Abstract
Communities living surrounding forest have used state forest for grazing area in East Nusa Tenggara Timur Province, Indonesia for a long time.  However, Indonesia government have not given them a permit for managing state forest. Government will involve communities in state forest management   to generate people income but government ,as a principal, was worried that the communities, as agent,  will act in the way contrary to the interest of government. We used a principal agent theory to analyze principal agent problems which will occur if communities manage state forest for silvopasture purpose. The research showed that there are some principal agent problems in silvopasture contract if government give communities a permit for silvopasture purpose, i.e. communities, as agent, are not willing to plant trees and keep forest. Government must control communities to prevent some principal-agent problems in silvopasture contract.
Highlights
Communities have used state forests for grazing areas especially in East Nusa Tenggara Province (Kurniadi, 2017)
Indonesia government didn’t allow communities to use forests as grazing areas because the government feared whether communities manage unsustainably forest
Government will contract with people or a wide range of agencies to manage state forests (Kurniadi, 2017) and give the community an obligation to preserve the forest
Summary
Communities have used state forests for grazing areas especially in East Nusa Tenggara Province (Kurniadi, 2017). They have managed forests before the government determined the grazing area as state forest. Indonesia government is increasingly seeking strategies to improve forests by involving local people They launch a policy that leads communities to manage state forests and make some programs to generate income for people living surrounding forests. Indonesian government has not yet provided a silvopature area in East Nusa Tenggara Province because they are worried that the communities manage unsustainably the forest. There are principalagent problems if government grant communities a right for managing state forest (Zubair et al 2014). Forests are degraded because principal agent problems with moral hazard occur
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