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World Development Vol. 33, No. 8, pp. 1345–1364, 2005
2005 Elsevier Ltd. All rights reserved Printed in Great Britain 0305-750X/$ - see front matter

doi:10.1016/j.worlddev.2005.03.004

The Shifting Natures of ‘‘Development’’: Growth, Crisis, and Recovery in Indonesia’s Forests PAUL K. GELLERT * CIFOR, Bogor, Indonesia Sophia University, Tokyo, Japan Summary. — This examination of Indonesia argues the Asian crisis marked a shift in the dominant discourse and practices of development from authoritarian state developmentalism to neoliberal globalism, exacerbating the environmental destructiveness of development. The analysis considers the ecological contradictions, first, of the ‘‘miracle’’ in Indonesia and, second, of the IMF-led structural adjustment in Indonesia. This program included unusual forestry sector reform conditions favored by nongovernmental critics of Suharto. However, the paper concludes that structural adjustment is part of the broader ascent of global neoliberalism, a model that pays scant attention to the increasing social and environmental costs of reliance on resource-based export growth.
2005 Elsevier Ltd. All rights reserved. Key words — Asian crisis, developmentalism, neoliberalism, environment, Indonesia, Asia

1. INTRODUCTION The Asian crisis that began in Thailand in July 1997 has been the object of tremendous academic and policy inquiry and has changed the terrain of the development debate in recent years. Hegemonic models of development have shifted perceptibly toward neoliberalism, supported ideologically by the ‘‘Washington Consensus’’ and exemplified by the World Bank and IMF structural adjustment strategy and action. 1 While the emphasis on economic growth persists, this shift encompasses a change in what political economic practices are considered to be acceptable or legitimate ‘‘development.’’ Beneath the grounds of this shift lie deeper questions about the definition of development and social relations with nature. 2 During the precrisis period in East and Southeast Asia, there was important, albeit limited, acceptance of a developmental state role in the transformation of national economies (e.g., World Bank, 1993; see also Wade, 1996). Postcrisis, however, even in Asia, the legitimate role of the state in the developing world has (finally) been circumscribed. This ideologically circumscribed role includes limited areas of governance of the economy in the service of globalized capitalism, such as constructing

‘‘comparative advantage’’ (see Bernard, 1999; Glassman & Carmody, 2001). Importantly, this shift was not a sudden, worldwide change, but with the debt crisis in Latin America and Africa, it had been increasingly prevalent over the past two decades. Historical periodicization is no easy matter, but a number of scholars date the shift to the 1970s, the end of the gold standard, and the beginning of a decline in US hegemony (Arrighi, 1994; McMichael, 2000). At the same time, national fractions of capital, especially those who do not benefit from the liberalization of the economy, as well as domestic and transnational oppositional groups from NGOs to indigenous rights groups to labor unions, have resisted certain aspects of the shift. * I am grateful for helpful comments and support provided by Shelley Feldman, Iwan Jaya Azis, and the Southeast Asia Program of Cornell University. I also received valuable criticism from reviewers, especially reviewer 1, for which I am grateful. Thanks are due to Lee Poh Onn and Hock Guan from the Institute for Southeast Asian Studies in Singapore and Steven Wolf from the Department of Natural Resources, Cornell University, for the opportunity to present and get feedback on this paper. All remaining errors are mine. Final revision accepted: March 4, 2005.

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This shift in the framing of the state’s proper role in ‘‘development’’ has been accompanied by a shift in the natural resource or material base of development—what might be called the nature of development. Primary commodity exports, which for decades had been one of the defining characteristics of Third World development and, before that, of colonial development, appeared to be declining in the ‘‘miracle’’ economies of Asia. In part, I argue below, this decline was an illusion. Although their contribution to the national economies of the region was overshadowed by the growth of manufacturing of textiles, shoes, automobiles, and computer components, natural resource exports did not experience an absolute decline. Nonetheless, the relative decline enabled advocates of the dominant models of development to ignore almost completely the enduring and crucial role of nature in development, as both source of raw materials and sink for pollution (Barham, Bunker, & O’Hearn, 1994; O’Connor, 1994; Schnaiberg, 1980). By ‘‘ignoring’’ nature, I mean that the models, first, deem natural resource exports as a transient phase in development trajectories that will move, it is assumed, sequentially from such primary exports to industrialization and eventually to advanced service sector-dominated economies. Second and equally important, the detrimental effects of increasingly large-scale resource extraction have been ignored. In this paper, I address the contemporary shifts in definitions and criteria of ‘‘development’’ as evidenced in the Southeast Asian ‘‘moment’’ of the late 20th century crisis. I intend to bring nature to the foreground, demonstrating that natural resource extraction has always been crucial to development even as it has figured differently as limiting or enabling features of capital accumulation at the national level and in the global political economy (see Boyd, Prudham, & Schurman, 2001; Bunker, 1992; Bunker & Ciccantell, 2003). An examination and comparison of the political economy of Indonesia and its forest sector during the ‘‘miracle’’ years and since the onset of the crisis in 1997 serves as the empirical basis for an analysis of the ecological contradictions of both precrisis authoritarian state developmentalism and postcrisis structural adjustment and neoliberal globalism. Although there has been an outpouring of academic and policy attention to the crisis, little of it has veered from purely economic analysis and, following that, political analysis

(see Pempel, 1999) to examine the environmental implications of crisis and recovery. 3 Yet it is important to recognize the enduring importance of nature to development overall and for particular regions and social groups (McCarthy & Prudham, 2004). Natural resource extraction and other ‘‘nature-based industries,’’ including agricultural and tree plantations play a significant role in the world’s economies (see Boyd et al., 2001). They are also important to the formation of hierarchical relations among regions and countries (see, e.g., Bunker & Ciccantell, 2003; Bunker & O’Hearn, 1993). Thus, although rarely emphasized in characterizations of the growth and expansion of manufactured exports, including global commodity chains approaches (Gereffi & Korzeniewicz, 1994), natural resource exploitation was crucial to the so-called miracle (see Bello & Rosenfeld, 1990; Burkett & Hart-Landsberg, 2000). There are important and striking differences between authoritarian state developmentalism and neoliberal globalism. In the former, the state takes an active and (domestically) legitimate role in industrialization strategies. As debates about the East Asian ‘‘miracle’’ attest (Wade, 1996; World Bank, 1993), both normative opponents and proponents agreed that the state was playing a significant role. Also, the project of development was defined nationally as part of postcolonial nation-building and national market construction. In the forestry sector of Indonesia, for example, successful industrialization and export of plywood and promotion of tree plantations were promoted as developmental even if the benefits accrued to a narrow band of politically well-connected firms. There is a nuanced difference: while the dominant discourse on development stressed the transition to manufacturing, domestic elites in Indonesia described the success of resourcebased industries in similarly developmentalist terms. Neoliberalism, by contrast, is identified by market-based methods of allocation and the removal of the state from decisions about industrial strategy (see Peet & with Hartwick, 1999). Although difficult to define, neoliberalism ‘‘stands for a complex assemblage of ideological commitments, discursive representations, and institutional practices, all propagated by highly specific class alliances and organized at multiple geographical scales’’ (McCarthy & Prudham, 2004, p. 276). It also fits with a globalist project of economic governance that

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emphasizes efficiency over equity and global markets over projects of nation building. By focusing on the shift toward neoliberal hegemony in a particular historico-geographical location, as McCarthy and Prudham have recently suggested, we can unpack the specific ways in which, ‘‘Neoliberalism entails the construction of new scales (Ôthe global market’), shifting relationships between scales (Ôglocalization,’ the alleged hollowing out of the nationstate), and engagement with many scale-specific dynamics’’ (McCarthy & Prudham, 2004, p. 279). The location of interest here is Southeast Asia, specifically Indonesia, where the Asian crisis was a pivotal conjuncture in the history of liberalization. One should recognize that this history is longer and more complex with perennial tension between the so-called technocrats (sometimes dubbed the Berkeley Mafia) and economic nationalists (such as German trained B.J. Habibie, who later became President) (e.g., Bresnan, 1993). In the 1980s, the drop in global oil prices, increasing debt payments, and pressures from international financial institutions (IFIs) led to export orientation via deregulation and financial liberalization, including currency devaluations (in 1983 and 1986) and banking sector liberalization (in 1985). Yet, Azis observed, ‘‘[S]ince the 1960s, Indonesia has never had the need to submit to IMF conditionality’’ (Azis, 1994, p. 392). In 1997–98, Indonesia appeared to submit fully. 4 To be sure, as became clear in subsequent months and years, the submission was neither permanently nor completely implemented. The post-crisis trends are toward continued and increased reliance on natural resources, especially in the countries of Southeast Asia (see Jomo, 2000). Viewed through a macrosociological lens, as neoliberalism spreads, there is a possibility of the beginning of a return to a colonial division of labor wherein Third World locations specialize in resource-based export niches, with financial control and benefits accruing to external firms. More than a temporary response to a crisis that included contraction of other sectors, this possibility implies what Llambi (1994) earlier and in the context of the Latin American crisis called a ‘‘backto-the-future’’ scenario (see also Akyu¨z, 1998). By enabling the conditions for and accepted practices of capital accumulation to be resolved not only domestically but also more importantly, globally, such a scenario helps to resolve global capital’s crisis (Bernard, 1999; Glassman

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& Carmody, 2001; Palat, 1999). My argument here combines two comparisons, and sometimes, they are difficult to untangle: the temporal comparison of periods before and after the crisis and the substantive one between domestic and global definitions and practices of development. In Indonesia, following the crisis, the move toward neoliberalism translates into freer trade and foreign investment regimes and the ‘‘creative destruction’’ of overprotected national industries. Whereas the authoritarian state of Suharto’s New Order attempted to bolster its legitimacy through job creation, poverty alleviation, and industrialization, neoliberal globalism implies fewer or no constraints on the plunder of resources, at least until market pressures signal the need for producing new supplies. In brief, neoliberalism implies no necessary ‘‘growing up’’ from primary commodity exports, or more generally no national ‘‘development’’ -at least not with state assistance. In this context, Indonesian timber, palm oil, and pulp and paper all present opportunities for global accumulation. Moreover, given the paucity of domestic capital during the crisis and reforms aimed to reduce barriers to foreign investment, these opportunities should be relatively more available to foreign capital. That is, one can deduce that in a period in which domestic capital experiences a crisis, marked by bank restructuring and neoliberal reforms such as the creation of ‘‘free markets’’ (e.g., for logs) and opening of foreign investment (e.g., for palm oil), more opportunities will accrue to importers and foreign sources of capital than domestic Indonesian ones. Attracting mobile (foreign) capital has long been the game in structurally weak locations such as Indonesia (Winters, 1996), and economic recovery has been slow since the crisis in part because foreign investors have stayed away from Indonesia longer than other parts of East and Southeast Asia. 5 Despite the differences in ideology and practice, however, there are important continuities across the models and, thus, periods in Indonesia. In both periods, the dominant models of development marginalize nature discursively while, at the same time, depending crucially on the exploitation and degradation of forestbased resources and displacements of social groups living near these sources of growth and accumulation. Rather than altering these relations fundamentally, the ecological and

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social contradictions of such a development under a neoliberal regime may be even more pronounced and uneven than during the era of state developmentalism. This continuity of exploitation and commodification of the environment is fundamental, and if these different models carry important continuities, we may need to push our analysis further in order to explain why this might be so. Ecological marxists, for example, have given us some suggestions. O’Connor (1994) has argued that capitalism is simply unsustainable because it does not reproduce the ‘‘conditions’’ for further production and accumulation. Others, such as Bunker and his colleagues (Barham et al., 1994; Bunker, 1992, 2003; Bunker & Ciccantell, 2003) have linked world-systems analysis to recognition of the importance of biophysical characteristics of raw materials commodities in shaping markets. In their analysis, one is able to see how the conjuncture of crisis-induced structural adjustment exacerbates longer-term tendencies of resource extraction in an unequal world economy. One additional continuity is that, in both periods, the environment and its uneven degradation have become important sources and arenas of political opposition. The dominant national-level model of Suharto’s New Order was increasingly challenged from ‘‘below’’ and from the periphery by a ‘‘vernacular’’ model of Indonesian development (Dove & Kammen, 2001). While the focus here is on shifts in dominant discourse and practices and their material implications, oppositional environmental NGOs and other groups have been working hard to identify what and especially who they are fighting against in the post-Suharto period. Such struggles are vital to debates about alternative visions of development. The remainder of the article is organized as follows: In Section 2, the tenuous definition of development and the underexamined ecological contradictions of the Asian miracle are probed, highlighting the importance of the forest sectors to Indonesia’s developmental ‘‘success.’’ In Section 3, the Asian crisis and the shift (back) in the dominant discourse to neoliberalism is examined. I focus on how this shift is reflected in the actual practices of structural adjustment and the emphasis on recovery through exports from three interrelated forestbased subsectors: logging, pulp and paper, and palm oil. While the future remains uncertain, I conclude that trends are foreboding for peripheral ecosystems and social groups in

Indonesia. This empirical conclusion buttresses the analytical argument that neoliberal ascent in postcrisis Indonesia, to the degree it is achieved, implies discursive shifts but material continuity in relation with ‘‘nature.’’ 2. THE ASIAN ‘‘MIRACLE’’ IN INDONESIA (a) Tenuous definitions and ecological contradictions ‘‘Except in abnormal periods of turbulence, growth is a natural state of affairs.’’ (Hill, 1996, p. 10) ‘‘The drive to exploit labor and the environment for growth is an essential feature of capitalism and this drive is arguably worsened by the export-led development strategy.’’ (Burkett & Hart-Landsberg, 2000, p. 173)

The first step in understanding the shift in development paradigms revealed through the Asian crisis is to review the situation during the ‘‘miracle,’’ focusing on explanations for and understandings of success and overlooked aspects of its environmental underside. Despite efforts to attribute Asian growth to getting the fundamentals ‘‘right’’ through fiscal and monetary discipline and openness to foreign investment and trade, revisionist (e.g., Amsden, 1989; Wade, 1990) and regional political economy explanations (Bernard, 1999) challenged neoliberal accounts at the height of the growth period in the late 1980s and early 1990s. At the same time, although largely ignored, the environmental underpinnings of the developmental model were weak and threatened the legitimacy of the political order (MacIntyre, 2001). To briefly recapitulate, in the 1980s, during Latin America and Africa’s ‘‘lost decade’’ when the debt crisis led to widespread economic contraction and IMF-led structural adjustment programs (SAPs), Asia experienced unusually high rates of growth. The ‘‘true miracles’’ (Booth, 1999) of Indonesia, South Korea, and Thailand not only achieved high growth rates for over three decades but also started the period with a much lower GDP per capita. This growth transformed them from the ‘‘basket cases’’ of the 1960s into the darlings of the international development and finance community in the 1990s—until the crisis returned them, or especially Indonesia, to the ‘‘basket case’’ status (Pincus & Ramli, 1998). Indonesia’s economy experienced a ‘‘remarkable transformation’’ (Hill, 2000, p. 3) after

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Lt. Gen. Suharto’s ascension in 1966 (Hill, 2000, p. 3) with an annual average economic growth of 6.5% for three decades. In addition, while Indonesia benefited from the early 1970s oil boom as Asia’s only member of OPEC, the ‘‘Dutch disease’’ risks of distortion of the economy associated with oil booms were largely averted in Indonesia (Auty, 1987; Gelb & Associates, 1988). The ‘‘Berkeley mafia’’ of technocrats were touted for tempering the inflationary risks of the boom through orthodox macroeconomic policy and for promoting investment in agriculture, including the creation of self-sufficiency in rice by the mid-1980s (see, e.g., Bresnan, 1993). Also, President Suharto was praised by some for ‘‘continuing success in poverty alleviation, even during the period of painful macroeconomic stabilization occasioned by a halving of world oil prices’’ (Hill, 2000, p. 4; for a critical perspective, see Winters, 1995, December). Last but not the least, the structure of the economy moved away from services and agriculture and toward manufacturing. By the late 1980s and early 1990s, Indonesian manufacturing exports were booming, having risen from 3% of exports in 1980 to 50% in 1992 (Hill, 2000, p. 82)! There was little dissent about the existence of a ‘‘miracle’’ in this combination of growth, industrial transformation, and some measure of equity gains. The neoliberal interpretation of the Asian ‘‘miracle’’ as relying on stable, noninflationary and open economic environments had been seriously challenged by the end of the 1980s, however. A close analysis of Japan, Korea, and other states showed how deeply their state leaders and ministries (e.g., MITI) were involved in developing industrial capabilities and competitive advantages through selective investment and trade subsidies. These states were able to ‘‘pick winners’’ and then, over time, ‘‘discipline capital’’ to compete internationally (Amsden, 1989; see also Chibber, 1999). In addition, historical analyses recounted the role of Japanese colonialism and land reform in laying the social foundations and state capacity for industrialization in Korea and Taiwan (e.g., Kohli, 1994). Regional and global political economy pointed to the importance of Cold War aid flows and the conjuncture of the 1985 Plaza Accord’s Yen revaluation (endaka), as well as falling profit rates and deindustrialization in the core global economies since the 1970s, in creating huge financial flows to Asia and profitable opportunities for Asian manufacturing exports (Bernard, 1999; Glassman &

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Carmody, 2001). There were significant variations among countries, such as the greater technical capacity and relatively autonomous discipline that governments were able to assert over firms in Japan, Korea, and Taiwan compared to the more ‘‘clientilistic’’ patterns of Malaysia, Thailand, and Indonesia (Palat, 1999, pp. 13–15; Woo-Cumings, 1999, pp. 16– 19), but even in the latter cases, a considerable degree of state interventionism was important (Rock, 1999; Jomo, 1997). In the end, the World Bank (1993) was forced to acknowledge the role of the state—if only partially and grudgingly (see Wade, 1996)—in constructing the growth and manufacturing success of the high-performing Asian economies (HPAEs) of East and Southeast Asia. 6 Dominant practices and also debates on the manufacturing miracles of Asia largely ignored the environmental underside of that miracle. 7 When such aspects were considered at all, they were understood as unavoidable ‘‘externalities’’ of growth or short-term costs of ‘‘development’’ that could (and should) only be addressed later—after growth (Woodhouse, 2003). In this acceptance of environmental Kuznets curve assumptions, debate about the possible environmental trade-offs of growth, let alone alternative definitions of what (sustainable) development might mean, was precluded. The position taken here, by contrast, is that the uses and abuses of the environment were vital to the production of the ‘‘miracle’’ and that a full accounting might lead to a redefinition of the miraculous years, as well as the current possibilities. 8 In a more complete rendering of the developmental model of the ‘‘miracle,’’ the role of nature would figure prominently. It would do so in terms of both the importance of primary exports from natural resources and agriculture to economic growth and also the negative environmental consequences of the growth. Taking the latter first, there was a broad urban bias that the governments of Asia engaged in by heavily emphasizing industrial manufacturing exports. On the one hand, this bias ‘‘sacrific[ed] agriculture on the altar of export-oriented industrialization,’’ penalizing agriculturalists with declining prices (Bello & Rosenfeld, 1990, p. 95; see also Hart, 1998). On the other hand, populations in the urban megalopolises of Seoul, Bangkok, and Jakarta suffered from serious water and air pollution due to industrial waste and high concentration of vehicles amid weak regulations on emissions (Dauvergne, 2000; World Bank, 1999).

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One of the most striking environmental undersides of the Asian miracle, especially in Southeast Asia, is deforestation. The World Resources Institute asserts that worldwide, ‘‘commercial logging poses by far the greatest danger to frontier forests. . . affecting more than 70% of the world’s threatened frontiers’’ (WRI, 2000). While smallholders also contribute, the largest portion of deforestation in Southeast Asia is attributable to logging and land clearing for large plantations. In Indonesia, by the mid1990s, best estimates of deforestation were in the (wide) range of 0.6–1.2 million ha per year (Potter, 1993; Sunderlin & Resosudarmo, 1996 (December)). Often the dynamics of depletion of extractive commodities have cumulative environmental and social effects (see Bunker, 1984). For example, logging and deforestation likely contributed to the damage from floods in Thailand in 1989, the Philippines in 1991, China in 1998, and Indonesia (North Sumatra) this past year. 9 Such dynamics also link successive cycles of extraction (Bunker, 1984) as logged over and ‘‘degraded’’ forest lands have frequently been reclassified for conversion by clear cuts for the establishment of plantations for pulp and paper or palm oil. Despite changes in the structures of the Southeast Asian economies, there continued to be significant absolute reliance on natural resources and the agricultural sector. While the percent of domestic GDP in the agricultural sector had declined by 1991 to less than 20% in Indonesia and less than 15% in Malaysia and Thailand, the absolute contribution of the

sector continued to rise to US$ 23 billion in Indonesia, US$12 billion in Thailand, and US$7 billion in Malaysia (see Table 1). In Malaysia, crude oil, palm oil, tin, and rubber provided over 50% of export earnings in the mid-1990s (FAO, 1997). While analysts hailed the importance of electronics and other low wage manufacturing exports, simple downstream processing in resource-based industries contributed substantially to the manufacturing growth in Southeast Asia (Burkett & HartLandsberg, 2000; Jomo & Rock, 1998). In Indonesia, natural resource processing industries increased eight times from 1970 to 1990, constituting 11% of the total GDP in 1990 (World Bank data cited in Barber, 1997, p. 32). In almost every year in the decade from the late 1980s to 1990s, plywood was the leading nonoil and gas export, and although it peaked in 1993, it was only overtaken by pulp and paper in 2000 (FAO, 2004). 10 The global praise for Indonesia as a high performing Asian economy or HPAE (World Bank, 1993), therefore, must be tempered by acknowledgment of the continued importance of oil, gas, and processed raw materials to Indonesia’s industrialization, to domestic accumulation, and to the distribution of wealth through patronage. Large scale resource exports began with the New Order’s first legal acts in 1967, which opened the country to foreign investment and the forests of Indonesia’s Outer Islands to logging for export. Indonesian log exports boomed in the 1970s with annual volumes exceeding 20 million cubic meters

Table 1. Contribution of agriculture to GDP in Southeast Asia, 1979–2001 1979

1981

1991

2001

Indonesia GDP (US$ bn) % Agriculture Agric GDP (US$ bn)

55.1 27.3 15

92.5 23.4 21.6

116.5 19.5 22.7

145.3 16.4 23.8

Malaysia GDP (US$ bn) % Agriculture Agric DP (US$ bn)

21.6 24.4 5.3

25.5 21.4 5.5

49.1 14.4 7.1

87.5 8.4 7.4

Thailand GDP (US$ bn) % Agriculture Agric GDP (US$ bn)

27.4 24 6.6

34.8 21.4 7.4

98.2 12.6 12.4

114.7 10.2 11.7

Source: Country at a Glance Tables (‘‘Indonesia at a Glance,’’ ‘‘Malaysia at a Glance,’’ and ‘‘Thailand at a Glance’’), available at www.worldbank.org/data/countrydata/countrydata.html (accessed January 8, 2003). Notes: 2001 data are preliminary estimates. Agric GDP calculated by author as (GDP) · (% Agriculture).

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and export earnings of over US$1.5 billion (Gillis, 1988, Table 2.3, p. 54; see also Dauvergne, 1997; Ross, 2001). Resource-based industrialization accelerated after the 1982 oil price decline when nonoil exports were promoted by the government (Hill, 2000; Winters, 1996). 11 The New Order government, in alliance with largely Chinese–Indonesian firms, moved to industrialization of downstream production of plywood (Dauvergne, 1997; Ross, 2001). A joint ministerial decree that banned log exports by 1985 and financial subsidies led to plywood processing mills to increase fivefold to 101 by 1985 and to 132 by 1990, with a capacity of 12.6 million cubic meters (Barr, 2001). Exports grew from less than 1 million cubic meters in 1980 to over 9 million cubic meters in the early 1990s, amounting to about 80% of world trade in tropical plywood (Dauvergne, 1997, p. 78, Table 9). Forest-based exports (plywood, furniture, and pulp) totaled more than $9 billion per year in the mid-1990s (World Bank, 2001, p. 6). During the state developmentalist period, concentration of ownership and power in the plywood sector increased over time under the tight organizational control of Apkindo (the Indonesian Wood Panel Association) and its leader and Suharto confidant Mohamad (Bob) Hasan. Foreign operators were pressured out, partly by state regulations requiring vertical integration from forest concession to plywood processing mills. Apkindo took control over export destinations, quantities, and prices, and sanctioned companies that attempted to evade its power (Barr, 1998; Dauvergne, 1997). Furthermore, Hasan leveraged domestic organizational control into a significant market share in Japan and other important markets (Gellert, 2003). Disproportionate benefits accrued to Hasan himself, resulting in complaints from importers and, on rare occasions, Indonesian exporters (Barr, 1998; Lingga, 1994). It was this personal, monopoly market power that the IMF helped to dismantle in 1998, but the sectoral dynamics and structures of accumulation beneath that power were not transformed. When acknowledged, the environmental degradation of state-capitalist industrialization was justified by political and economic leaders of East and Southeast Asia as the ‘‘price of growth.’’ For example, Prime Minister Mahathir of Malaysia complained of those who would deny Asians the ‘‘right’’ to develop by felling the forest since, he argued, the United States and European countries had done the

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same in the past (see Sachs, 1992). In Indonesia, the role of the timber sector was similarly supported by a discourse of national development as seen in the Ministry of Forestry’s broad claims: The logging industry is a champion of sorts. It opens up inaccessible areas to development; it employs people; it evolves [sic] whole communities; it supports related industries. . . .It creates the necessary conditions for social and economic development. Without forest concessions most of the Outer Islands would still be underdeveloped. (FAO/GOI, 1990: also quoted in Down to Earth, 2002)

The discourse of development evident in this statement includes the two elements identified earlier: a sequential understanding wherein logging is an initial and necessary step on the road to ‘‘development’’ and a downplaying of environmental and social costs which are assumed to pale in comparison to the gains. The gains, moreover, are constructed as general and the costs as restricted to isolated and primitive communities (see Dove & Kammen, 2001; Ferguson, 1994; Li, 1999). To be sure, such positions are common among the world’s political and economic leaders, as well in most economic theories, but that neither makes them correct nor morally superior (see Burkett & HartLandsberg, 2003). The presumed definition of development as modernization by industrialization with its assumption that logging areas and the people who reside there are ‘‘marginal’’ and ‘‘backward’’ does not allow space for consideration of alternative definitions of development (Dove & Kammen, 2001; Fried, 1995; Tsing, 1993). 12 And lest the argument here be construed as an effort to ‘‘deny’’ Indonesia her right to develop, it is worth noting that these positions were not universal within Indonesia at the time. They were challenged by environmental NGOs at least since the late 1980s (see, e.g., SKEPHI, 1992b; WALHI, 1995). In addition to the discursive justification of ‘‘development,’’ the very growth and domestic accumulation of the Asian ‘‘miracle’’ in Indonesia afforded leaders the financial resources to expand into other forest-based sectors. 13 First, in the late 1980s, ostensibly in response to growing signs of forest degradation after 15 years of logging (FAO/GOI, 1990; IIED & GOI, 1985), the government began the promotion of industrial tree plantations (hutan tanaman industri or HTI) for the pulp and paper industry, with capital support from IFIs and the government, including interest-free loans from the so-called Reforestation Fund (Barr,

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2001; Gellert, 1998a; WALHI, 1995). 14 Over $15 billion of international investment poured into the sector through loans, public listings (IPOs), and bond offerings (Matthew & van Gelder, 2001), and by 1997, installed capacity of pulp and paper and board production had increased over sixfold to 3.9 million and 7.2 million tons, respectively, (Barr, 2001, pp. 28– 32). Pulp and paper exports from Indonesia increased an astounding 1,117% in the last decade, surpassing Brazil in 1998, and further expansions were planned (ITTO, 2001). Second, palm oil plantations had unprecedented expansion in the 1990s. Crude palm oil (CPO) production doubled from 1.2 million tons in 1985 to 2.4 million tons in 1990; doubled again by 1996 to almost 5 million and exceeded 5 million from 1997 (Casson, 1999). While domestic consumption of palm oil for cooking is extremely important, CPO became a valuable foreign exchange earner. In 1997, exports of almost 3 million tons of palm oil earned $1.4 billion, accounting for 31% of agricultural exports and 3.5% of nonoil and gas exports (Casson, 2002, p. 223). The ‘‘success’’ of New Order developmentalism was beset by growing ecological and social contradictions and, increasingly, voices of criticism. Overcapacity in the plywood mills created a ‘‘structural timber deficit’’ (Barr, 2001) that reached 40 million cubic meters by 1997 and 57 million in 1998 (World Bank, 2001, p. 22). 15 The export industry was buffered against the short- to medium-term effects of depletion through a combination of state and private firm actions. State regulations and lack of state capacity to monitor logging favored the plywood industry (Gellert, 1998b; Kartodihardjo, 2002). Firms responded to depletion by increasing the number of species harvested and technological innovation at the mills. The most crucial response was to increase the source of raw materials through permits to clear cut the forest via IPK (ijin pemanfaatan kayu or wood use permits) logging. By 1994, IPK cutting equaled 15% of the legal harvest in East Kalimantan province (Gellert, 1998a); by the end of the decade, it accounted for ‘‘roughly 40%’’ nationally (Barr, 2001, p. 44). The overriding interest in obtaining raw material from natural forests, rather than plantations, is evident in the low planting levels: about 2 million of the almost 9 million ha of allocated land for HTI development and about 4 million of 7 million allocated for estate crop plantations (FWI/ GFW, 2002, p. 23).

Not surprisingly, land clearing exacerbated the negative impacts on the millions of Indonesians who live in and rely on the forests for their livelihoods. While this clearing may have provided opportunities for newcomers, groups living in and around the forest logging concession areas were provided, at best, with minimal compensation (Fried, 1995) and occasional employment. 16 The social inequities of New Order development were addressed through a combination of ‘‘a powerful coercive apparatus with potent state-centered narratives on national unity, anti-communism, Pancasila, and national development’’ (Berger, 1997, p. 335; see also Heryanto, 1988). The ‘‘trickle-down’’ notion of growth slowly bringing benefit to everyone is clear in the notion of ‘‘left behind villages’’ (desa tertinggal) needing to be brought into normative development trajectories (Dove & Kammen, 2001). Land clearing, especially for palm oil, was also implicated in the vast forest fires in 1998 (Barber & Schweithelm, 2000; Gellert, 1998a). The New Order made any questioning of the model illegitimate. The developmentalist model was, nonetheless, criticized by NGOs and activists for its environmentally unsustainable and socially damaging logging practices (see, e.g., SKEPHI, 1992a, 1992b) and promotion of industrial tree plantations (WALHI, 1995). Due to the constraints imposed on them, however, NGOs made environmental critiques of the New Order on the technocratic and legal grounds of the developmental state, such as the low levels of economic rent appropriated in the timber sector (Ahmad, 1992; WALHI, 1991) and misuse of the Reforestation Fund to fund ‘‘white elephant’’ projects (WALHI, 1994). 17 In participating in the technocratic discourse, (some) NGOs thus joined in the broader construction of development as an apolitical, technical problem, rather than a question of political rights and struggle (Ferguson, 1994). 18 In the last years of Suharto’s tenure, critics increasingly focused on the corruption, collusion and nepotism (korupsi, kolusi dan nepotisme, or KKN) in the forest sector, from the allocation of logging concessions, tree plantation, and palm oil lands to the personal power of Hasan over exports and accumulation. At the same time, thousands of local protests, and conflicts in the forests were suppressed (Fried, 1995; Human Rights Watch, 2003). Violence came from the military, which has served as security force for firms while also maintain-

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ing direct ownership of timber operations through its yayasan organizations (see Ascher, 1998). Suppression occurred as well via the ‘‘unrelenting dissemination of an ideology which denies the legitimacy of opposition... as beyond the pale of the Indonesian national character’’ (Berger, 1997, p. 341). The state’s daily practices further blocked the flow of unsavory information, such as about conflicts and forest degradation, from reaching the center and a wider international audience (Dove & Kammen, 2001). Change, it was observed, required ‘‘understanding and addressing the basic structural issues that... frustrate reform’’ (Barber, Johnson, & Hafild, 1994, p. 8). The Asian crisis provided the critics with that opportunity, but perhaps at the cost of the broader neoliberal shift. 3. THE ASIAN CRISIS, NEOLIBERAL REFORMS, AND DEEPENING ECOLOGICAL CONTRADICTIONS The so-called Asian crisis 19 was an important conjuncture for the ascent of neoliberal globalism and continued disregard for the ecological ramifications of export growth. Of the economies of East and Southeast Asia, Indonesia’s economy suffered the worst and longest reversal of fortunes; the rupiah lost 80% of its value and economic growth declined by 13.6%. After three decades of rule, Suharto’s indecisiveness between obeisance to the International Monetary Fund—symbolically represented by the then IMF Managing Director Michel Camdessus standing with arms folded behind Suharto as he signed the (second) Letter of Intent (LOI) in January 1998—and loyalty to his family and friends led to his resignation in April 1998. Declining legitimacy and street protests against the corruption, collusion, and neopotism (korupsi, kolusi dan nepotisme, or KKN) of his regime clearly played a part in his decision (MacIntyre, 2001; Robison & Rosser, 1998). The $43 billion bail-out and SAP came with unusual conditions on forestry sector reform. For a time, it seemed, the forest was not being ignored. The January 1998 LOI and subsequent World Bank Policy Reform Support Loans specifically required liberalization and rationalization of forest-based industries (see Seymour & Dubash, 2000; World Bank, 2001). This was enabled, first, by reducing export taxes on raw logs to zero by 2002 and replacing other ‘‘punitive’’ taxes on timber with an area-based

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resource rent tax. Second, by requiring an end to the ‘‘monopoly’’ marketing role of Apkindo, firms were freed to export to whomever they wished. Third, by requiring that the Reforestation Fund, previously used for projects favored by Suharto and Habibie, be moved on-budget, the rational use of this revenue for its originally stated purpose was to be ensured. These and other reforms, such as auctioning of concession licenses, lengthening of the concession period, and de-coupling of processing from logging concessions, came to the IMF directly from the World Bank’s former Jakarta field officer (Seymour & Dubash, 2000). Such unusual conditions relied on untenable assumptions about the state’s capacity to reform within a ‘‘sustainable forestry paradigm,’’ rather than strategies to alter the pressure on the forests from excessive demand and easy finance (Barr, 2001). Seymour and Dubash (2000) argued that better forestry reform might be achieved if the Bank (and IMF) did not rely only on direct pressure at a moment when Indonesia’s economy was ‘‘on its knees.’’ Recognizing that technocrats in the government also appreciated the conjunctural opportunity for forestry reform, they argued for a more sophisticated political analysis of domestic constituencies for forestry reform, as well as of external agents who could be mobilized for support, to enhance the Bank’s leverage in achieving reform. They proposed that the Bank engage in the longer-term processes of identifying constituencies. While bold in advocating that the Bank more openly engage in politics rather than hide behind a veneer of apolitical or depoliticizing technical assistance (Ferguson, 1994), the proposal underestimates the interests of the Bank and other IFIs, as well as the power behind the neoliberal agenda in general (Wade & Veneroso, 1998). That is, it assumes a unified change in Bank practices in favor of environmental regulation and sustainability. Such unity is belied by the reluctance of the Bank to consider the cross-sectoral impact of its practices. One small textual example is that while the Bank’s (2001) report on Indonesia and the environment emphasizes the risks and opportunities of continued natural-resource dependence amid decentralization, the Indonesian office’s report to the donor community focuses on accelerating the sale of ailing banks and privatization while improving the investment climate and ensuring labor market ‘‘flexibility’’ (World Bank, 2003). The latter report is remarkably silent on issues of environment. 20

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In 1998, environmentalists and other critics were ambivalent and seemingly caught off guard by the rapidity of the IMF reforms (WALHI, 2000). Their appreciation for the demotion of their long-time foes, Bob Hasan and Suharto, created an ambivalent attitude toward the IFIs. 21 This ambivalence was revealed in an open NGO letter to the IMF and the World Bank noting ‘‘inconsistencies’’ in the simultaneous dismantling of Apkindo and encouragement of palm oil investment. Under pressure from environmental groups, bilateral and multilateral lenders in the Consultative Group on Indonesia put forestry on its agenda, resulting in a high-level seminar on forestry in 2000 (Ginting, 2000; World Bank, 2001). At this seminar, the Ministry of Forestry and Estate Crops made commitments, among others, to interagency coordination, a moratorium on natural forest conversion, and closure of indebted forest industries. In subsequent practice, however, these commitments have been difficult to fulfill, and it is increasingly clear that the power of the timber industry was larger than that of Hasan and Suharto. The IMF and governmental evaluations of progress on reform ultimately pushed these environmental conditions off the agenda in favor of their more conventional focus on balance of payments and stable currency. This is not surprising since ‘‘Neither negative nor positive environmental impacts are systematically addressed in structural adjustment loans’’ (Seymour & Dubash, 2000, p. 18). Exclusion of the environment is common to both ‘‘Wall St.-Treasury-IMF complex’’ neoliberals (Wade & Veneroso, 1998) and neoliberal ‘‘dissenters’’ (Robison, 1999) or ‘‘left-wing neoliberals’’ (Burkett & Hart-Landsberg, 2000). The former group blamed the internal economic structure of the Asian economies for the crisis (see Khor, 2000). Specifically, the ill judgement of banks and financial institutions based in collusion and current account deficits were noted, and the recommendation of this group was to obey the discipline of global financial markets. Inconsistently, what had yesterday been ‘‘miracles’’ were today deemed the nests of the so-called ‘‘crony capitalism’’ even though cronyism ‘‘far from existing as an aberration, was (and is) the predominant mode of accumulation’’ (Pincus & Ramli, 1998) and financial liberalization had preceded some of the problems (Burkett & Hart-Landsberg, 2000; on Indonesia’s 1985 liberalization, see Hill, 1996). The dissenters, notably Jeffrey Sachs and Joseph Stiglitz (then Chief Econo-

mist of the World Bank), blamed lack of global financial governance for the crisis (see Chang, 2000). Since foreign investors had ‘‘willingly poured billions of dollars into these imprudently managed financial systems,’’ the neoliberal dissenters ‘‘failed to consider whether Ôsound’ financial regulations might prove impossible to sustain in a world marked by intense financial-sector competition’’ (Burkett & Hart-Landsberg, 2000, p. 183). Thus, while this group was less inclined to blame cronyism, their recommendations focused just as much on economic recovery at any environmental cost as the first group. From a regional and global political economy perspective, I argue, one can better understand how the environment figures into pre and postcrisis growth. The integration of Asia into global capital flows and the availability of core capital for short-term speculative investment in East Asia, particularly due to global overproduction caused by a debt-financed expansion led to the manufacturing booms (Bernard, 1999; Palat, 1999, p. 16). 22 After the 1990 collapse of the Japanese ‘‘bubble’’ economy, even more capital was available and produced overinvestment in the region. Importantly, as we shall see, the expansion of investment in pulp and paper and palm oil in Indonesia, heavily dependent on cheap access to Indonesian forest lands, were fueled by this financial inflow. One of the ironies of the post-Suharto period has been the increasing frankness of the reports on forest sector practices. 23 During the New Order, criticisms of the developmental trajectory and its reliance on natural resource exploitation and the diminished livelihood of people in the extractive areas were often muted (Dove & Kammen, 2001). Since 1997, strident criticism of the New Order for its tendency to engage in ‘‘KKN’’ (korupsi, kolusi dan nepotisme) has become almost de rigeur. And such criticism is coming from some unlikely quarters. The US Embassy in Jakarta writes (in 1999) of ‘‘favored companies with deep pockets,’’ logging with ‘‘little or no regulatory oversight’’ and ‘‘few environmental safeguards,’’ as well as ‘‘illegal logging flourish[ing] with the complicity of local officials’’ (quoted in Human Rights Watch, 2003, p. 17). 24 The World Bank, which had previously joined in blaming shifting cultivators for deforestation, now berates the Government of Indonesia for doing so, observing, ‘‘The smallholder category has been overrated as a cause of deforestation’’ (World Bank, 2001, p. 13).

THE SHIFTING NATURES OF ‘‘DEVELOPMENT’’

Less surprising in source but still more strident in tone than previous reports, a 2002 joint report by Forest Watch Indonesia and the World Resources Institute found, ‘‘Deforestation in Indonesia is largely the result of a corrupt political and economic system that regarded natural resources, especially forests, as a source of revenue to be exploited for political ends and personal gain’’ (FWI/GFW, 2002; compare Barber et al., 1994). Finally, with respect to the debt, Kaimowitz and Ahmad claim: Many organizations, including the Indonesian Ministry of Forestry, WWF, CIFOR, the IMF and the World Bank, believe the government should be closing down companies that lack sustainable timber supplies. . . (Kaimowitz & Ahmad, 2003)

What exactly is all this criticism accomplishing? 25 One interpretation, I propose, is that it has taken the wind out of the critics’ sails by coopting the agenda of reformasi total of the political economy into narrow reforms of the economy. There is obviously tension but also, surprisingly, commonality between populist critics of the New Order who advocate communitybased natural resource management or indigenous rights to the forest on the one hand and neoliberals from the IFIs, especially the IMF, on the other. It may seem highly unusual, to argue that environmental critics of an authoritarian regime such as Suharto’s would have anything in common with the advocates of market reform and neoliberalism who are so frequently the targets of opprobrium. If one is sympathetic to the broader agendas of environmental sustainability and social justice, these are uncomfortable possibilities to consider. And, to be sure, in their efforts to expose the state’s lack of autonomy from capital, NGOs diverge from neoliberal commodification and market-based solutions. Yet, both focus on (excessive) instances of KKN in Indonesia. That is, they both worked and—intentionally or not—worked together to bring down Suharto’s illegitimate regime of authoritarian state developmentalism. As the focus of governance reform increasingly centers on the problem of ‘‘illegal logging,’’ it is worth considering whether NGO participation in this framing, which blames both financial and ecological troubles on government intervention and the close government–private embeddedness of the previous period, unintentionally supports the transition to neoliberal globalism.

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Recovery has been slow in Indonesia, and much of it premised on a return to agriculture and natural resources, a shift that a World Bank (1999) report called ‘‘building on strengths,’’ despite the long praise for Indonesia’s manufacturing growth. As in Ghana, the forests (and other resources) have turned into a source of ‘‘current convenience’’ in Indonesia (Owusu, 1998). However, it is not so simple. As critics of structural adjustment elsewhere have argued, the need for foreign exchange leading to more intense natural resource extraction can be tempered by declines in global demand for commodities during crises and underpricing of natural resources (Cruz & Repetto, 1992; Reed, 1992; Seymour & Dubash, 2000). Also, although international fund managers had returned to Korea, Thailand, Singapore, and Malaysia by early 1999, investors continued to lack confidence in Indonesia due to social unrest and political instability. 26 Total nonoil exports contracted by 5.9% in 1997, 7.3% in 1998 (Athukorala, 2002, p. 157) and 12.3% in the first quarter of 1999 (Johnson, 2000, p. 80). From 1999 to 2000, amid high world prices, oil and gas accounted for almost half of the 27% export growth (Dick, 2001). In 2001, investor confidence continued to decline as Standard and Poor’s reduced Indonesia’s rating to CCC+ (Pangestu & Goeltom, 2001) and total nonoil exports declined 8.5% further (Athukorala, 2002). For the plywood industry, the results of opening log exports and freeing export marketing channels were complex, affected by neoliberal reforms, industry resistance, and regional and global market factors. Initially, Indonesia’s industry was hurt badly by both volume and price declines. The export price which had been relatively stable around $450 per cubic meter in the mid-1990s dropped precipitously to $250 in May 1998 (ITTO, 1999, p. 169). By 1999, a recovery seemed to be taking shape, and prices climbed to over three-quarters of precrisis levels (Adams, 1999). However, with the onset of a global crisis within a year and a decline in key construction sectors in the core economies, the ITTO (2001, p. 24) observed that ‘‘global overcapacity’’ was creating price declines to new record lows (below $250 per cubic meters) in 2001. 27 Meanwhile, China’s (PRC) imports of wood products, especially logs, have skyrocketed due to unusually high economic growth rates, a related construction boom, and a 1998 ban on logging in the southwest of the country

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implemented after serious flood episodes. 28 In 1999, China overtook Japan as the world’s largest importer of tropical logs, importing 6.1 million cubic meters in 2000 and 7.3 million in 2001, year-on-year increases of 27% and 20%, respectively. With Indonesian log exports re-opened, the ITTO reported that China imported over 600,000 cubic meters of logs in 2000 (ITTO, 2001, Table 2-1). 29 Large domestic timber industry actors, recognizing the threat to ‘‘their’’ claim on raw material supplies, resisted market reform. Official plywood exports had declined to 5.8 million cubic meters by 2000 (see Table 2). Under the guise of a response to the ‘‘epidemic’’ of illegal logging, APHI (Indonesian Concession Holders Association) and Apkindo lobbied successfully for a reinstatement of the log export ban, as a ‘‘temporary moratorium.’’ Now in place since October 2001, this ban and the reassertion of the power of the industrial associations it represents were a rebuke to the intent of IMF conditionality. It also distorted the intent and words of WALHI’s call for a total logging moratorium until industrial capacity could be adjusted and local and regional institutional capacity to manage the forest resources could be prepared. As in the state authoritarian developmentalist period, the environmental effects as seen in Indonesia’s forests have been dramatic and arguably worse. The structural deficit in the forest sector is being met by a range of practices, from excessive logging within legal concessions to outright theft of wood from national parks. Although 1990 logging rates were twice the legally specified sustainable yield rate (Barr, 2001; FWI/GFW, 2002), they were limited by the desire of Apkindo to control all production and exports. By opening export channels and dismantling domestic levers of control, the limiting factor became a global demand. Additional complexities have arisen with decentralization, which ‘‘magnify the consequences of the weaknesses’’ in state technical capacity and poor coordination across sectors

and agencies (World Bank, 2001, p. x). Structural adjustment’s emphasis on decreasing government makes such weaknesses more difficult to overcome. Updated estimates are that Indonesia’s deforestation rate since 1996 is 2 million ha per year, perhaps the highest in the world, and that (commercially viable) lowland tropical forests rich in biodiversity will disappear in Sulawesi, Sumatra, and Kalimantan by 2010 given the current trends (FWI/GFW, 2002). While it is difficult to draw direct causal links between trade liberalization and deforestation, liberalization of foreign investment rules, as per IMF conditionality, has contributed directly to palm oil sector expansion. 30 Export hopes were high, given the weak currency and lower costs of production than Malaysia, due to both cheaper labor and greater land availability. As manufacturing has been slow to recover and new investments are moving to China and Vietnam, natural resource sectors such as palm oil seem an obvious choice. At first palm oil experienced only a ‘‘hesitant boom’’ (Casson, 1999). During the crisis, reduced subsidies to cooking fuel led to shortages and consumer ire, leading the government to impose a 60% export tax on palm oil in 1998, gradually reduced to 10% by the end of 1999. In addition, new regulations limited the amount of land that one company could convert. In more recent years, palm oil has begun to follow the expected trajectory of export growth. From fiscal year 1997–98 through 2001–02 palm oil exports increased again from 2.4 million to 5.6 million tons (USDA FAS, 2002: latest data are preliminary). For 2003, with global prices again exceeding $400 per ton (Malaysian Palm Oil Board, 2002), a further jump was projected by Indonesian producers to 6.5 million tons (Simamora, 2002). As opposed to plywood where Indonesia’s market share has declined, the share of global palm oil exports increased from 20% in 1997–98 to 31% in 2001–02 (USDA FAS, 2002). 31 Like other commodity markets, however, palm oil prices are extremely volatile. During the crisis, for

Table 2. Indonesian plywood exports, volume, and value, 1990–2000 1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

Production (000 cubic meters) 8,250 9,600 10,100 10,050 9,836 9,500 9,575 9,600 7,800 7,500 7,200 Exports (000 cubic meters) 8,244 8,635 9,761 9,627 8,223 8,376 8,564 8,500 7,424 6,718 5,790 Export value ($ 000) 2,725 3,230 3,239 4,227 3,723 3,786 3,603 3,416 2,084 2,407 1,996 Source: FAOStat Data, available online at www.faostat.fao.org.

THE SHIFTING NATURES OF ‘‘DEVELOPMENT’’

example, export prices dropped 60% from highs over $700/ton in late 1997 to $287 in August 1999, a level not seen since 1986 (Casson, 1999, p. 32). The most fundamental impacts of neoliberalism will likely come from managing the debt, which ballooned as a result of the crisis. Although the loans in Asia were heavily private—only about 15% of Indonesia’s was public and in Korea, Taiwan, and Thailand it was closer to 5%—the loans were still ‘‘tantamount to sovereign debt’’ (Palat, 1999, p. 22) because Asian governments underwrote much of the debt and, it was assumed, the governments would not allow these companies to go bankrupt. As of September 2002, Indonesia’s domestic debt was Rp 656 trillion, two-thirds of which was bonds to recapitalize insolvent banks, and external debt was $73.5 billion (Alisjahbana & Manning, 2002, p. 289). Over 21 trillion rupiah ($2.4 billion) of forestry company debt 32 came under the control of the Indonesian Bank Restructuring Agency (IBRA), created in 1999 to revitalize Indonesia’s ailing banking sector (Barr, 2001, Table 5.3). As IBRA neared the end of its five-year mandate, it was poised to sell off forestry assets at 15–20% of their value, despite a government commitment to shut down forestry companies due to overcapacity (Kaimowitz & Ahmad, 2003). 33 The sell-off and writing-off of much of the debt would put many of the same conglomerates back in financial health for further expansion (Barr, Brown, Casson, & Kaimowitz, 2002). Recapitalization of the banking sector, one of the pillars of an IMF structural adjustment, therefore may herald renewed growth in some of the same sectors so pointedly criticized during the crisis. 4. CONCLUSION In this paper, I have used the conjuncture of the Asian crisis and structural adjustment in Indonesia to re-examine the ecological underpinnings of ‘‘development’’ in the periods before, during and after the crisis. There are glaring continuities in the degradation of environment across the periods most evident in the forestry sector that includes logging, plywood, pulp and paper, and palm oil. This may not be surprising since there are also overriding similarities in the processes of uneven and socially unequal ‘‘development’’ that characterize global capitalism (Barham et al., 1994;

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Bunker, 1992; O’Connor, 1994). I have argued, however, that the neoliberal model not only continues but also exacerbates materially and discursively the environmental destructiveness of the authoritarian state developmentalism. In the developmentalist era, investor confidence (especially but not only by foreign investors) was based on taking on a (domestic) partner who ‘‘enjoyed the support of the president or his close associates’’ (Athukorala, 2002, p. 145). In practice, what was left unsaid in depictions of personalistic, patron–client relations was that they relied in turn on the violence or threat of violence against recalcitrant workers, peasants, and indigenous forest dwellers by the armed forces (see Human Rights Watch, 2003). In the era of neoliberal globalization, while patron–client relations have not diminished, a slightly different meaning is attached to investor confidence. In this case, investors seek legal (over personal) assurance that their interests, such as in clearly defined and stable access to forest lands for plantations, will be respected and upheld. This concern with secure property rights and the ‘‘freeing’’ of nature from social constraints in order to fully commodify it is why McCarthy and Prudham observe that neoliberalism ‘‘is significantly constituted by changing social relations with biophysical nature’’ (McCarthy & Prudham, 2004, p. 275). Barring such security, new foreign investment does not flow in, and the potential for economic collapse, beginning with inability to make debt payments, increases. Both debt and its resolution through increased exports are far from a development strategy that inherently benefits the poor or the forests of Indonesia. To be sure, neither did Suharto’s New Order. Yet, one of the most important differences is that the national developmentalist project based its legitimacy in part on the (unfulfilled) promise of nationally distributed benefits from ‘‘development.’’ It could also be challenged on these grounds. By contrast, in neoliberal globalism, it is not at all clear whose responsibility poverty and environmental degradation are, and there is little if any normative imperative toward equity. As its ideological underpinnings spread, those interested in social justice and environmental sustainability, therefore, will need to be creative in mobilizing for alternatives. If Indonesia’s economy recovers on the neoliberal path, it may be faced with ‘‘overcapacity’’ in two senses: First, overcapacity in regional and global export markets translates

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into collapsing markets, layoffs, and social dislocation. With low wage manufacturing such as textiles and shoes shifting to Chinese locations, unemployment has risen. Similar effects may be felt in the forest industries. However, there is a second sense of overcapacity in relation to the forest sectors. Because the forests and the livelihoods (and even lives) of those dependent on them have been priced so cheaply by both nationalist development projects and by global capital interests, market overcapacity does not, in fact, translate into a large-scale collapse of the forest-related industries. Instead, industrial overcapacity exacerbates exploitation of forests

well beyond the capacity to regenerate timber (i.e., ‘‘sustained yield’’) and encourages illegal logging, as well as cheaper land clearing by burning, to further depress the price of the forest resources. The pressures to maintain constructive working relations and attractive investment climates with the global financiers of the IMF, the Paris Group, and portfolio investors will not abate until the social and/or ecological contradictions reach a crisis. 34 In the meantime, it seems likely that numerous local ecosystems and social groups will suffer the consequences of the neoliberal export growth strategy.

NOTES 1. Babb has traced these shifts among economists and policy makers in Mexico, and Biersteker, as well as Peet and Watts had earlier observed the ‘‘triumph’’ of such liberal, market triumphalist ideas (Babb, 2001; Biersteker, 1995; Peet & Watts, 1996). I should also note that despite Williamson’s (1999) efforts to distinguish the Washington Consensus from neoliberalism and especially from international impositions of policy regimes, he acknowledges the broader societal appropriation of the term in this manner (see Gore, 2000; Kanbur, 1999; Naim, 1999). 2. For a deeper discussion of the vexing issues attendant to nature–society relations, see Goldman and Schurman (2000) and Gellert (forthcoming). 3. For a notable exception, see Dauvergne (2000). Specifically on Indonesian forestry, see Sunderlin (1999). By environmental implications I do not mean (only) the impact of crisis on environmental ‘‘variables’’ like deforestation or pollution but the material bases of development and exploitation. For the economic literature, at least through 2000, see Nouriel Roubini’s wellknown website, http://www.stern.nyu.edu/globalmacro/. 4. IFI ‘‘pressure’’ was common and felt by many countries in the 1980s, but ‘‘When the IMF came in November 1997, it forced the Government of Indonesia (GOI) to implement a sweeping structural adjustment (e.g., monopoly removal, etc). So, they are two different things.’’ (Iwan J. Azis, personal communication, 2004). 5. It remains to be seen whether domestic investors will be more eager and fare better amid widespread complaints about uncertainties and corruption in the judicial system, as well as political uncertainties, in a period of decentralization.

6. The HPAEs are Japan, Hong Kong, Republic of Korea, Singapore, Taiwan, Indonesia, Malaysia, and Thailand. The World Bank’s shift was a ‘‘two-step shuffle’’ (Weiss, 1999, p. 338) with the East Asian Miracle report of 1993 followed by the 1997 World Development Report on ‘‘The State in a Changing World.’’ 7. A quick perusal of the indexes of books on Asia during the period finds almost no entries for ‘‘environment’’ or ‘‘natural resources.’’ The East Asian Miracle report notes productivity growth in agriculture but concludes that HPAEs have made the ‘‘typical’’ structural transition to a smaller agricultural sector ‘‘more rapidly than other developing economies’’ (World Bank, 1993, p. 32). 8. Ecological modernization theorists argue to the contrary that environmental degradation need not accompany industrial development, but extending this theoretical perspective to peripheral or ‘‘developing’’ areas has proven more difficult (see Sonnenfeld & Mol, 2000). 9. The Thai floods ‘‘took 116 lives, destroyed 16,000 homes and damaged one million farmlands in southern Thailand’’ (Bello, Cunningham, & Poh, 1999, p. 175) and the Thai and Chinese governments responded by banning logging, but the effect of such national bans has not decreased tropical logging so much as moved its location and legality (see Belcher & Gennino, 1993; Le Billon, 2000). In the Philippines, after Aquino became President in 1986, no more new logging concessions were granted. 10. Exports of textiles edged out plywood once in this period.

THE SHIFTING NATURES OF ‘‘DEVELOPMENT’’ 11. Aside from natural resources, the other leg of support was cheap labor (Deyo, 1989; Hadiz, 1997). Within natural resources, I concentrate on forest-based industrialization. There also was considerable petroleum-based development and industrialization, for example, of petrochemicals (see Auty, 1987). In addition, notably, the Freeport MacMoran copper and gold mine in Papua province (formerly Irian Jaya) was the first foreign company to operate in Indonesia after Suharto took power. In the 1990s, mining had become a growth area, with a high potential and much foreign interest (perhaps more from China and Japan than Australia and the West), leading to protracted interministerial and center-local institutional conflicts over activities in protected forest areas. 12. The naturalization of growth evident in the quotation from Hill at the beginning of the section is questioned, for example, by ecological economists, some of whom argue for zero growth. 13. It also led to some phantasmagoric projects of modernization with broad reaching social and biogeophysical displacement effects (Gellert & Lynch, 2003), including the Bakun Dam project in Sarawak (Thompson, 2001) and President Suharto’s Million Hectare Central Kalimantan Swamp Forest Mega Project to convert the peat swamps and rain forests of Kalimantan into rice fields. This last project has been stopped by political lobbying in post-Suharto Indonesia. The Bakun dam was suspended due to crisis-related financial problems, but appeared to be resuming as of 2002. 14. I say ‘‘ostensibly’’ because the replacement of Dipterocarp tree species by eucalyptus and other fastgrowing pulp species would not help supply the plywood mills with raw material. 15. The deficit is in comparison to officially defined levels of sustained yield logging harvest. The higher number in 1998 is largely due to a decline in official logging. One response by logging firms was to return to previously logged areas, in violation of the selective logging 35-year cycle regulations, to ‘‘clean the bowl’’ (cuci mangkok) of smaller trees. 16. Employment of Dayaks in Kalimantan logging enterprises was limited mostly to low-paid timber cruising, that is, identifying stems to be cut, and dangerous chainsaw work (author’s field notes). 17. Overall timber sector economic rent collection rarely exceeded one-quarter of total available rents (Brown, 1999; Gillis, 1988; Ruzicka, 1979; WALHI,

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1991). By contrast, in the oil sector, through production sharing arrangements, the Indonesian government collected 85% of economic rent. 18. An alternative but not necessarily contradictory formulation would view the more radical critiques by SKEPHI at the time as making space for comparatively more mainstream criticisms by WALHI, for example, of low economic rent collection, to be heard by political elites. 19. Although the label ‘‘Asian crisis’’ is convenient shorthand and the case I focus on here is Indonesia, there are multiple, related crises in various countries of Asia and other parts of the world from Russia to Argentina. Some have argued that the Asian crisis is the first global crisis that emanated from Asia. 20. Comparing the list of abbreviations and acronyms, one finds that Apkindo and MoFEC (Ministry of Forestry and Estate Crops) in the former but not the latter. 21. Hasan was later convicted and spent several years in jail for embezzlement of Forestry Department funds before his release in 2004. 22. The deeper historical roots of the crisis are in the deregulation of finance in the United States (Arrighi, 1994). 23. Such frank and open criticism is not in contradiction to the waning of environmental conditionality, as one reviewer suggested. I wish to clarify and emphasize that the irony is precisely that increasingly open criticism of KKN in the forestry sector from historically complicit voices is accompanied by a lack of ‘‘political will’’ to stick to environmental conditions on financial assistance. The integrity of the authors of the statements and reports is not in question, but the power of their words pales in comparison to the broader geopolitical and material interests in Indonesia. 24. Illegal logging has come under tremendous scrutiny by a wide range of groups from NGOs to the donor community to the ITTO. 25. This rhetorical question is an adaptation of Corrigan and Sayer’s (1985) notion of the accomplishment of rule. 26. In the three years from 1998 to 2001, Indonesia had three presidents, B.J. Habibie, Abdurrahman Wahid, who replaced him in the first relatively free elections in decades, and Megawati Sukarnoputri, who replaced

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Wahid after he was forced out of office. By 2003, concern about the 2004 elections was already rising; these elections were heralded, in the end, for the general lack of violence. The political situation has also been complicated by political decentralization and the regional autonomy laws that went into effect at the beginning of 2001. 27. Prices recovered moderately in 2002 (ITTO, 2002). Tropical plywood exports also face substitution by softwood plywood and other panel products, for example, oriented strand board or OSB and medium density fiberboard or MDF. 28. In part, Japan’s slightly increased levels of tropical plywood and panel imports have been attributable to the importer difficulties in competing with China to obtaining raw logs. 29. A similar legal volume over 600,000 cubic meters was reportedly imported by Malyasia. Other imports were much smaller volumes. 30. In an unusual analysis of the East Asian ‘‘miracle,’’ Akyuz and Gore note, ‘‘[The] focus on investment is also vital to avoid the mistakes of the 1980s, in which the bias of structural adjustment programs (SAPs) against accumulation resulted in policies which, in the name of more

efficient resource allocation, almost invariably led to lower investment and growth ’’ (Akyu¨z & Gore, 1996, p. 468)—as Indonesia has experienced. 31. Data for 2001–02 are preliminary, but the trend is well established by the previous year. Much of this increase is at the expense of Malaysia, whose exports still are by far the highest in the world. 32. I have converted Barr’s rupiah figures at the approximate 2003 rate of 9000 rupiah to the dollar. This debt figure notably does not include additional debts incurred by the conglomerates involved in their nonforest businesses, as well as overseas debts. A World Bank report notes that $4.1 billion of the $51.5 billion in private debt owed to IBRA is forestry industry debt and $2.7 billion of that debt is ‘‘nonperforming’’ (World Bank, 2001, p. 23). 33. According to CIFOR analysts, IBRA sold about $1.3 billion dollars of the forestry debt to Bank Mandiri, a Government owned bank slated to be privatized. As they note, ‘‘By Ôselling’ the debts from one government entity to another, the government’s net revenue from the sale was zero’’ (CIFOR, 2003). 34. Restoring investor confidence is high on the agenda of President Susilo Bambang Yudhoyono, who came to power in October 2004.

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