1. Can Decentralization Work for Forests and the Poor? Australian Centre for International Agricultural Research (ACIAR) Center for International Forestry Research (CIFOR) Australian National University and Hasanuddin University Presented at INDONESIA-ACIAR CONSULTATION ON FORESTRY 22 February 2007

2. Expected change due to the issuance of the revised law on regional governance (decentralization, UU 32/04); and deliberations of draft laws on relevant issues to forests (spatial plans, forestry laws, agrarian law) Findings and lessons from previous research and an external review of the previous project: the need to look further at claims on community lands and fiscal balancing / performance based budgeting system (incentive and disincentive mechanisms) Problems

3. Project objectives To analyze the consequences of the shift in decentralization policies on decision making (land use, fiscal issues and budget allocation) To define the extent to which district government can promote more inclusive decision making processes To promote more equitable and efficient system incentive and disincentives (fiscal balancing and performance based budgeting)

4. improved vertical coordination shifting perceptions on extent of authorities among different agencies as well as district vs province No significant impacts on local forest management (district head power to issue regulation is lacking, only related to NTFP etc.) But, intervention from the MoF still high (technical implementation unit, Law 41, Government Regulation 34) Efforts to increase accountability through performance based budgeting system are in place but there were unclear roles of different teams and agencies and procedure; lack of connection between the system and incentive to better develop forests (internal assessment) Summary of project findings

5. Provincial and district spatial planning has been better coordinated, but is still not well prepared and there are no incentives to do it right Despite the deficit (district forest expenditure exceeds revenue, 4 billion vs 270 million), the district government and parliament expressed commitment to sustain forests. However, central government provides no incentives for conservation Land encroachment by local people increased Customary rights remain an issue Despite the potential of local capacity to manage forests, there are no sound forest policies that would promote effective forestry decentralization

6. Priorities for further research (1) Study the role of devolved authority (village government) in managing village forests (hutan desa); and identify challenges and opportunities for sustainable and equitable forest management at local level Continue to look at the role of collective action among rattan farmers and small-scale rattan industries in accessing market (for a better price) Further study the district’s budgeting system in relation to the performance of the district government in promoting sustainable forest management

7. Priorities for further research (2) Explore and identify the central government polices that would provide incentives to better manage forests The impact of increased district fragmentation on land tenure, forest management and sustainability