The State Forest Company of Indonesia launched its Company-Community Forestry Partnerships system on the island of Java in 2001 (PHBM system). We examined the PHBM's effects on the economic lives of participating villagers through a case study in Madiun, East Java. We specifically examined the potential and limits of the PHBM's contribution to villagers' livelihoods by quantitatively evaluating (i) the system's impact on household livelihoods and (ii) the continuity of its impact. Of households engaging in PHBM, 45.6% had more than half their arable land in the forest, and 10.0% of households had arable land only in the forest. The bulk of non-timber forest products, mostly fuelwood, was collected in the forest. Among villagers earning an income, 12.2% earned more than half via the PHBM, which was the only source of cash income for 2.2% of the engaged villagers. For some households, PHBM has helped significantly improve their livelihoods. However, the benefits derived from the PHBM were tempered by problems of quality, quantity, and continuity. The benefit of the system could be increased by providing preferential opportunities (to access farmland in the forest and/or cash income) to small-scale or impoverished farmers by improving the usage of intercropping land under planted trees, and promoting small business as a group enterprise.
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