Indonesia's forests have been severely over-exploited over the last three decades, with little regard to sustainability or the interests of local communities. The current policy and economic environment favours large private sector forest concessionaires and government over village level resource users. Although local forest users (who tend to be poor) have considerable knowledge of the forest environment and the clearest incentives for sustainable management, they have least influence over forest resources, policies and management practice. However, policy makers are now beginning to appreciate the important role that local forest users can and must pay in the management of these forests.

The main constraints in the sector are:

* lack of independent and effective monitoring and regulation of forest concessions by forest authorities.

* poor representation and participation of local people in policy development and forest management contributing to inefficient management and inequitable distribution of benefits.

trade and industry policies that create incentives to convert natural forest to other uses, rather than manage it sustainably, notably: cartelisation of processed wood exports, vertically integrated operations, trade restrictions which discourage competition, and deficiencies in the forest revenue system.

need for further development of market driven approaches to sustainable forest management, e.g.: certification and labelling, and performance bonds.

Removal of these constraints will require progress to be made on several fronts. Improvements are needed in the domestic policy, institutional, and trade environment to encourage effective self-regulation. Improvements are also needed in the interface between key stakeholders (government, private sector and local forest resource users). In particular, the balance of power needs to be shifted to increase the rights of local forest resource users to forest land. The preparation phase will need to engage different stakeholder groups both inside and outside Indonesia.

Constraints on sound forest management being addressed by key stakeholders.

• Support for the development of national programmes for sustainable forest management, and in replicating the new forest management system in one or more outer island provinces where there are significant numbers of poor people.
• Incentives to encourage the private sector in the direction of more sustainable forest management practices and avoidance of environmental degradation.
• Strengthening of the capacity of the key groups of stakeholders, particularly organisations representing local forest resource users, empowering them to exert influence and help implement new forest management systems, possibly including non-timber forest products.
• Strengthening the development of independent institutional arrangements for certification and labelling of products from sustainably managed forests in Indonesia.
• Increasing the development of market access opportunities for products from sustainably managed forests.
• Assisting with the initiation and development of community management of areas of production forest which may fall outside new systems because of their limited size.
• Initiatives to inform and influence international fora to encourage a trade and development environment more supportive to sustainable forest management within Indonesia.