* Indonesia losing nearly $1 bln a year in timber royalties
* Report highlights ineffective law enforcement, poor auditing
* Points to rise in mining, palm oil, pulp and paper output
By Michael Taylor
JAKARTA, Oct 9 (Reuters) - Unreported forest clearing cost Indonesia up to $9 billion between 2003 and 2014 in lost timber royalties - about three times the royalties it actually received, an investigation by the country’s main anti-graft agency showed on Friday.
An eight-month investigation by the country’s Corruption Eradication Commission (KPK) estimated the value of the lost timber at up to $81 billion, with the cleared land often used for growing crops or mining.
A copy of its report, seen by Reuters and due to be handed to government ministers on Friday, will put further pressure on President Joko Widodo who has been criticised by green groups and other Southeast Asian nations on forestry policy and for failing to stop the annual “haze” problem from forest-burning.
“Where does the money go - it goes to the corrupters,” Dian Patria, group head of corruption prevention for natural resources at the KPK told Reuters. “It could be $9 billion, it could be more, because these are quite conservative figures.
“This is not only a corruption issue, it’s also about the long-term environmental impact.”
Home to the world’s third-largest tropical forests and a major palm oil and pulp and paper producer, Indonesia will be in the spotlight at the U.N.’s climate change conference in Paris in December.
Unregulated land clearing has long been a problem in the country, which lost 1.5 million hectares of tree cover last year, up from 1.1 million hectares in 2013.
The KPK report cited ineffective law enforcement, inaccurate production data and auditing by timber plantations, a lack of transparency on royalties data within government ministries, and poor coordination between central and regional governments as causes for the lost timber revenue.
Over the 12 years to 2014, Indonesia earned just $3.2 billion from timber royalties, said the report, which comes as Widodo’s government battles sluggish economic growth.
Late last month, Indonesia announced it would borrow $4.2 billion from international agencies to cover a widening budget deficit.
The report, which did not name any companies or individuals, highlighted rising timber prices and land clearing for the rapid expansion of palm oil and pulp and paper production, as well as mining.
The worst year for state losses was in 2012, it showed, one year after the government signed off on its ban on primary forest clearing.
The KPK will hand its report to the forestry and finance ministries and the country’s audit agency, and will monitor the development of action plans to correct problem areas, Patria said.
If no action was taken within 12 months it could hand its findings to its corruption investigations arm, he added. (Reporting by Michael Taylor; Editing by Richard Pullin)