The forestry sector is an extractive industry with very high revenue loss in Indonesia. The findings of the Supreme Audit Agency (BPK) RI in 2010 claimed that the state loss due to illegal logging is Rp 83 billion per day or Rp 30.3 trillion per year. As much as 70-80% of log production in Indonesia is estimated to come from illegal timber. Meanwhile, the formal forestry sector contribution to Gross Domestic Product (GDP) is not more than the range of 1% or US$ 1.8 billion per year over the last decade, according to the Central Statistics Agency (BPS) in 2012.
The following analysis focuses on state revenues from timber harvesting. Largest share of Non-Tax State Revenue (PNBP) is derived from the Forest Resource Rent Provision (PSDH), the Reforestation Fund (DR), and Forest Utilization Permit Fee (IIUPH) levy, which are then distributed to the producing region. Three issues to be observed in this policy brief are: (1) the forestry sector revenue stream, (2) loss of forestry sector revenue, (3) the mechanism of transparency in the forestry sector.