Understanding Aspects of Economic Rent of Forest Resources Extraction in Indonesia

Summary

Riko Wahyudi, writing for Article 33 Indonesia (a Jakarta-based research organization), published a working paper in July 2026 examining how well Indonesia's system of state levies on timber extraction actually captures the economic rent generated by forest exploitation. The paper is a natural resource-rent case study in a geography this wiki has not previously covered, and a useful complement to the wiki's timber-specific theoretical coverage via Gaffney's Faustmann financial-maturity analysis.

Indonesia's Forest Levy System

The paper surveys five distinct state instruments layered on timber extraction:

• IIUPH (Forest Utilization Business Permit Fee) — an upfront licensing charge.
• PSDH (Forest Resource Rent Provision) — the levy most directly framed, by name, as a rent-capture instrument.
• DR (Reforestation Funds) — earmarked for replanting.
• PNBP (Non-Tax State Revenue) — the general non-tax revenue collection system these levies feed into.
• DBH (Revenue Sharing Fund) — the mechanism distributing collected revenue between national and regional government.

Findings: Where Rent Capture Fails

Wahyudi identifies "fundamental discrepancies among academics, the public, the government, and concession holders" about whether these levies, collectively, are adequate or transparent. The paper's diagnosis centers on three structural leakage points:

1. Uncalculated socio-ecological costs. The valuation base for the levies does not incorporate the environmental and social costs of extraction, meaning the "rent" being captured is calculated against an incomplete cost accounting — a systematic overstatement of net rent relative to true social cost.
2. High informal transaction fees. The paper documents significant informal payments occurring throughout the extraction chain, alongside the formal levy system — a parallel, uncaptured extraction of value that formal PSDH/DR accounting does not see.
3. Outdated standard timber valuation formulas. The formulas used to compute levy liability do not track current market conditions well, contributing to both revenue leakage and distorted incentives.

The paper connects these design failures to broader outcomes: reduced non-tax state revenue, cascading effects on deforestation rates, and forestry's shrinking contribution to GDP. Its policy recommendations include re-evaluating Indonesia's log export ban, adjusting the standard valuation formulas, and better integrating non-timber forest products and Industrial Timber Plantations (HTI) into the rent-capture framework.

Relation to the Georgist Case

This is a rent-capture-failure case study rather than a rent-capture-success one — its value to the wiki is documenting how an ostensibly rent-targeted instrument (the PSDH is literally named "Forest Resource Rent Provision") can still leak most of the rent it is designed to capture, through channels — uncosted externalities, informal payment leakage, and stale valuation formulas — that are directly analogous to the assessment and enforcement problems this wiki documents for land value taxation and for other developing-country property tax systems. It is a reminder that naming a levy "resource rent provision" does not, by itself, make it one in practice.

Nuances and Limits

• No specific numerical data. The source page provides no percentages, revenue figures, or rent-capture-rate estimates — only a qualitative account of the mechanisms and structural issues. This page accordingly makes no quantitative claim.
• Working-paper tier. Not yet peer-reviewed; Article 33 Indonesia is a policy research organization, not an academic journal, so this is treated as Supplementary tier pending a published or peer-reviewed version.

Bears On

• Concept: Economic Rent — a case study in how a nominally rent-targeted levy can still fail to capture most of the rent it names itself after.
• Research: Gaffney: The Faustmann Formula and Financial Maturity of Timber — the theoretical timber-rent framework this paper's empirical Indonesian case sits alongside.
• Objection: Land value can't be assessed accurately — the outdated-valuation-formula finding is a resource-tax analogue of this objection's administrative-capacity concern.

See Also

• Resource Rents
• Economic Rent
• Gaffney: The Faustmann Formula and Financial Maturity of Timber
• Mintz & Chen: Capturing Economic Rents from Resources through Royalties and Taxes

Sources

1. Riko Wahyudi, "Understanding Aspects of Economic Rent of Forest Resources Extraction in Indonesia" (working paper), Article 33 Indonesia, July 2026. article33.or.id — article/working-paper summary fetched and read 2026-08-14; used for the five-instrument levy taxonomy (IIUPH, PSDH, DR, PNBP, DBH), the three rent-leakage mechanisms (uncalculated socio-ecological costs, informal fees, outdated valuation formulas), the deforestation/GDP connection, and the policy recommendations. Working-paper tier, no quantitative figures provided on the summary page (C-claim; qualitative findings only).