Press release from CIFOR:
[quote]Payments to developing countries to reduce emissions from deforestation will only succeed if corruption and lack of financial management capacity are addressed, says new report.
BOGOR, INDONESIA (15 January 2009)—As discussions continue post Copenhagen on the future of the world’s forests, a new report from one of the world’s leading forestry research centres says that if proposed REDD (reducing emissions from deforestation and forest degradation) schemes are to succeed it is essential to address corruption, build financial management capacity and create transparent mechanisms for financial transfers.
“The prominence of forests in the Copenhagen Accord has demonstrated that REDD can become a reality,” said Frances Seymour, Director General of the Centre for International Forestry Research (CIFOR), headquartered in Indonesia. “But our new report underlines that we should be paying increased attention to the measurement, reporting, and verification of REDD-related financial flows. Many of the countries with the most remaining forest are also those with weak or evolving governance structures to control corruption. We need to build management capacity in order to ensure that REDD funds end up in the pockets of the people who are actually the ones protecting the forest. This doesn't mean we should stop REDD; the risks of corruption have to be balanced against the risks of no action, which are huge. We have to introduce REDD in phases so that capacity on the ground can catch up with the ambition.”
Tachrir Fathoni, Director General, Forestry Research and Development Agency (FORDA) at the Indonesia’s Ministry of Forestry, who is also a member of CIFOR’s Board of Trustees, is studying the report. “This research has highlighted the serious abuses that dogged forest management in the past,” said Fathoni. “We have made tremendous progress since then and we must continue to learn from this research about how to make the system more transparent, measured and monitored – not just in the REDD sector but in all our financial management. We call upon the international community to support this progress and invest in capacity building at all levels.”
The CIFOR study, Financial governance and Indonesia’s Reforestation Fund during the Soeharto and post-Soeharto periods, 1989–2009: a political economic analysis of lessons for REDD+, reveals details of mismanagement of the Indonesian Reforestation Fund, which was established in 1989 under former President Soeharto and which collected billions of US dollars in levies from timber concessionaires to pay for reforestation. The research found the fund had been subject to financial mismanagement and fraud between 1993 and 1998.
The CIFOR report recommends that Indonesia set up new mechanisms to monitor the money flowing into the country for REDD projects, and to strengthen existing oversight bodies such as the KPK (Indonesian Corruption Commission). Control of the Reforestation Fund has now been transferred to the Ministry of Finance, and anti-corruption bodies such as the KPK and the State Audit Board (BPK) have helped to improve the situation since the fall of Soeharto in 1998, said one of the report’s authors, Ahmad Dermawan.
“We have accepted the report’s conclusions that the Reforestation Fund was partly used for non-forestry purposes or subject to abuses,” said Fathoni, “However, we have learned a great deal since 1999 and have been in the process of developing and improving all aspects of financial governance. We cannot extrapolate the past to the future. We can and will change.”
REDD, as currently envisioned, could eventually transfer US$15-25 billion a year from developed to forest-rich developing countries. These funds would be used to implement policies to control the drivers of deforestation and degradation and to compensate forest owners for foregoing income available from converting forests to other uses. Emissions from the deforestation and degradation of forests are estimated to contribute 15-20 percent of total global emissions, more than the transportation sector contributes. But while REDD is seen as a crucial part of a new global climate pact, there is little consensus among decision makers and interest groups over how the mechanism should be implemented at the national level and below.
“If significant payments were to flow today, REDD programs would be challenged to meet the tests of effectiveness in reducing emissions, efficiency in channelling funds, and equity in distribution,” said Seymour. “Strong, vested interests are driving the conversion of forests to other uses. There are also profound disagreements about who should benefit from REDD schemes, in terms of rights and benefit-sharing among forest communities, private companies, and local and national governments. Those conflicts will take time, money, and political will to sort out. Capacity building at all levels is urgently required. Still, REDD is a vital tool for mitigating climate change and protecting forests. We must embrace these challenges to ensure that it is a success.”
Added Fathoni: “Indonesia is in the process of developing mechanisms for accepting REDD funds that will minimise the possibility of mismanagement. Unlike the case of the Reforestation Fund prior to 1999, in which the Ministry of Forestry was the sole authority, REDD fund mechanisms will involve multiple institutions, including the Ministry of Finance, the National Planning Board, as well as local government. Transparency will be the most important characteristic of the mechanisms. Indonesia is confident it is on the right track toward controlling drivers of emissions from deforestation and forest degradation through REDD implementation.”
Financial governance and Indonesia’s Reforestation Fund during the Soeharto and post-Soeharto periods, 1989–2009: a political economic analysis of lessons for REDD+ by Barr, C.; Dermawan, A.; Purnomo, H. and Komarudin, H., is available here: http://www.cifor.cgiar.org/Knowledge/Publications/Detail?pid=2886[/quote]