Indonesia provides an interesting example of the implementation of intergovernmental fiscal transfers for conservation. Following decentralisation in 2002, district governments now have the authority to provide basic public services. The Regional Autonomy Laws do not specifically regulate the forestry sector, and Santoso (2008) argued that, according to Law 32/2004, the forestry sector is not a mandatory affair or a minimum public service to be performed by local governments. This means that local governments can choose whether to partake in the forestry sector to increase the welfare of the people within their jurisdictions. According to the latest Regional Autonomy Law 23/2014, the power to manage forests is mainly distributed between the national and provincial governments. However, as we will discuss below, district governments still have an important role in decision-making processes concerning the exploitation of natural resources. To achieve the objective of this book, two case studies – Riau and Papua provinces – were selected to inform the design of the IFT for conservation. They were chosen on the basis of the following factors: (i) local governments’ commitment to, and interest in, conservation (or reducing deforestation); (ii) fiscal capacity; and (iii) special autonomy status. Riau has the highest deforestation rate in Indonesia, while Papua currently has one of the lowest rates of deforestation in the country. Riau is one of the richest provinces in Indonesia as it is one of very few oil-and gas-producing provinces.
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