In the late 1960s, Philippine log exports began to decline; at the same time, Indonesia's timber exports began to soar. By 1973 Indonesia had replaced the Philippines as the world's leading hardwood exporter. Timber also became Indonesia's largest source of foreign exchange, after oil.

The case of Indonesia differs from the others in three important ways. First, its forestry institutions were far weaker. In the Philippines, Sabah, and Sarawak, rent seizing damaged the institutions that fostered sustained-yield forestry. The Indonesian government had no such institutions in the 1960s and early 1970s; there was little to dismantle. But the Indonesian forests had been protected, in part, by nonstate institutions – the institutions of adat, or customary law. Of the four cases in this study, Indonesia and Sabah had made the greatest strides – before their timber booms – toward recognizing the customary land rights of forest dwellers. Shortly after the timber boom began, the Indonesian government rescinded those rights, to boost the size of the windfall.

Second, Indonesia's boom was not triggered by rising international timber prices; rather, it was caused by the government's efforts in 1966 and 1967 to lower the costs of cutting and exporting timber.