Seventy-five percent of Indonesia's total land area of 191 million hectares was classified as forest land, and tropical rain forests made up the vast majority of forest cover, particularly in Kalimantan, Sumatra, and Irian Jaya. Estimates of the rate of forest depletion varied but ranged from 700,000 to more thaÍÍÍÍn 1 million hectares per year during the mid-1980s. In a critical evaluation of Indonesian forestry policy, economist Malcolm Gillis argued that deforestation could not be blamed on a single major factor but was instead due to a complicated interplay among commercial logging, Transmigration Program activities, and shifting or swidden cultivation, still practiced largely on Kalimantan. Gillis argued that the most immediate threat to Indonesia's forests was the government promotion of domestic timber processing, whereas the Transmigration Program was the greatest long-term threat.

The government had ownership rights to all natural forest, as provided for in the 1945 constitution (see The Constitutional Framework , ch. 4). Ownership could be temporarily reassigned in the form of timber concessions, known as Forest Exploitation Rights (Hak Pengusahaan Hutan), or permanently transferred, as in the case of land titles granted to transmigration families. The average concession size was 98,000 hectares, and the usual duration was twenty years. Foreign timber concessions were curtailed to conserve resources in the 1970s, and by the 1980s, of more than 500 active forest concessions, only 9 were operated by foreign firms. Log production peaked in 1979 at 25 million cubic meters, of which about 18 million cubic meters were exported as unprocessed logs. Restrictions on unprocessed exports in the early 1980s contributed to a decline in total log production, which fell to 13 million tons in 1982. However, increasing demand for sawn timber and plywood began to boost production again, bringing it up to 26 million cubic meters by 1987. In that year, about half of total log production was exported in the form of sawn timber and plywood, the rest going into domestic consumption. Log production again dropped at the end of the 1980s, falling to 20 million cubic meters by 1989. The government attributed this decline to policies designed to preserve the natural forest. One such policy was the increase in a levy imposed on loggers for reforestation, which was raised from US$4 to US$7 for every cubic meter of cut log.

Data as of November 1992