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JAKARTA (Reuters) - A $1 billion dollar deal with Norway to save Indonesia's forests and cut planet-warming carbon emissions will trigger a much-needed shake up of Indonesia's notorious bureaucracy, a top official said on Thursday.
It will also be a key test of how money flows to forest communities to ensure none is siphoned off by local government officials, said veteran technocrat Kuntoro Mangkusubroto, known as Indonesia's "Mr Fix-it" for his ability to cut through red tape.
The vast Southeast Asian country has the world's third largest remaining area of tropical forests and has become a central player in the fight against climate change because forests soak up huge amounts of carbon dioxide from industry.
The deal with Norway announced earlier this year aims to help the country overhaul forest management and halt clearing of carbon-rich peat and primary forests. In return, Norway will reward Indonesia for cutting its carbon emissions.
The clearing and burning of forests is a major source of Indonesia's, and the planet's greenhouse gas emissions.
"We have to simplify things, integrate things, and that's a process we've been waiting for," said Mangkusubroto, head of the president's delivery unit and in charge of making the Norway deal a success.
He earned international praise as leader of the multi-billion dollar reconstruction effort in northern Sumatra after the Dec 2004 Indian Ocean tsunami killed 170,000 in Aceh province.
"This country has been so structured, so many silos such that one sector does not speak with the other. Now how do you manage a bureaucracy like that?"
He pointed to at least four different versions of land maps, with efforts now focused on creating just one. Licenses issued by different ministries also had to be streamlined.
Under the deal with Norway, Indonesia has created a special task force to implement a U.N.-backed forest preservation scheme called REDD+, or reduced emissions from deforestation and degradation.
The scheme, which also takes into account efforts to conserve forests and boost the amount of carbon stock, such as replanting, aims to create a way to finance forest emissions reductions in developing countries.
REDD could potentially evolve into a multi-billion dollar market in annual trade of forest carbon credits. Developing nations would be rewarded for saving their forests and for the carbon they lock away, with rich nations as the main buyers.
Indonesia wants to be a leader in a future global REDD market but investors first want to see poorer nations implement credible schemes on the ground and reform their institutions.
To date, there are 38 REDD projects in Indonesia at various stages of development, Mangkusubroto said, and the Norway deal will help fund a series of pilot programs.
But an Indonesian government draft national REDD+ strategy paper outlines myriad problems such as poor land planning, weak governance and corruption, questions of land tenure and weak law enforcement, issues Mangkusubroto said must be tackled.
He said his job was to reform the bureaucracy to create a transparent and credible system in which emissions reductions from REDD+ projects were real and measurable.
He also said the country needed a new system to ensure money for REDD+ projects flowed directly to local people to incentivize them to save forests, fearing there could be "leakage" if the money flowed through regional governments.
He also pointed to the challenges of implementing a two-year moratorium from January on logging of protected forests and all peat areas, a key part of the Norway deal.
The moratorium has worried some palm oil and mining firms, which have large land banks that include rainforest.
Indonesia is the world's top palm oil producer and Mangkusubroto said palm oil firms with peatlands in their concessions would have to swap them with areas of degraded forest, adding the government was talking with palm oil firms one by one.
But he SAID talks had not reached the stage of looking at a map and discussing swaps. "We haven't gone into that level of detail yet."
He also said President Susilo Bambang Yudhoyono would issue within weeks a decree spelling out how to enforce the moratorium.
Editing by David Fox