9.39 million hectares of Indonesian forest is now endangered. In maintaining its existence, various initiatives are needed, one of them is the Ecological based Provincial Fiscal Transfer (“TAPE”) which encourage local government to protect forest area in their region. Additionally, this initiative also gives chance for the province to give contribution in achieving the central government’s target such as the National Determined Contribution (NDC) in reducing the carbon emission.
In a Stakeholder Roundtable Discussion, entitled “Developing Provincial Fiscal Incentive Policy to Protect Indonesian Forest” which held by the Asia Foundation and PWYP Indonesia as a side event of the 2018 IMF-WBG Annual Meeting, Erman A Rahman, the Senior Director at the Asia Foundation, explained that rich forest provinces like Papua, West Java, and Aceh have quite a room for fiscal discretion to allocate the transfer fund to their regencies/cities. “Like its name, TAPE is a transfer fund from provincial government to the regency or city allocated on the basis of the performance in protecting the environment,” said Erman.
There are 2 scenarios offered in this fiscal transfer scheme. First, the basic allocation and incentive-disincentive scenario. Regency/city will get basic allocation in addition with incentive if the region succeeds protecting their forest, and disincentive if their forest area decreased. Second, the scenario is based on the district/city forest cover index, relative to other regions. The regions with a higher deforestation rate than the maximum deforestation don’t get the funds.
Responded to this, Mochamad Ardian, Director of Facilitation of Balancing and Loan Funds, Ministry of Home Affairs, said that a regulation at the provincial level is needed to enact the initiative, and also to ensure the commitment of the regent/mayor to implement this fiscal instrument in protect the forest. He added, the utilization of the ecological fiscal transfer needs to be ascertained according to its allotment. We should ensure that it won’t create a room for the moral hazard.
Dr. Joko Tri Haryanto, representative from the Fiscal Policy Office of Ministry of Finance said that TAPE is a neutral fund towards the provincial budget, with the thematic traits than can actually be adjusted to the theme of development. For example, TAPE focuses on protecting the forest areas, when it is achieved, in the future it can be used for other development goals. For the supervision, it can be done with the budget tagging or budget tracking.
Noak Kapisa, representative from the Papua Provincial Government, appreciated the initiative. TAPE can be the alternative instrument to conserve the Papua’s forest, because the provincial government cannot use the Special Autonomy Funds to do so. “We are just waiting for the certainty of the regulation, the technical guidance for the implementation and the supervision mechanism,” said Noak Kapisa.
On the other hand, Laksmi, expert staff of Ministry of Environment and Forestry (KLHK) added that ideally the indicator used in the ecological fiscal transfer is not limited to the cover forest index only, but also need to consider the regional governance, region’s performance, and characteristic each region.