An economic analysis of ecosystem restoration concession policy in Indonesia: a new strategy for sustainable forest management?

To tackle the high rate of deforestation in Indonesia's production forests, a new type of licence was introduced in 2004 known as an Ecosystem Restoration Concession (ERC) or IUPHHK-RE by the Indonesian Government. For the first time, production forests could be managed for the purpose of restoration instead of logging. At the same time, however, the economic feasibility of ecosystem restoration concessions has to be proved if they are to be made attractive as a business opportunity. This paper examines the business feasibility of ERCs using a cost-benefit analysis method. The results show that the benefits of natural ecosystems are not well recognised and hence it is difficult to attract funds or investment for ERCs. Therefore policy support and sustainable funding mechanisms are needed for ERCs to ensure their economic viability.