In Kutai Barat, decentralisation has the potential to build up the physical infrastructure and industrial facilities of the district. Before Kutai was divided into three regions, most of the original districts development occurred within the area now encompassed by the district of Kutai Kartanegara, while the outer regions of Kutai Barat were more or less neglected. Following the partition of Kutai, the Kutai Barat government has the opportunity to focus on developing these previously neglected areas and ensuring that more funds are directed to building up local infrastructure. A Kutai Barat government is also likely to pay more attention to local people and to listen to the needs and concerns of the local population.

However, the Kutai Barat government faces many challenges in the years ahead as it has to work with limited infrastructure, poorly skilled government officials and little revenue. PT KEM planned to close down its operations in 2004 and PT LonSum had limited funds to continue its operations and build a crude palm oil processing factory. Because of this situation, the local government was being forced to find new ways of generating income from its natural resource base, particularly forest resources. An example of this was the new HPHH scheme that enabled local government to generate income and local communities to benefit from the district’s forest resource base. While this scheme may have been preferable to the former system whereby large HPH timber concessions were issued to conglomerates close to the Suharto family, the allocation of large numbers of HPHH permits resulted in increased social conflict and environmental damage. This was primarily because Kutai Barat’s district government did not have the skills, staff or expertise to manage or monitor the scheme in 2000.

In 2001, the Bupati of Kutai Barat heeded concerns raised about HPHH licences by NGOs and donors. The Kutai Barat government slowed down the issuance of these permits and decided to develop more transparent and accountable management strategies for balancing sustainable forest management with improved community welfare. These strategies sought to facilitate and develop community forestry mechanisms in order to promote more equitable forest resource exploitation. Nevertheless, problems did exist because district regulations formalising these new arrangements contradicted various central government forest regulations. Agreements between both levels of government were therefore needed to ensure that local government regulations promoting more equitable sharing of forest resources could be implemented and accepted by multiple stakeholders.