Thu, 02 Jul 2009
Benget Besalicto Tnb., The Jakarta Post, Jakarta

The Indonesian forestry industry could see up to Rp 15 trillion (US$1.5 billion) in investments this year, of which Rp 6.1 trillion has already been realized, a senior Forestry Ministry official said Monday.

Bedjo Santosa, director of production forest development at the ministry, said 24 investors - mostly local companies, with others from Japan, South Korea and the UK - with a total investment of Rp 6.1 trillion had been approved to develop 972,000 hectares of production forests in Sumatra, Java, Kalimantan, Nusa Tenggara, Maluku and Papua.

"I'm sure another Rp 9 trillion in investment in the sector will be realized later this year. And we expect to draw in at least the same amount next year," he told The Jakarta Post.

Bedjo added the ministry had targeted total investment of Rp 50 trillion in the production forest sector in 2008 and 2009. Last year, he said, total realized investments reached Rp 35 trillion.

He said the logs from the production forests would feed wood-related industries, in the form of plywood, sawn timber and wood chips, and to supply bio-energy plants for making biomass, in the form of wood pellets.

Bedjo said the Forestry Ministry would also approve a number of investments to develop production forests for food, in the form of sago, breadfruit and sap trees.

"During the last two years, investment in production forests have grown well, because there's a great future in this sector," he pointed out.

"And the investors, such as those from the UK, see the production forests as an opportunity to sell carbon at the international carbon market.

"So besides making a buck on the logs, they also benefit from trading carbon credits."

Hadi Daryanto, the Forestry Ministry's director general of production forest development, said the wood-related industrial sector had increased in the last two years, after the government decided to reform its investment regulations in the forestry sector, through, among others, the 2007 regulation on forest management and production forest development.

Hadi said the government had provided incentives for new investors and no longer required them to apply for new licenses for expansions or to make new and innovative products, such as wood pellets.

He noted it was also due to the banking industry's willingness to funnel credit to the wood-processing industry, previously considered a sunset industry.

During the last five months of this year, investment in the industry has reached Rp 1.2 trillion. Fourteen companies have been granted licenses to develop new plants with total investment of Rp 851.6 billion, while four other firms will expand their production capacities with total investment of Rp 366 billion.

"They will produce sawn timber, plywood, wood veneer and wood chips in Sumatra, Java, Kalimantan, Sulawesi and Papua, employing 65,000 workers," Hadi said, adding that last year, 11 companies had invested a total of Rp 861 billion in the wood industry.

He added several Korean companies would develop more than 700,000 hectares of production forests here, mostly in Kalimantan.

More than 200,000 hectares of it will be developed to produce raw materials for making biomass to meet the increasing need in Korea," he told the Post.

With Korea pursuing an economic policy of green growth, Hadi said, the country would substitute 5 percent of its total 8 million tons annually of coal with biomass in the near future.

"They've developed a wood pellet plant in Wonosobo *in Central Java* with total investment of $9.3 million.

"But due to a problem getting raw material, they can only produce 48,000 tons a year," he said, adding that 200 grams of wood pellets could produce 1 kWh of electricity.



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