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close this bookIn Place of the Forest: Environmental and Socio-economic Transformation in Borneo and the Eastern Malay Peninsula (UNU, 1990, 310 pages)
close this folderPart 1 : Background and the course of events
close this folderChange since World War II
View the documentThe background of modern economic transformation
View the documentNew Order and New Economic Policy
View the documentEnergy exports and production
View the documentMinerals, industry, and the cities
View the documentAgriculture and land settlement
View the documentDeforestation and timber extraction

Deforestation and timber extraction

Change in demand and in technology

Before World War II and in the early post-war years most tropical hardwood timber entering world trade came from countries bordering the Atlantic Ocean.8 Demand for South-East Asian timbers was selective, with emphasis particularly on teak and on certain species of great constructional value such as the Borneo ironwood (Eusideroxylon zwageri). Only in the Philippines, supplying the American market, was a more diversified trade developed, including logs and sawn timber from a number of dipterocarp species. Elsewhere, timber was widely felled and sawn for local use and, as agriculture expanded, a combination of logging and clearing destroyed large areas of lowland forest.

In the 1950s the forest industry of the Philippines was quite quickly rehabilitated after wartime destruction of equipment, and production expanded to meet a rising new market in Japan. In Borneo, some swampforest timbers, particularly ramin (Gonostylus bancanus), became important, still for the European market. Toward the end of the 1950s, Japanese demand - for hardwood logs as raw material for its timberworking industry - began to soar. Production rose rapidly through the 1960s and between 1970 and 1985 Japan alone took half the world's rising imports of sawlogs, most of it from South-East Asia. For the first time, there was substantial demand for the dipterocarp timbers of Sundaland, which, with a high merchantable density per hectare, had important comparative advantages as against the forests of Africa and the Americas. At first emphasis was placed on the group of Shorea species known as meranti, abundant in the lowland forests; later, demand widened significantly.

Exploitation of this comparative advantage called heavily on new technologies, especially the one-man chain-saw first developed in the 1950s, which made possible a great increase in productivity and, coupled with transport improvements, much deeper penetration of the forest.9 Among other innovations of significance were the outboard motor, extensively used on the rivers and bays, bigger and more powerful trucks, four-wheel drive vehicles, and especially that creature of World War II, the bulldozer. Others included the crawler tractor for hauling logs and all the equipment used in modern highlead winching, making possible extraction from increasingly steep slopes. In the rainforest environment all this costly equipment is punishingly used and has a short amortization period. Its introduction therefore brought with it a need for higher and faster returns.

Politics, economics, and management in the boom

In the Peninsula, where change began first, foresters quickly developed a system for managing extraction from the meranti-rich lowland forests - the Malayan Uniform System. This called for the creation of large gaps within which new dipterocarp seedlings would thrive, and be encouraged by poisoning unwanted species, so that a more uniform forest would become available for later extraction 60-80 years on. The system required an interest in the long-term future of the forests, but neither politics nor economics allowed this. Increasingly, the lowland forest lands were converted to agriculture after logging, and sometimes even without first extracting all the merchantable timber; in any case, no one was going to get concessions for up to 100 years in this fast-developing region.10 A "Selective System" therefore quickly took the place of the Uniform System and became necessary once extraction began to move into the more diverse forests of the hills, as it increasingly did after 1965.

The Selective System involves taking only mature trees, relying on the growth of immature trees to ensure a second harvest in the much shorter period of only some 35 years. Given that the very large, oldgrowth trees seem to be at least a century old and some are much older, the system would necessarily imply some reduction in biomass over time even if its exacting conditions are fully observed, which even now is very rare. However, few concessions have been given for longer than 20 years, and subcontracts are usually shorter. Together with the need, as well as the opportunity, for high short-term profits, the conditions were therefore created for a selective system that took far more than would permit the system to work as planned, and that approached the Uniform System in the size of gaps created.

In the Peninsula and Malaysian Borneo, concessions were rapidly extended over the upland forests after 1960. In Indonesia, the boom was delayed until after 1970 when, initially, a number of concessions were given to large multinational companies. In the absence of any real knowledge of the resource and its ecology, and with totally inadequate means of enforcing such regulations as were already in place, concessions were offered on extremely favourable terms, and were permitted to be worked without supervision, in order to develop log exports as important earners of foreign exchange. The theoretical

"annual allowable cut" was exceeded by several times in the 1970s, even in the Peninsula where regulation was far better than in any part of Borneo (Kumar, 1986). The rapidity of expansion yielded large revenues for state and provincial governments, despite low rates of royalty. Indonesia and Malaysia, with Brunei, together produced 17 per cent of the world's non-coniferous tropical timber in 1965, and 30 per cent by 1973. By the latter year, their share of world exports had risen to over 60 per cent and soon after reached the 70 per cent range around which it then stabilized to the end of the 1980s.

Rationalization and vertical integration

Timber did not share the 1973/74 price rise for oil; rather, prices dropped sharply. Production declined until about 1975, and a number of the early concessionaires withdrew. By this time, it was coming to be realized that export of unprocessed logs allowed all the profits of downstream manufacture to be captured in Japan and, by then, also Korea and Taiwan. As part of its post-1969 economic restructuring, therefore, Malaysia began to ban export of logs of some species from the Peninsula in 1972, and steadily widened the prohibition in order to build up domestic sawmilling as an industrial enterprise to diversify the economy of the new settlement regions. This did not apply to Malaysian Borneo, where few advantages in restricting log exports were seen at that time. Some of the "integrated timber complexes" set up on the Peninsula, and allocated large concession areas, have made serious efforts to develop sustainable extraction plans. However, much of the industry has remained outside this centrally guided system.

Indonesia followed suit with a higher log-export tax to encourage domestic processing in 1978; then a progressive ban on log exports was imposed in 1981, becoming complete from 1985. Although quite often described as such at the time, this was by no means a conservationist measure, but was designed to ensure the profitability of domestic sawmilling and especially plywood manufacture, an industry that Indonesia sought to capture from the East Asian countries. The capture was only partial, as Sarawak and Sabah exports increased dramatically in order to fill the gap in supply to East Asian industries. The new policy became of greater importance as the prolonged oil boom came to an end in the mid-1980s, and timber prices fell by less than those of many other commodities in the subsequent depression. Indonesia needed its plywood incomes and revenues to sustain in dependence in the planning of its own development. By 1987, Indonesia was supplying 58 per cent of all world exports of tropical plywoods, a high proportion of this from Kalimantan.

The frontier and the two nations

We take up the story from this point in the following chapters of part II. Before leaving this account of a remarkable transformation, however, it is important to stress highly important changes in regional development that have taken place during the period since World War II, and especially since 1970. The eastern side of the Peninsula has, substantially, become incorporated into the Malaysian national economy, but in the role of supplier of timber, oil, gas, palm oil, and the other products of the new settlement areas and the South China Sea. Indonesian Borneo not only has become the nation's major source of foreign exchange from oil and timber, increasingly gaining a larger share at the expense of initially dominant Sumatra, it has also become a growth area for manufacturing industry within the country. Sarawak and Sabah, still retaining a significant measure of constitutional independence, are also major suppliers of income from oil, gas, and timber for Malaysia. However, though less so than wholly independent Brunei, they are able to retain a larger share of the revenues than are the provinces of Indonesia.

What we have described in this chapter, therefore, is the incorporation of the eastern Peninsula and Borneo into the two nations in the role of "resource frontier." In his classic discussion of regional development policy, Friedmann (1966) discussed possible development paths for such regions. Where, because of their isolation, resource frontier regions cannot be merged with the core, it is clear that the exporting role that is the basis of their existence must be sustained. For their internal development, however, they need an urban focus, an agglomeration or agglomerations of a size that will provide a sufficient internal market, help diversify the economic base, reduce costs due to distance, and create a basis of community. Writing in a different and more interventionist era, Friedmann suggested the creation of regional development authorities to help accomplish these ends.

Regional development authorities were certainly created in the eastern Peninsula, where strongly Friedmannite development plans were proposed and implemented in the late 1970s and early 1980s. They still operate, but it cannot be said that they have been wholly successful.11 The Borneo territories have been less exposed to such directive regional planning, although it is becoming more fashionable to identify specific "development zones" within Indonesian provinces, and this has been done in Kalimantan. Identifying such zones and actually implementing particular plans are, however, two different things. The states of Sabah and Sarawak are themselves identified as "development regions" within Malaysia. The Second Outline Perspective Plan 1991-2000 (Government of Malaysia, 1991b) specifically states as an objective of regional development: "to progressively integrate the regional economies of the states of Sabah and Sarawak to foster national integration and to promote the complementarily of these economies with the economy of the Peninsular states." It is of major importance to evaluate how far the Borneo territories of Indonesia and Malaysia have advanced from a very peripheral "frontier" status to become sustainably developing regions within their countries. We shall return to this question in our conclusion.


1. The basic sources on developments at national level include Hill (1989, 1994); Rigg (1991); Booth (1992a); and Brookfield (1994d).

2. Malaysian public sector expenditure rose to above 50 per cent of GDP in the early 1980s but, with a privatization policy in place since 1985, has since declined by a few percentage points (Chee, 1990: 15).

3. It has been suggested that reports of the large discoveries off Brunei, announced at a critical time in 1963, played an important role in persuading the Sultan of Brunei to remain outside the Malaysian Federation (Leake, 1990).

4. One place submerged was an anthropological field site of Padoch (1982a, 1982b). She found during a visit in 1992 that her report has now become of particular value to the people of that community as the sole written record of their past (C. Padoch, pers. comm.).

5. Within Brunei, the oil town of Seria has a similar role to Miri and Bintulu. Bandar Seri Begawan is essentially the national capital and little more.

6. "Fringe alienation" allocated and assisted the clearing and planting with rubber of remaining forest around villages, mainly in hill country. Though it continued into the 1970s, much of the effort was wasted, and large areas have reverted to secondary forest. Small-farmer rubber became the object of a sustained rehabilitation drive, which still continues under overlapping authorities.

7. This history is recounted in detail by Fox (1991, 1993).

8. The story of deforestation and timber extraction, the subject of a large and still-growing literature, has been recounted by us in several other places, including Brookfield and Byron (1990), Brookfield, Samad Hadi, and Zaharah Mahmud (1991), Potter (1993b), and Potter, Brookfield, and Byron (in press), and in a number of more specific papers by Potter. Comprehensive recent accounts going beyond our own, principally with reference to Malaysia, include Berger (1990), Hurst (1990), and Aiken (1992). Other sources are used in chapters 4, 5, 6, and 7. We therefore offer only a brief and unreferenced review of the background in this chapter.

9. The history of the one-man chain-saw, one of the major modern innovations of environ mental transformation and destruction, and its adoption by the world's farmers and loggers, remains to be written.

10. There is a partial exception in Sabah, where lands of the former British North Borneo Company were transferred on long title to the well-funded Sabah Foundation, the Yayasan Sabah. The Uniform System was also used in Sabah.

11. One of us once wrote, for the benefit of the World Bank, which deleted it from the report: "So planners, on Malaysian maps, with central places fill their gaps; and underneath tall jungle crowns, plant growth poles in the place of towns." The central towns in the Jengka Triangle and Pahang Tenggara might be better than this, but not by much.