The relationship between political and economic power, timber markets and the sustainability of the forests in Indonesia, after decades of relative certainty, has been in a period of change and uncertainty since 1998. This chapter reviews the domestic and international political and economic alliances that supported oligarchic power in the timber sector during the New Order period (Robison and Hadiz 2004). Oligarchy in the timber sector was part of a more general phenomenon in the Indonesian political economy – of concentrated benefits from economic growth (Winters 1996). However, the social and environmental costs of such growth have been dispersed. In the case of timber, these costs have been concentrated in the resource-rich regions of extraction in Sumatra, Kalimantan and, increasingly, eastern Indonesia.

The reformasi period since 1998 and the specific International Monetary Fund (IMF) conditionalities that dismantled the marketing power of the Indonesian Plywood Producers'Association (Apkindo) have altered longstanding relations in the timber sector. Globalisation of markets and changes in regional markets, notably the emergence of China as a key importer, further challenge the old forces. Signs of the enduring power of the old oligarchy have also emerged, however. They include the re-implementation of the log export ban, the formation of a new industry organisation, the Wood Industry Revitalisation Agency (BRIK), and the lack of resolve within the Indonesian Bank Restructuring Agency (IBRA) to use its authority over financially troubled industries to reduce excess industrial capacity in the timber sector. The persistence of the old oligarchic powers, in conjunction and competition with decentralised state forces (including the military) and market forces, both legal and illegal, poses an increasing threat to the sustainability of Indonesia's timber resources.