. The democratic governance or social justice network is less powerful; has fewer monetary resources and no hold over the purse strings of governments; and is based in moral suasion to universalistic principles (e.g. indigenous rights, local control over resources). By comparing the two kinds of networks within one analytical frame, the ground is set for a more incisive understanding of the actors and institutions involved in political reform efforts. This paper proposes that we examine the relative power of the rival networks and the conditions under which one or the other is likely to succeed and why. Given the overall “shrinking policy space” (Lerche, 2008) and the spreading legitimacy of neo-liberal economics and discourse (Babb, 2001; Goldman, 2005), there may even be overlap between the two networks that justifies an integrated analysis. Combining the two strands of literature may lead to insights into the politics of development and structural adjustment, as well as the possibilities for truly transformative change.

Good governance Governance and the more normative term “good governance” have become ubiquitous among international financial institutions, development researchers, and practitioners (Weiss, 2000; Leftwich, 1994; Arndt and Oman, 2006; Robison , 2009). The

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(good) governance literature and political agenda emerged in the wake of a period of embedded liberalism in which state interventionism and welfare policies were the norm (Ruggie 1982). However, the neo-liberal perspective has come to dominate, and neoliberal reformers have defined “good governance” as the insulation of markets from collective social demands. They have posited that good governance can be achieved through the reform of institutions to make markets work. Although historically international financial institutions (IFIs) stressed national development and states with capacities to steer such development, the 1980s and 1990s saw increasingly critical accounts of the state. At the time when neo-Weberian theorists re-introduced the importance of the state, the Washington Consensus emerged as an antistatist move (Evans et al., 1985).2 In the early phase of the triumph of neo-liberal ideas, the focus was on effective government capacity and proper legal frameworks (Hout and Robison, 2009). It was assumed that rational actors would develop effective institutions. While the IFIs were previously agnostic about domestic political arrangements – in alignment with stated policies of non-interference in the internal affairs of sovereign members – discussions of internal political and economic governance became increasingly commonplace. Weiss observes four key reasons why this occurred: the glaring illegitimacy of some regimes, e.g. Idi Amin, Pol Pot (but not Suharto (see Aspinall and Mietzner 2008; Simpson 2008)); the “third wave” of democracy and accompanying reforms in many places around the world; the proliferation of non-state actors, including both international NGOs and transnational corporations, as well as media; and increased humanitarian interventions, which raised the possibility of “contingent” sovereignty (Weiss, 2000: 799-800).

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For the World Bank and IMF in particular, good governance came to embody a set of changes in the governance of developing and post-socialist states concentrating on reversing the unrepresentative governments and inefficient, non-market systems that were deemed to define “bad governance” (Weiss, 2000: 801). The World Bank led international institutions in the recognition of the need to defeat corruption and clientelism. At the same time, greater programmatic emphasis was placed on participation and inclusion. In a possibly emerging third phase of governance thinking, some are recognizing the importance of power and conflict in achieving reform, although there is a deep contradiction between this realisation and the perennial effort to depoliticise development as a technocratic achievement (Ferguson, 1994; Rhee, 2006). Producing good governance assumes a technocratic modality of implementation that is rarely achieved fully (Li, 2007). The reasons for the persistence of bad governance are deeply connected to the domestic politics in receiving nation-states. Notably, as Robison (2006) has observed, there is uncanny coalescence of “illiberal regimes” defined by the persistence of predatory practices with the spread of neoliberal economic policies.3

Rival transnational advocacy networks Whereas governance advocates assume technocratic, apolitical processes of reform, the literature on transnational activism has recognized self-consciously political processes from the start. Part of the contribution of scholars interested in transnational activist networks (TANs) has been to recognise and highlight the efforts and achievements of non-state actors in the political realm. More specifically, in the context

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of developing nation-states, Keck and Sikkink’s (1997) notion of “boomerang” politics in which weak domestic actors overcome blocked domestic political opportunity structures is now widely applied. Yet, as Caraway’s (2006) comparative study of labor activism in Burma, Indonesia and India demonstrates, the domestic political context is of great importance to outcomes, including the form and quality of activism. Recognizing the inclusion of states in TANs, Jackie Smith (2008; see also McAdam et al., 1996) argues that there are “rival transnational networks” at work in the world today. As she writes, The concept of rival transnational networks seeks to convey the idea that most political struggles are contests between competing networks that are made up of diverse actors, and that these networks differ in their access to resources, organizing capacities, political opportunities, and intra-network relations (Smith, 2008: 19). Smith identifies two broad rival networks: the neoliberal globalisation network and the democratic globalisation network. This paper deploys the concept of rival transnational networks to emphasise the comparable ways in which advocates of neoliberalisation and of democratisation both act through networks. They differ in the degree of diversity of their actors and other characteristics affecting their effectiveness. The neoliberal network tends to be more unified ideologically and more homogenous in its membership, providing it with a coordination advantage.4 Yet, even this network, despite obviously being more powerful in a capitalist world system, needs to forge alliances and garner support to achieve its goals. The democratic globalisation network offers alternatives to globalisation but its membership is more diverse, which often complicates its message and dilutes its power. Yet both networks have organisational, political, technical and cultural fractions (Smith

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2008; Sklair 2002). Table 1 distinguishes these two main networks, as well as the liberal capitalist network that dominated the Suharto period from 1966 to 1998, in terms of their membership, support groups, initiators and mechanisms of network formation and primary strategies. TABLE 1 ABOUT HERE

Competing Models of Governance and Rival TANs Rival transnational networks have fought over the terrain of reform within Indonesia’s domestic political structure before, during and after the financial crisis and political transition of 1997-98. Transnational actors need to gain “access” to domestic political systems and contribute to “winning” coalitions, depending further on transnational actors’ ability to “adjust to the domestic structure” (Risse-Kappen, 2008: 466-467). While the two main rival networks in the current period in Indonesia are neoliberal and democratic, contestation is not just between two rival transnational networks focused on global good governance agendas promoted by the neoliberal network and democratic alternatives promoted by the democratic globalisation network. There are four distinctive models of forestry governance that may be distinguished in terms of their economic and social objectives, the methods advocated to achieve good governance in the sector and the actors that are their agents and beneficiaries. Each of these also evaluates the environmental degradation from timber extraction and the best ways to redress it differently. The first or industrialist model was the dominant model during the New Order of protecting domestic business. In the postSuharto period, it is represented by the new forest industry association (BRIK) that was

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established and the emphasis by leading players (Suarga et al., 2004) on recovery and revitalisation of the industry following economic crisis and slumping exports. Principles of economic viability are central to the model of governance advocated here. As described in Table 2, the second two models parallel Smith’s notion of a neoliberal globalisation network and a democratic globalisation network, respectively. The World Bank-IMF good governance model is a market-led model based on neo-liberal prescriptions calling for transparency, as well as rule of law in the implementation of market-led solutions to forestry problems. The model is based on technocratic assumptions about the processes of governance reform implementation and reflects the broad shift from Washington Consensus policies towards emphasis on institutionbuilding and reform as the key to change. The NGO bottom-up social reform model supports bottom-up social reform intended to address the corruption, collusion and nepotism (KKN) of the New Order. It places conservation as a central principle of good governance. Among the large, Jakarta-based NGOs in the network supporting bottom-up reform, the environmental organisation WALHI has called for a total logging moratorium to allow time for a reconfiguration of rights and responsibilities over forests. On the other hand, more centrist groups such as WWF, WRI and Nature Conservancy have moved to support the fourth model of reform based in improved international trade. This model is designed to support improved governance through emphasis on legality in the regional and global trade. It is also put forth by importing nations and firms who are interested in secure and stable access to supplies of legal timber. It may be intended to address the persistent local networks of illegal logging and power that, in fact, challenge the viability

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of all of these models (McCarthy, 2002).5 One key program of this last model is voluntary agreements to limit trade to certifiably sustainable or legal supplies. In addition, governments in Japan and the US have imposed regulatory mechanisms to limit imports of illegal wood. TABLE 2 ABOUT HERE More important than identifying four basic models, however, this paper focuses on the politics of struggle over the different models of governance. The different models lend themselves to differing actors deploying their agency, through ideological positions and rhetorical strategies. The attempt to thrust the neo-liberal governance model on Indonesia’s forestry sector was accommodated and resisted both by powerful industrialists who promoted the first model and by less powerful environmentalists and local activists who promoted the third model. The network perspective stresses the fact that the neo-liberal model is not monolithic. It reflects a certain ideological position and is promoted via important and powerful transnational networks. Moreover, it is crucial to address how the networks intersect, as well as how those intersections change over time. Notably in the case of Indonesia’s timber sector, the NGOs’ relationship to the IFIs changed from oppositional to allied and back again. Importantly, both international NGOs and IFIs are external to domestic power structures and seek, through their networks, to alter the power relations that inhere in these structures. Finally, they each work in relation to popular bases and these relations, too, change over time.6

ESTABLISHING POWER IN INDONESIA’S FORESTRY SECTOR: NEW ORDER STABILITY AND LIMITED RESISTANCE

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Transnational networks were active from the start of the New Order. External powers provided military, political, and economic support for the liberal capitalist network through three decades (Aspinall and Mietzner, 2008). The baseline, therefore, for analyzing more contemporary transnational network activity is the formation of the durable regime of President Suharto in Indonesia from the overthrow of President Sukarno’s leftist authoritarian regime amid the violent murders of 1965-66 (Cribb, 1990; Robinson, 1995; Roosa, 2006). Supported by the West due to Cold War politics, the main thrust of Suharto’s New Order regime from 1967 until 1998 was to build a capitalist developmentalist state that responded to foreign capital’s needs and the advice of neoliberal technocrats dubbed the Berkeley Mafia (Winters, 1996; Tyner, 2007; Simpson, 2008). Yet, the impact of transnational actors such as foreign investors and the World Bank was not automatic, as they too needed to gain access to the domestic political systems (on such necessities, see Risse-Kippen, 2008: 466). Moreover, the regime was steered domestically by a “politico-bureaucratic oligarchy” that transformed patronage into a fusion of public authority and private interest (Robison, 2006; Robison and Hadiz, 2004; Smith, 2007). The forestry sector is a key illustration of this fusion and the limited effect of challenges posed to it by either the neoliberal good governance model or the NGO social and environmental justice model. Under Suharto, although some sectors were liberalised, the forestry sector never was. Rather, domestic actors, both private and state, dominated the sector in favor of an industrial extractive model of forest development and accumulation (Ross, 2001; Gellert, 2005). The model began with the opening of the forests to foreign investment and trade creating a logging boom in the 1970s and 1980s

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that enriched forest concessionaires. Concession (or HPH, hak pengusahaan hutan) holders, including foreign firms and large numbers from the military (both individually and through their organisations known as yayasan), predominantly Chinese-Indonesian conglomerates, and members of the extended Suharto family, accumulated significant wealth. As part of a national developmentalist strategy, governance of the forestry sector came to be controlled by an oligarchy of domestic timber industrialists, under the leadership of Mohamad (Bob) Hasan, and aimed at growth of exports and industrialisation (Dauvergne 1997; Barr, 1998; Gellert 2003). A 1985 log export ban and regulations promoting vertical integration subsidized the growth of a domestic plywood industry, and forest products grew to 30 per cent of industrial exports by 1989 (Simangunsong 2004). The Indonesian Wood Panel Association (Apkindo) built on Hasan’s personal relationship with Suharto to discipline domestic producers and accumulate wealth both for its members and for Hasan (Barr, 1998) while transnational alliances were crucial to penetrating Japanese and other markets (Gellert, 2003). The New Order was in effect a liberal capitalist network generally supported by the Western powers. Criticisms of policies and practices by rival networks of domestic and international NGOs, as well as political fractions7 of the transnational capitalist class, were ignored, thwarted, or repressed. Accumulation was based in a deepening infringement on local and indigenous rights to forest lands and environmental depletion overcome periodically via a spatial fix (Harvey 2003) of extensification of logging permits. For example, when forest areas managed under the contadictory Indonesian Selective Logging and Replanting system (Barr, 2002) proved insufficient for the

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plymills in the 1980s, plantation establishment was supported by interest-free loans from the state. The Ministry of Forestry added regulatory support for clear-cutting permits that grew in importance (Barr, 2001). Lacking sufficient capital to achieve an expansion into pulp and paper on its own, the industrialist growth model of forest governance broadened into a transnational network. Some of the knowledge to embark on the expansion came from feasibility studies done by the World Bank and the Asian Development Bank (Noor and Syumanda, 2006), demonstrating the role of international policy and knowledge networks (Goldman, 2005). With global capital also seeking outlets during this period, $15 billion of international capital support flowed into Indonesia to create a six-fold expansion in pulp and paper capacity to almost 4 million tons and over 1100 percent growth in pulp and paper exports in the 1990s (Barr, 2001). Not surprisingly, activist networks formed to oppose the powerful coalition behind the timber industry and the growing impact on peoples and forests (Barber et al., 1994). Despite the high degree of repression and political de-politicisation (Peluso et al., 2008: 382) and de-mobilisation (Lane, 2008) during the years of Suharto’s authoritarian rule, there emerged a modest degree of openness.8 As in other parts of the world, the 1980s was a period of significant NGO growth in Indonesia generally (Eldridge 1995; Riker 2002). By 1996, there were as many as 8,000 NGOs operating in Indonesia (Aspinall and Mietzner, 2008:10). Often, rather than directly confront the undemocratic regime, NGO activists focused energies on the typical (non-class) substantive areas of new social movements. Environmentalism, especially environmental law and advocacy, was a “safe arena” in which to help local people (Peluso et al., 2008: 383). They did so

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formally in the form of self-reliant organisations (lembaga swadaya masyarakat) or NGOs (Eldridge 2005), and even garnered some official sanction from the Minister of Environment Emil Salim (Mayer, 1996; Nomura 2007).9 When pressing labor rights issues, activists mostly did so via NGOs rather than the one state-sanctioned union (Caraway, 2006: 285), although some joined illegal trade unions (Hadiz, 1997). During this period, NGOs largely operated within the rhetorical terrain and discourse of “development” and its accompanying “technical” approaches (Li, 2007). For example, SKEPHI and WALHI conducted public campaigns and attempted to sway policy-makers via analyses of the economically unsound and environmentally unsustainable character of forest exploitation. Amid criticisms, Hasan deflected both democratic and neoliberal governance pressures, suggesting instead, “One solution to lighten the government’s burden would be to turn the administration of the production forest areas over to the people who would benefit most: the timber companies” (Poffenberger, 1997: 467). The NGOs countered that development was not being achieved -- at least neither sustainably nor fairly to the logging regions (SKEPHI 1992a; SKEPHI 1992b; WALHI 1991; WALHI 1993). The expansion of clear cutting fueled more serious conflicts and social unrest in Kalimantan, Sumatra and other areas of land clearing (Fried, 2003; Peluso and Watts, 2001). As NGOs were thwarted domestically in their pursuit of popular participation and self-reliance, they pursued the “boomerang” strategy of seeking external allies, such as international NGOs based in the US and Europe, to push their cause and to obtain resources (see Table 1). In an early, defining attempt at this strategy, activists supported within INGI (INFID’s predecessor) tried to pressure the World Bank over displacement

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effects of the Kedung Ombo dam project, but this may have resulted in reduced tolerance of NGOs by Suharto and the turn back to the underground (Peluso et al., 2008: 385-8). Although not substantially challenging Suharto’s rule, international financial institutions (IFIs) favoring neoliberal reform did show periodic signs of frustration over the persistence of dirigiste elements in the regime (Kapur et al., 1997; Rock 1999; World Bank 1993). After the 1983 liberalisation of the banking sector, the World Bank attempted unsuccessfully to impose conditionality on forestry sector loans (Ross, 1996: 176). In 1994, loan negotiations with the Department of Forestry came to an impasse because proposed reforms directly challenged the power of Hasan and Apkindo (Seymour and Dubash 2000: 86). The proposed reforms included liberalisation of the forest concession system and dismantling of vertical integration with processing mills; a system of auctioning forest lands as in the United States; liberalised trade, including reducing export taxes and elimination of Apkindo marketing mechanisms; and decentralisation of forest control through revenue sharing and stakeholder involvement in managing the forests (World Bank, 1993b; see also Gautam et al., 2000: 69). In refusing to accept this foreign interference, the Minister of Forestry effectively rejected a $120 million World Bank forestry loan. In a similar rejection of foreign interference, President Suharto had cut off bilateral relations with the Dutch over non-economic conditionalities, especially in the area of human rights but the foreign supporters in the liberal capitalist network simply reorganized without the Dutch (Feridhanusetyawan, 2003: 234; Schwarz, 1999). To summarize, in this period, the long-held dominance of domestic business interests was beginning to be challenged by two rival networks, democratic globalization

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activists and neoliberal policy reformers, including the international financial institutions. However, it took the crisis and its weaking of Suharto’s hold on power to open the doors to reforms of forestry and other areas of governance. Increasingly, opponents called for an overhaul of the New Order and its corruption, collusion and nepotism (known by the Indonesian acronym KKN) that had allowed resource extraction and conflicts to expand (Colfer and Resosudarmo, 2002; LATIN, 1999). Through many prior crises, the New Order regime endured, but when the Asian financial crisis hit in 1997, it shook the regime. Because elite opposition remained “weak and indecisive” about how to reform itself, Aspinall (2005: 210) concludes, “it was student protest that finally broke the impasse.” A mobilisation of NGOs, Islamic groups, student groups, as well as protests by the People’s Democratic Party or PRD (Lane, 2008), joined together in a movement to bring down Suharto (Boudreau, 2004). Finally, as elites abandoned him in the final days (Aspinall and Mietzner, 2008), Suharto resigned on May 21, 1998.10

THE ASIAN CRISIS AS POLITICAL OPPORTUNITY The Asian crisis of 1997-98 provided a tremendous political opportunity (McAdam, 1998) for reform of the politico-bureaucratic oligarchy that had tightly controlled the forestry sector. At this conjuncture, the interests of the IFIs in neo-liberal reform of the economy including the timber sector and those of NGOs interested in democratisation, indigenous rights and environmental sustainability coalesced around political reform of the oligarchy. A tactical alliance between NGOs in the broad democratic network and the IMF in the neoliberal network (see Table 1), therefore, made

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sense -- if only briefly. In forestry governance, both networks were interested in transparency and fairness as part of the definition of good governance, but resistance by entrenched interests to market-based neoliberalism (as well as criticism of uncontrolled illegal logging) mostly thwarted efforts to promote social justice and representation. In the early days of this conjuncture, the IFIs forcefully promulgated the neoliberal good governance model. Indonesia became one of only three countries in the world in which forestry-related conditionalities were attached to an IMF structural adjustment loan. This inclusion reflected the broadening of the IMF agenda beyond its original focus on fiscal stability (Gautam et al., 2000: 75; Kapur, 2007). The details of the forest governance reforms, which were taken “off the shelf” of the 1993 reforms advocated (see above) by the former World Bank Forestry Officer in Jakarta, supported the neoliberal globalisation network’s agenda (Seymour and Dubash 2000). Michel Camdessus, the IMF Director who was captured in a widely circulated image standing arms folded behind Suharto during the signing of the LOI, supported a broader institutional focus on governance to ‘improve the management of [lenders’] public resources’ (Camdessus, 1998). Specifically, the second Letter of Intent (LOI) from the Government of Indonesia to the IMF in January 1998 (IMF, 1998a) included a long and detailed list of conditionalities related to forest governance: • Increase the forest land tax • Transfer the Reforestation Fund to the official budget and ensure that it is used exclusively for reforestaton program • Abolish the export tax on logs, sawn timber, and rattan and replace it with a resources rent tax • Remove restrictive marketing arrangements embodied in the exporter’s cartel (Apkindo) • Reform logging concession regulations, with periodic reviews of stumpage fees • Lengthen concession terms and allow transfer of concession rights • Allow competitive auctioning of concessions

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• • • •

Implement performance bonds Reduce land conversion targets to environmentally sustainable levels Reduce the export tax on palm oil Remove restrictions on foreign investments in palm oil plantations

These conditions reflected a substantial “mission creep” in IMF structural adjustment loans from its earlier focus on fiscal stabilisation.11 The World Bank followed up in April 1998, with an overlapping but also more specific list12 of reforms (Gautam et al., 2000): • Linkage of forest royalties to world prices • Reduction of export taxes on forest products (with a schedule) • Introduction of an independent system of monitoring of forest resources and management of operations on all forest lands, encouraging participation of local communities and protection of indigenous forest dwellers • In consultation with stakeholders, develop an improved methodology for allocating forest land • Complete an updated map showing correct outer forest boundary • Moratorium on new licenses and permits until these new measures are in place • Development of sustainable forestry land management targets The emphasis is clearly on building the market state (Robison 2009) by creating marketbased mechanisms in forestry governance and by reducing opportunities for opaque transactions. NGOs in the rival democratic governance network were initially supportive of the power of the IMF to impose conditionalities that included forestry and environmental sectors in the IMF LOI (Kartodihardjo, 1999). They appreciated the potential to challenge the power of the industrialist growth model and its leader, Bob Hasan. Some of the elements of the reform package, such as weakening the Apkindo cartel, making the reforestation tax more transparent, and consulting stakeholders, had long been part of campaigns and legal actions by NGOs.13 Coalitions under INFID (International NGO Forum on Indonesia and Development) and WALHI (Indonesian Environmental Forum)

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thus supported conditionality. The neoliberal reform impetus gained further support from international forestry experts and consultants, who believed that their ideas would finally be on the inside of policy network discussions (Rhee, 2007). Tactical support from NGOs contributed to the broader domestic legitimacy of policies advocated by the neoliberal governance network that otherwise raised controversy about the power of foreigners over Indonesia. In fact, however, the NGOs provided support only with “ambivalence” and for political tactical reasons (WALHI, 2000). To the democratic globalisation network, good governance was defined not so much by market reforms as by respect for the traditional (adat) rights of the millions of people living in or near the forests and a reduction of the power of the “crony capitalists” who had benefited from growth during the New Order (Sheng and Cannon, 2004: 16). In the heat of the crisis conjuncture, both networks challenging the entrenched political interests gained. First, a number of liberalising steps were taken. Apkindo’s marketing monopolies via joint marketing boards in key markets were, in fact, abolished. As a result, timber firms became responsible for marketing their own plywood and other products (Gellert, 2007). Also, scheduled reductions in export taxes on logs, sawn timber, and rattan and increases in timber stumpage fees were met (IMF, 1998b; Sheng and Cannon, 2004). Although Suharto never faced prosecution for KKN, Bob Hasan was jailed for several years for corruption of government funds intended for aerial photographs of the forests. However, fuller implementation of reforms would prove to be more difficult. Given NGOs’ history of being simultaneously “cooperative and critical” (Eldridge, 2005: 156), the alliance was bound to split over the causes of bad governance

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and its consequences for marginalized and impoverished groups. Moreover, the emphasis on “high-level lobbying, not on changing decision-making structures within society” (Riker, 2002: 188) by INFID, for example, posed deeper political challenges for NGO efforts. An alliance of international and domestic NGOs (Fried and Bruce, 1998) quickly began to campaign against the IFIs, with the following demands: • • • • •

Stop support for expansion and privatisation of the palm oil sector (specified in the 2nd LOI) Stop direct and indirect subsidies to mega-projects in Kalimantan (one million hectare peat swamp conversion to rice fields) and Papua Disband plywood, rattan, and paper cartels and monopolies before further disbursement of IFI multilateral and bilateral funds Apply World Bank environmental and social policies and operating procedures to the rapid disbursement of funds (e.g. through structural adjustment and PRSP tranches) Ensure that loans follow ‘rigorous, monitorable, enforceable measures to promote civil service reform, greater financial accountability and transparency, and respect for good governance and human rights’

This list of demands supported the anti-monopoly measures in the good governance model but sought to make further capital infusions conditional on compliance in this (narrow) area. On the other hand, it rejected expansion of market-based mechanisms and capital support for further commodification of forested areas in lieu of social and environmental accountability. A wide variety of non-governmental groups contributed to the debates about how to reform unjust and unsustainable policies (Colfer and Resosudarmo, 2002). In the process, alliances were built across NGOs, intellectuals, and state institutions. For example, undercover NGO video reporting on the growing illegal logging crisis bolstered government statements in favor of reform (EIA/Telapak 1999). University foresters and student activists spearheaded the creation of the Community Forestry Communications Forum (FKKM) with the aim of altering the paradigm from forest resource management

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supported by the extractive industry and its allies in the Department of Forestry into a forest ecosystem management paradigm (LATIN, 1998: 57). Importantly, a national alliance of indigenous (adat) communities called AMAN (Aliansi Masyarakat Adat Nusantara) emerged from protests against plantation conversions and supported recognition of indigenous rights (Moniaga, 1993; Li, 2001). Their demands centered on land reform and indigenous land rights, as well as denial of the government’s longstanding claims to the forest land estate for the national welfare (Affif et al., 2005; Contreras-Hermosilla, et al., 2005; Fay and Sirait, 2002). Another significant development during the reform period was the open alliance between previously oppositional groups and (parts of) the more democratic, reform era government. Notably, Indonesian Corruption Watch and Greenomics managed to create a partnership with the Secretary General in the Department of Forestry to investigate corruption inside the department. This partnership allowed ICW and Greenomics considerable access to internal documents, such as those pertaining to log movements and logging concession areas, activities, and performance evaluations.14 However, when this official was forced out of the Department in the subsequent electoral period, the relationship withered.15 During the Presidency of Susilo Bambang Yudhoyono, another “outside” critic of the Department of Forestry and leader of the NGO Forest Watch Indonesia, was hired as an expert advisor to Minister of Forestry Kaban during the current presidency. In addition, transnational networks among NGOs and research think tanks were deepened. The NGO Telapak partnered in its ongoing research on illegal logging with the UK-based Environmental Investigation Agency. Conservation International led a

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workshop with international and domestic groups to reinforce aspects of the CGI commitments.16 The World Bank sponsored a study of opportunities in the forestry sector conducted by the Center for International Forestry Research (CIFOR, 2004). As part of its efforts to re-enter Indonesia’s forestry sector, the Bank engaged in “public consultations” in three provinces in 2004 and 2005 to discuss this report with a variety of civil society members from community and NGO groups, universities, industry and government.17 The NGOs, although promoting their social and environmental justice model sympathetic to the weakest and most oppressed groups in society, did not have the resources (or, perhaps the inclination) to be more confrontational. Crucially, the primary mechanism of their network’s formation is through external funding (Riker, 2002: 198; Eldridge, 2005: 166). Foreign funders were not interested in supporting messy and partisan politics (Li, 2007).18 The liberal capitalist network of domestic state and capitalist interests was weakened by the crisis, and it appeared that the power of protected timber business interests would finally be challenged. However, the alliance between the neoliberal and democratic governance networks was a weak and temporary one. As it turned out, both networks of reformers were unable to forge a productive relationship with the business sector. As discussed in more detail below, a new industrial association organisation was formed through a public-private partnership that was tipped unequally in favor of the private side. Since the political transition in Indonesia was a limited and managed one, it is not surprising that NGOs were unable to challenge the power of the business sector,

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but even more powerful networks in favor of neoliberal governance failed to achieve to use their greater resources and organizational capacities to achieve their broader aims. THE FAILURE OF NEOLIBERAL GOOD GOVERNANCE REFORMS The political opportunity afforded by the Asian crisis and the political transition from Suharto rapidly dissipated. The governance reform agenda promulgated by the neoliberal globalisation network actors proved difficult to achieve. However, the democratic globalisation actors were quicker to be frustrated by the lack of reforms. Neither neoliberalisation nor global democracy “won” the battle; rather the forces of personalistic capitalism that Hadiz and Robison (2004; see also Robison 2006) call “illiberal” governance persisted. Although the transnational advocacy network literature addresses the need for local partners, there is still insufficient attention to issues of power and conflict (Shefner, 1999). Neither the neo-liberal globalisation network nor the NGO democratisation network was capable of sufficiently challenging recalcitrant coalition of forces supporting the Indonesian industrial oligarchy (Rosser, 2003). The good governance promoters in the IFIs had failed to grasp the depth of the problems that the good governance agenda faced. Perhaps they overestimated their power over domestic interests. In general, they continued to define the problems as weak institutions and bad governance rather than an analysis of relative social and political forces. Neoliberal good governance thwarted In the midst of euphoria at Suharto’s resignation, there was a brief confluence of interest between the neoliberal good governance model and the NGOs reform model. NGO networks, as mentioned, supported the continuation of forestry governance conditionality alongside the broader corporate, legal and economic governance priorities

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of the IFIs. However, this moment of alliance was insufficient to break the vast network of support for the industrialist growth model. In the post-Suharto spirit of reformasi, and amid the public exposé of vast illegal logging operations, IFIs agreed to hold Consultative Group on Indonesia (CGI) meetings of donors inside Indonesia in 1999. Beginning in 2000, they included NGOs in preparatory discussions and as meeting observers.19 For the NGOs like WALHI, a “strategy of critical collaboration with state authorities” (Eldridge, 2005:159) was pursued. Gaining access was viewed as having increased voice in the negotiation over reforms and their implementation. Cooperation with NGOs also fit with the World Bank’s renewed stance on participation. Indonesia World Bank Country Director Mark Baird observed in 2001 that although the focus on forest governance and law might be surprising, not addressing it was a constraint not just on forest management but on development in Indonesia. For the Bank (2006), “key features of good governance include adherence to the rule of law, transparency and low levels of corruption, voice of all stakeholders and accountability of all officials, low regulatory burden, and political stability.” The governance reforms came to focus on two areas of implementation : debt and legality. Restructuring of debt accrued by Indonesian conglomerates in all areas of the economy was one key way to address the problems with governance of the New Order. Forestry enterprises, especially those that had expanded into the growing pulp and paper sector, had accrued significant debt. The Indonesian Bank Restructuring Agency (IBRA) had assumed control of assets worth US$ 78 billion (or 548.3 trillion Rupiah) (Setiono, 2007; Tacconi et al., 2004). The Minister of Forestry and Plantations had committed to

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closure of highly indebted wood industries and linking debt write-offs to capacity reduction at the February 2000 CGI meeting as part of a broader commitment to reforming forest governance.20 IBRA’s potential influence on forestry governance was highly significant. The indebted companies under its administration represented 78 percent of pulp capacity, 58 percent of installed paper capacity, 60 percent of plywood capacity and 75 percent of blockboard. Logging was also affected as IBRA controlled debts included companies with over half of the country’s forest logging concessions (Setiono, 2007: 15). The possibility existed for IBRA to use this control to improve forest governance via disclosure of supply sources to address illegal and unsustainable supply. Such reform might also reduce risk ratings on further investment in forestry in Indonesia. In addition, control could be exerted over the recycling of forest firm capital into other unrelated investments. However, such potential went mostly unrealised. IBRA’s directors declared the issue of illegal logging outside its purview in a narrow focus on debt recovery. Much of the debt was sold at “fire sale” prices – as little as 20 percent or unreported levels. Over half of the debts were sold to Bank Mandiri, a merger of state banks from which the debts originated. Ultimately, the lack of debt recovery and other deficiencies of IBRA meant continued overcapacity and contradicted Minister of Forestry M. Prakosa’s “soft landing” policy that reduced logging rates from over 20 million m3 to 6.9 million cubic metres in 2002 and 5.7 million cubic metres in 2004. In effect, there were at least two basic obstacles to reform of the forestry sector via the bank restructuring method. First, the banks, both Indonesian and foreign, were too

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weak to force the timber conglomerates to repay debts or to prevent new, more favorable debt agreements and transfer of capital out of the forest industries. IBRA became “a mere selling agent” of debt, uninterested in altering the prevailing political economy (Setiono, 2007; Barr, 2001). Second, the President “failed to reconcile” a conflict of interest between forestry decision makers desiring to reduce pressure on natural forests and economic decision makers still seeking to extract timber for profit. In as many words, Setiono (2007) describes the continued power of the politico-bureaucratic oligarchy to maintain the dominant position of the industrialist model against the pressures of the other networks. The second key area of IMF/World Bank implementation was the area of legality. Despite increasing pronouncements on the costs and dangers to the economy of illegal activity, the minimal notion of rule of law that was understood during the New Order was “essentially a political commitment to keep order and to not expropriate foreign investments” (Ohnesorge, 2003: 101). This commitment served the liberal industrial capitalist model and its patronage networks well during the New Order, albeit with debate over whether corruption and (lack of) rule of law were important at all. For IFI policymakers, post-crisis analyses firmly favoured key elements in the “good governance” approach, including the claim that rule of law and reduced corruption were crucial to economic development. The IFI approach to forest governance emphasised transparent regulations based on clear property rights and rule of law based on a strong legal system (see Table 2). In its messy implementation, however, establishment of clear property rights has faced the changing terrain of decentralised control, including a struggle between national

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and local governments, as well as increased demands by local communities and indigenous groups for recognition. Establishment of rule of law also has faced challenges from the politico-bureaucratic oligarchy. The question has become not whether law will be implemented but whose law will be implemented (Ohnesorge, 2003). For example, regional leaders challenged Prakosa’s soft landing because they wished to benefit from allocation power over permits, and hundreds of local permits were issued. Decentralisation, ironically but perhaps not surprisingly, dissipated support for the most challenging national agendas of forestry reform. Although social movement scholars observe that closed, centralised regimes are less amenable and thus less vulnerable to movement opposition, decentralised regimes may weaken the opposition through fragmentation into localised movements (Risse-Kappen, 2008). Unsure of their potential for influence in the reformasi period, NGOs became occupied with policy advocacy at the national level and provision of technical assistance to regional governments in areas such as taxation, accounting and monitoring. A further irony is that while decentralisation was promoted as a (potentially) more democratic and environmentally sustainable approach to resource management, it fits nicely with neoliberal market-led advances. That is, decentralisation does not automatically or technocratically translate into democatisation and truly accountable good governance (see Ribot, 2002; Hadiz, 2004, Colfer, 2004). While the neoliberal network seemed to have overwhelming power over its rivals, Seymour and Dubash (2000) observe that the IMF did not obtain sufficient “ownership” for its governance reform agenda among domestic actors. That is, the ‘needy’ domestic state was only seeking certain kinds of overseas support. As early as June 1998, shortly

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after Suharto’s resignation, IMF documents show mixed results on implementation (IMF 1998b). NGO support faded into disenchantment, as their input, too, was ignored by the state. Under Suharto’s successor President B.J. Habibie, the Minister of Forestry set up a reform committee to make recommendations to restructure the ministry and draft a new forestry law. The creation of the new national forestry law (UU 41/1999) included mention of input by NGOs but evaded the question of how and how much. The Community Forestry Communications Forum (FKKM), a loose network of researchers and activists (Nomura, 2007: 509) had been created to provide expert input into reform, but it faced a lack of transparency from the Department of Forestry. The reform committee’s recommendations were mostly ignored in the promulgation of a new government regulation on forestry (PP 6). Identifying the lack of responsiveness of the reformasi government to their demands to eliminate KKN from the forestry sector and provide local rights to forest land and resources, NGOs such as LATIN called to “reform the reformists” (Fay and Sirait, 2002: 132-133). Despite strenuous efforts to promote transparency of even basic logging data, for example, foreign consultants noted the continued opacity of the private sector (Brown, 2002).21 Another potential avenue of NGO input, an inter-departmental committee on forestry intended to support commitments made as part of the CGI meetings by coordinating forestry affairs with other government departments (e.g., industry and trade) was inactive – except when prompted to meet by foreign aid agencies (Rhee, 2006). While NGOs clamored in support of decentralised control of the forests, the department of forestry became concerned about regional government allocation of forest cutting

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licenses and sought to re-centralise control (Gellert, 2005). The recentralisation of forestry is an anomaly compared to the decentraisation of other sectors (Peluso et al., 2008: 391). After the closing of IBRA and the recapitalisation of the forestry related firms, the hopes of NGOs such as the Indonesian Working Group on Forest Finance (IWGFF) finally “faded into skepticism” (Setiono, 2007: 3). As a result, NGOs that were initially ambivalent returned to their oppositional stance – both towards IFIs and their imposition of neoliberal adjustment in Indonesia that perpetuated debt and towards the domestic state and its protection of business interests. In 2001, four NGOs (WALHI, INFID, FWI and KPSHK) concluded that the CGI process was failing and called for an immediate end to illegal logging and conversion of natural forests for plantations. Building on the spirit of the government’s commitment not to convert any more forests to plantations, the call for a logging moratorium on large-scale commercial logging advocated giving the forests “breathing space” (Down to Earth, 2001a, 2001b). However, the logging moratorium idea was widely regarded as unrealistic among policy makers and foreign advisors whose networks overlap in their emphasis on growth in the US$9 billion export sector. Facing their lack of power and divergence with the neoliberal governance network supporters, NGOs have somewhat diverged in their approaches. WALHI has continued to advocate a total moratorium, phased in over three years and applied for at least fifteen years. Some NGOs have mulled the possibility of forming a green political party to challenge the power of the politico-bureaucratic oligarchy directly.22 However, their dependence on foreign funders reluctant to support NGOs becoming too “political”, as well as their own lack of experience in the requisite sort of political mobilisation to

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build a party, have prevented this avenue from being pursued. Only the election of former Free Aceh Movement (GAM) rebel Irwandi Yusuf as Governor of Aceh in 2007 gave the moratorium some traction. In April 2007, Yusuf declared that there would be complete logging moratorium in Aceh, at least in part to prevent military operatives from continuing to gain from the illegal sale of timber. It is too early to evaluate how effective this ban will be, and public officials in Jakarta were quick to point out that Aceh’s post-war situation was unique. This policy direction came after years of armed conflict, and it may demonstrate that broad-based mobilisation and not just policy advocacy through transnational is a necessary condition to challenge the powers of the interests behind the liberal capitalist network supporting non-transparent and illegal exports. Meanwhile, well-organized and funded networks supporting neoliberal governance were not supportive of the anti-market tenor of the policy.

Persistent strength of industrial foresters’ governance model Industrial foresters resisted all efforts to “restructure” (i.e. downsize) their industries, whether pressures came from the IMF and World Bank, government officials and leaders, or critical NGOs advocating community and indigenous rights. Rather, they persisted in framing an industrial model that defined good governance in terms of legality of their access to and control of timber supplies and the successful domestic industrialisation of the forestry sector. Like the neoliberal good governance model, this model also relies on the legality of its operations, indicating the malleability of the legal basis (Ohnesorge, 2003). More generally, industrial actors and their network of supporters in government and the military have maintained dominance and created the

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failure of neoliberal reform efforts. Yet, due to pressures from rival networks to reform governance, the industrialists have improved their technical capacities while maintaining lack of transparency. As noted above, the neoliberal globalisation network took advantage of the conjuncture of the economic and political crises to undercut the power of the industrial oligarchy. However, market liberalisation began to be reversed when the log export ban was reinstated in October 2001. In December 2002, the industrial model was supported by a renewed system of regulation via a public-private partnership to revitalise the industry. The departments of trade, industry and forestry jointly created BRIK, the Wood Industry Revitalisation Agency (Badan Revitalisasi Industri Kehutanan), and the persistence of industrial growth in forestry without concern for democratic governance or neoliberal reform was assured.23 In practice, BRIK is led by industry officials, with little to no involvement by the government. All firms are required to hold a new licence (eksportir terdafter produk industri kehutanan or EPTIK) in order to export wood products. BRIK coordinates the collection of firm reports on wood consumption and log transportation based on documents that, critics note, are often forged or sold illegally. This data is collected and analyzed at a large and expensive facility in the private sector wing of the Ministry of Forestry building. Moreover, although BRIK officially reports to the Department of Forestry, government officials and foreign experts interested in transparency complain of a lack of reporting of the data that BRIK collects.24 There are some signs of lack of unity in the industrial network, although whether this represents an overall weakening is dubious. Analysts in the neoliberal network have

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emphasized that the era of one monolithic industry viewpoint supported by one authortarian leader has ended (World Bank 2006a). For example, some sub-sectors, such as saw mills and furniture producers, have enjoyed the end of Hasan’s dominance because vertical integration in the past prevented access to wood. At the same time, illegal logging has become an epidemic problem, and direct military involvement even inside national parks seems to have increased over the prior emphasis on providing security to legal logging operations (EIA/Telapak, 2002; McCarthy, 2002). Although a 2004 law required the military to end all business activities within 5 years, progress has been slow. These local networks of power are, if anything, less transparent than the industrial foresters, and they either lack the imprint of legal rights to the forest that the centrally based companies obtain and/or they rely on local political leaders for legitimacy. Overall, the large-scale industrialists networked in the capital continue to unite against any regulation that would limit their access to further supplies of timber and financing. They maintain secrecy in the face of calls for transparency. Moreover, they reject any mention of downsizing the industry. Restructuring has been reframed by the industrial association leaders as “revitalisation” (Suarga et al, 2004; Gellert, 2008). In this framing, both the “soft landing” policy of Minister Prakosa and the logging moratorium are rejected as dangerous to the Indonesian economy and its growth. If industry association leaders occasionally recognise that some downsizing and regulation may be inevitable, they add the caveat that government actions should be “proportional” (asal proporsional) – presumably to the power of the model’s supporters.25 The power of the model, to be sure, rests in profits, and industrialists have worked hardest to maintain their

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profits. The industry frequently blames illegal trade and decentralised control for their (increasing) difficulties in obtaining raw materials, which has led to some plywood factory closings. International and domestic NGOs supportive of building regional and sustainable trade as an alternative model have argued that illegal trade is immense, accounting for anywhere from 40 to 88 percent of Indonesian logging (Greenpeace, 2003). The industry finds allies on this point in the Indonesian government, which has made addressing illegal logging a priority. However, some of the illegal logging is clearly supplying the same mills as the previously legal supplies. The deeper problems in forest governance are structural. They are caused by the legal but destructive practices of the sector and their continued backers. For example, the BRIK-EPTIK system allows vast quantities of timber that is “technically illegal” but administratively legalised to enter into normal trade channels (Obidzinski et al., 2007: 533).26 Finally, it is worth noting that the government of Susilo Bambang Yudhoyono (SBY) and Jusuf Kalla placed illegal logging high on its list of national priorities after its election in 2004. Despite a series of operations against illegal logging, however, the big fish have not been reined in. In a recent and egregious case, Adelin Lis was tried for illegal logging but apparently helped out by a “magic letter” (surat sakti) from Minister of Forestry M.S. Kaban. The letter argued that Adelin Lis’s logging was incorrect but deemed it not a crime to be be prosecuted in the courts but, rather, the breaking of an administrative rule that should be sanctioned within the Department of Forestry. Impressively in this era of political reform in Indonesia, the Lis case was openly criticised by various members of civil society and the press. However, SBY himself did

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not intervene (see Jakarta Post, 2007; EIA/Telapak, 2007). The IFIs re-adjust While both NGOs and the IFIs may have faced a lack of state “ownership” of the reforms being pushed, the World Bank continues to consider “engagement” with the political elites in the national capital -- but increasingly also in Aceh and other regions -to be a sine qua non of its work in Indonesia. Now that the political opportunity of the 1997-98 crisis has receded and democratic elections have occurred, the leverage of the neoliberal globalisation network is lessened. Repeatedly, the Bank has reinvented itself and the necessity for its involvement in reforming forest governance in Indonesia (see Goldman 2005). In attempting to re-establish its presence in Indonesia, the Bank engaged in a series of public consultations in 2004 and 2005 with a variety of stakeholders from government, business, academia and activist groups. The meetings were held in several key provinces of Indonesia, recognizing the increasing role of districts in decisions over forest and other resource management issues. When the World Bank published a new forest strategy document in 2006, the position on governance had changed subtly. Rather than emphasizing privatisation and liberalisation, the document declared, “Forest governance is a tangible entry point for engagement on decentralisation and democracy, conflict and injustice, poverty and vulnerability” (World Bank, 2006a, 2006b). This position was confirmed by a Bank officer in Jakarta who took the position that he and the Bank were now interested in broader issues of social justice around the forest, but that in order to achieve these aims, a program palatable to the Indonesian government and timber industry was required.27 The Bank renewed its activities in forestry lending, as it asserted that the Department of

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Forestry was (finally) becoming “more open and responsive” with “progressive forces” in the Department who have thwarted ‘potentially damaging’ projects (World Bank, 2006b: 2).28 At the same time, however, the Bank contradicted this progressive approach by arguing that ‘poor forest governance damages the investment climate, rural economic potential, and Indonesia’s competitiveness and international reputation’ (World Bank, 2006b: vii). Thus, the Bank redefined governance by linking its arguments not only to renewed opportunities to “improve” Indonesia (Li, 2007) but also to a strategy of renewed economic growth and (foreign) investment. Controversially, in its synthesis of studies from the Department of Forestry, the Center for International Forestry Research (CIFOR) and a UK aid project (Brown et al., 2005), the Bank’s approach included investment in plantations. Rather than addressing how and why the beneficiaries of continued industrial accumulation had re-established their power in domestic politics, the Bank rejected a “status quo scenario” as simply irrational because it was projected to create a collapse of supplies by 2019. Instead, the Bank promoted the expansion of plantations to replace natural forests both for pulp and paper and solid wood products. Little thought seems to have gone into the political networks likely to seize opportunities in this expansion. Other difficult steps, such as gaining trade association assistance in improving transparency about its production, were recognised but not addressed. In sum, neoliberal governance reform was caught between the recalcitrance of the industrialist model and its powerful supporters and the weak and fragmented community support for the NGO bottom-up models. The lack of success of the IFI reforms was “predictable” as it repeated earlier failed attempts (Rhee, 2006: 234) and laid the ground

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for renewed efforts (Li, 2007). Yet reform was also supported by donor organisations and scientific research organisations, such as CIFOR. Even the government of Indonesia and the minister of forestry joined the rhetorical calls for reform, although internal divisions weakened the support. Prakosa’s soft landing was balanced by support for industrialists who blamed developed country consumer markets for causing the illegal trade problem (Obidzinski et al., 2007; Rhee, 2006: 260). His successor, Malam Kaban, and the government of President Susilo Bambang Yudhoyono have continued to be divided over the issue of production versus sustainability and more generally, between resisting neoliberal globalisation (e.g. by paying off IMF loans early in 2006) and accomodating it to attract foreign investment.

CONCLUSION Rival transnational networks with different access to resources and organizational capacities have battled over the terrain of forestry policy and practice in Indonesia for several decades. This paper has examined the contested terrain of these networks through several key periods. During the New Order, the external power of foreign capital and liberalizing networks was broadly reflected in a regime that was open to foreign capital and supportive of the United States in the Cold War. Yet, the limits of this external power were seen precisely in the forestry sector (and other extractive sectors), where domestic capitalists sought to capture benefits for themselves. The Asian financial crisis provided the political opportunity for this power to be challenged. At this conjuncture, due to widespread street protests against Suharto and withdrawal of elite support for his New Order, the regime collapsed. The neoliberal

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thrust of the IFIs was to transform it into a more fully neoliberal regime with minimally democratic government and a reliance on clear property rights and rule of law. This model garnered short-term support from the democratically oriented NGO networks in their single-minded focus on toppling Suharto. The NGOs that supported them, however, almost immediately tired of the lack of neoliberal interest in questions of social and environmental justice. Ironically, neither neoliberal good governance nor social and environmental justice have been achieved in Indonesia. Although the financial crisis and resignation of Suharto were useful to rival networks of reformers, the ideological thrust of fiscal stability for neoliberalisation of the economy took precedence for the IFIs. In other words, despite specific forestry conditionalities and the removal of Hasan from leadership of the forestry oligopoly, the IMF’s measure of success was not forest reform, let alone more difficult questions about agrarian reform of forest lands (Peluso et al., 2008). Since the IFIs were unwilling to push these social issues further and domestic movements have not strengthened sufficiently to do so, the power of domestic elites continued. This has happened even against the policies and publicly expressed desires of the national government to create more transparency and rule of law. The weakness of NGOs and the social and environmental justice model is less surprising than that of the good governance model. Although the TAN literature looks hopefully to NGOs as the seeds of civil society in both authoritarian regimes and burgeoning democracies, the cases of significant transformation are still rare. The shortlived possibility of cooperation between the NGOs and the IFIs occurred because their opposition has never been completely fixed (Eldridge 1995, 2005; Riker 2002). At

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particular historical moments, there is room for limited alliances between these two groups and their networks. In particular they can come together due to a common interest in transparent governance and democracy, but they part ways over how deep democratisation and social justice should go. Both governance perspectives and transnational advocacy scholars, however, need to pay close attention to the domestic context of efforts at social change. The more significant problem for NGOs is that a modicum of political success can create less political space for addressing structural inequalities. On the one hand, the neoliberal reformers are satisfied to have participation in very unobtrusive and unchallenging ways from NGOs. Demands for consideration of more political and economic issues, such as downsizing of industry or recognition of land rights, can be ignored. On the other hand, if a technocratically competant populist such as Thaksin in Thailand were to emerge, the role of NGOs and other supporters of social and environmental justice may be decreased (Kengkij and Hewison, 2008). More importantly, the discursive terrain of debate in Indonesia potentially poses a confluence of interests with not only the Indonesian government but the industrialists that still dominate the state. As in Thailand, nationalism has positioned itself in opposition to neo-liberalism (Kengkij and Hewison, 2008: 8-9). Opening to foreign investment and liberalisation of trade were criticized as against the national interest by all groups, thereby opening political space for assistance to more nationally-minded firms who would develop more domestic industries. In addition, although a Thaksin-like figure has not emerged in Indonesia, rural people continue to be blamed for their ignorance and ability to be manipulated by outsiders, including NGOs, to claim land and become involved in

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illegal logging operations (Li, 2007). In the 2009 presidential election cycle, Yudhoyono was criticized for his “neoliberal” choice of running-mate but it was hard not to be skeptical about the self-proclaimed populism of the retired generals opposing him. In order to achieve a more lasting transformation of the political economy, NGOs may need to be supplanted by political parties. Interestingly, in Indonesia, NGOs have not moved into parliamentary politics in the reform period (Nomura, 2007). Instead, they continue to be shaped by a legacy of depoliticisation and demobilisation of society (Lane, 2008). With large NGOs in the West continuing to provide financial assistance to most NGOs and constraining the NGOs from getting involved in politics, most continue to focus on the technical aspects of their activities. Indonesian bureaucrats, too, argue that NGOs should stay out of politics (Li, 2007: 176). The result is that NGOs display an “underlying and perhaps necessary ambivalence” toward political processes in Eldridge’s view (Eldridge, 2005: 165). Transnational networks favoring social reform – and the academics favoring them – also face limits in thinking about how to alter the class structures affecting production and distribution in a capitalist society. Without a political party that organizes struggles for social justice directy on the state’s terrain, expecting more from networks than conjunctural change at the pinnacles of power may be unrealistic.

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ENDNOTES 1

There is much debate about the relationship between NGOs and civil society and what

‘civil society’ means in a neo-liberalizing period. See Feldman (1997), Shefner (2007). 2

The beginning of the governance approach is traced to the so-called Berg Report (World

Bank, 1981). 3

The notion of “illiberal” states may raise confusion about the class (or neutral) character

of the state and the ability of some putatively outside actors to “capture” the state. I am grateful to the audience at a presentation of this paper for pressing me on this point. 4

Offe and Wiesenthal’s (1980) classic analysis of the two logics of collective action --

one for capital and another for working class movements -- is relevant to this point. In fact, since the new social movements are even more diverse, the unifying logic of capital’s action is relative more powerful. The caveat is that capital is also fractured across foreign-domestic and national-regional lines. 5

Local networks of power involved in illegal logging are clearly important and do not fit

neatly into these four models, in large part because they do not even pretend to promote good forest governance. These local networks also involve local military commands who sometimes act autonomously. I am thankful to a reviewer for raising this point, although it is difficult to address within one paper focused more on the relative power of external or international influences. 6

It is important to acknowledge that both NGOs and IFIs are ‘expert’ rather than

‘popular’ actors. I am grateful to Jon Shefner for raising the distinction between ‘expert’ organisations and actors and ‘popular bases’ of support, although I cannot address it fully here. On the role of expert knowledge, see also Rhee (2006).

49

7

Building on Sklair’s notion of a transnational capitalist class, Smith (2008: 244)

identifies a political fraction that would include the World Bank and also a technical fraction that would include forestry policy researchers and consultants. 8

Exactly how much room was left uncertain by the regime. Undoubtedly, there was more

openness than in Burma (e.g., Caraway, 2006). However, media carefully negotiated the risks of being shut down or censored by engaging in self-censorship. More generally, not only the killings of 1965 but also the ongoing violence of the New Order created widespread domestic fear (see Heryanto, 2006). 9

In explaining Indonesian NGOs, Eldridge distinguishes two kinds, self-reliant

community institutions (Lembaga Swadaya Masyarakat or LSM and institutions for developing community self-reliance (Lembaga Pengembangan Swadaya Masyarakat or LPSM). He observes that although they are not totally equivalent they are both essentially NGOs (Eldridge 1995: 12-13). 10

Lane (2008: 168) argues, “The New Order was already in political crisis – long before

the country was hit by the Asian economic crisis.” However, Lane is unusual in his argument that the PRD played a vital role in the final days of Suharto, although Boudreau (2004:228) credits the PRD and NGOs as being the “more organized” parts of the rising mobilisation. 11

Babb and Buira (2007: 73) argue that there has actually been a ‘mission push’ as the

World Bank and IMF persist with Washington Consensus style liberalisation even as economists largely move away from these recommendations. Also, the US government has pushed to add conditions related to money laundering and global terrorism.

50

Interestingly, researchers at CIFOR (Center for International Forestry Research) in Indonesia and in the IWGFF (Indonesian Working Group on Forest Finance) have also advocated money laundering laws as a tool to combat illegal and questionable logging practices. 12

Interestingly, all of the reports on improving governance, be they from the World Bank

or from other bilateral and multilateral institutions, or even the NGOs that comment on them and criticise them, present their approaches in lists of bullet points. This style is reflective of the discursive formation that emphasises problems amenable to linear and fixable solutions, as explored by Ferguson (1994). 13

WALHI (1994) increasingly turned to the courts in the late Suharto years, for example

challenging the right of the government to use Reforestation Fund revenue to support then-Vice President Habibie’s small aircraft project. 14

Author’s interviews with Teten Masduki, ICW 11/4/04, Elfian Effendi, Greenomics,

11/8/04, and Wahyudi, Department of Forestry, 11/11/04. 15

Author’s interviews, July 2006.

16

The position of CI as an ‘outsider’ group is acknowledged in their report, where they

accept World Bank officials’ viewpoint that, ‘proper stewardship and management of the forestry sector is first and foremost the responsibility of the nationals of the country and not that of outsiders (Lele and Gautam, cited in Sheng and Cannon, 2004: 2).’ 17

The author attended the Jakarta session, October 6, 2004.

18

Confidential sources inform me that some funding of NGOs came with specific

conditions forbidding involvement in partisan politics or mobilisations. 19

The CGI and its predecessor, the Inter-governmental Group on Indonesia (IGGI), had

51

been coordinating multilateral and bilateral aid and loans to the government throughout the New Order. The IMF lends to the Bank of Indonesia. 20

The Minister committed to eight steps: (1) a moratorium on the conversion of natural

forests; (2) closure of debt-laden industries; (3) elimination of illegal forest logging; (4) restructuring of timber processing industries; (5) recalculation of the value of forest resources; (6) linkage of reforestation programs with industrial capacity; (7) decentralisation of forestry administration; and (8) formation of a national forestry program. In November 2000, four more commitments were made by the government on (9) addressing forest fires, (10) revising tenurial rights, (11) making a forest resource inventory, and (12) improving forest management. 21

Only half of the large concessions reported their logging volumes to the Department of

Forestry. It is not only private sector data but also governmental data that have severe gaps. Author’s interview with David Brown, 12/3/04. 22

Author’s confidential interviews with NGO leaders, October 2004.

23

During 2009 revisions of this paper for publication, the Minister of Industry and Trade

Mari Pangestu revoked the authority of BRIK over export licensing. Further research is needed into the cause of this reversal. 24

Author’s interviews.

25

Author’s interviews with Apkindo and BRIK officials, 2004 and 2005.

26

Although there is insufficient space here for a full analysis, NGOs are divided on the

efficacy of voluntary trade regulatory approaches. Some, large international ones like WWF, WRI and TNC are attempting to gradually build sustainable trade networks. Others, inside Indonesia and internationally worry that FLEGT does not address deeper

52

problems of community rights, corruption, and the gap between supply and demand in the forestry industry. 27

Author’s interview with World Bank official, 7/18/2006.

28

Potentially damaging projects included those without professional standard feasibility

and impact studies, such as allocation of millions of hectares of forest land to a Chinese firm via negotiations with the Vice President.

53