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This chapter examines the initial impacts of decentralisation on forests and estate crops in the district of Kutai Barat, East Kalimantan. It is one of nine district-level case studies carried out during 2000 and early 2001 by the Centre for International Forestry Research (CIFOR) in four provinces: Riau, East Kalimantan, Central Kalimantan, and West Kalimantan. Fieldwork for this study was conducted in mid-2000 and the author has relied on secondary material and key informants to update some information.
Located in the upper region of East Kalimantan’s Mahakam river basin, West Kutai district was formed through the administrative division of the previous Kutai district shortly after the Habibie government issued Law No. 22/1999 and Law No. 25/1999 on the decentralisation of authority from the central government to district governments. As a newly formed district, Kutai Barat had limited infrastructure and revenue. Local government officials also had limited capacity to develop policy and sustainably manage natural resources.
Decentralisation did, nevertheless, provide opportunities for the government of Kutai Barat to secure a greater portion of the revenues generated by forests and mineral resources extracted within the district; and to build up the district’s physical infrastructure and industrial facilities. In 2000, the Kutai Barat district government issued large numbers of small-scale timber extraction licenses, known as Hak Pemungutan Hasil Hutan (HPHH) permits, to establish a district regulatory regime for forest exploitation. The district government also indicated that it would encourage investors in the oil palm industry to establish operations in Kutai Barat. The HPHH scheme resulted in widespread and accelerated deforestation in the district and attracted considerable criticism from a wide range of stakeholders, including NGOs, donors, provincial governments and the forest industry. The district government eventually heeded these concerns and set about establishing a more equitable and sustainable forest regime, which seeks to facilitate local development.