Apkindo cancels plan on plywood export deposit

JAKARTA (JP): The Association of Indonesian Wood Panel Producers (Apkindo) has canceled a controversial deposit requirement for its members which had been criticized as a violation of the IMF-brokered rescue package for Indonesia.

Apkindo executive director A. Tjipto Wignjoprajitno said yesterday the decision to remove the deposit requirement was made due to a continued drop in plywood prices.

"The decision to abolish the compulsory bond was taken to help plywood companies survive while facing the sharp drop in plywood prices," Tjipto said.

He said the price of Indonesian plywood overseas had declined since August due to a lower demand.

Plywood in China sold at $220 per cubic meter last month, a sharp drop from its average price of $400 per cubic meter last year. Plywood prices in European countries and the United States have also dropped 30 percent since late January, he said.

Apkindo issued a directive on Jan. 29 obliging all plywood companies to transfer to the association's bank account Rp 50,000 (US$5) for every cubic meter of plywood exported from early last month.

The directive to Apkindo's 112 company members said the fund was needed to facilitate the operations of Apkindo's center of statistics, which was established in January.

The association required plywood companies to submit certain information to the center every time they made an export shipment. The export information must include copies of export notification forms, bills of loading and other basic facts.

Tjipto said the decision to scrap the deposit requirement would help plywood producers who have already been hit by a declining demand from the country's two major buyers, Japan and South Korea.

Apkindo explained that the bond was a security to guarantee that each company would submit all required export information. Upon satisfactory submission of the information, the association said it would refund the deposits.

Many plywood companies, however, said the new directive broke the 50-point Memorandum of Economic and Financial Policies agreed to by the government and the International Monetary Fund on Jan. 15 as a condition to a $43 billion bailout package arranged by the IMF.

The memorandum, among other things, banned all formal and informal restrictive marketing arrangements and all other cartel- like practices in the plywood, cement and paper sectors from Feb. 1.

Minister of Industry and Trade Tunky Ariwibowo issued four rulings in late January which removed all restrictions on plywood trade, dismantled Apkindo's joint-marketing board and revoked the quota system in plywood exports.

Tjipto said accusations that the association had created a new monopoly arrangement by requiring its members to export solely through PT Karana Lines (controlled by Apkindo Chairman Mohammad 'Bob' Hasan) were not true.

He said 23 other local and foreign shipping companies were allowed by Apkindo to handle shipments as they had joined the association's center of transportation service.

He also denied that Karana had any preferences to transport plywood only to certain markets.

"Apkindo appointed those shipping companies, whose integrity has been proven, to curb the smuggling of Indonesian plywood," he said.

Tjipto said Apkindo's members were no longer obliged to sell through its overseas trading firms. "They are now free to deal directly with foreign buyers as required under the government's agreement with the IMF," he added.

Apkindo now functions mostly as a communication forum for plywood producers and a liaison agency between its members and related ministries, he said.

Indonesia is currently the biggest producer of plywood in the world. Last year, the country exported 7.58 million cubic meters worth $3.58 billion.

But Tjipto said the export value of Indonesian plywood was expected to fall almost 50 percent this year due to a drop in demand and prices overseas. (gis)