Auction opens for forestry concessions

JAKARTA (JP): After several delays, the government finally opened the long-awaited auction for obtaining concession rights to carry out logging activities in the country.

Director General of Forest Utilization Waskito Soerjodibroto said on Tuesday the auction, the first open bidding system to award forest concession rights to investors, would be made for 170,000 hectares of forest blocks in Central Kalimantan and Irian Jaya.

"The concessions to be offered are 70,000 hectares of forest in Central Kalimantan and 100,000 hectares in Irian Jaya," he said, adding that prospective bidders must submit their application letter before June 8.

Waskito said the logging rights on offer were those which formerly belonged to companies which had been suspended after failing to meet administrative requirements.

He guaranteed the concessions to be auctioned still possessed virgin forests and productive logged-over areas.

"The bidder's application should provide important information, including the technique it will use in managing the forests, investment plans and development plans for people in nearby villages..."

He said bidders must also employ forestry expert staff, be financially sound and be active in agribusiness or the forestry business. They also must open their headquarters in the province where the concessions areas are located.

"The applications will be processed within seven days. After announcing the names of the bidders who meet our requirements, we will brief them on the mechanisms of the auction and then we will show them the concession areas. After that, those taking part in the auction must submit their bidding prices.

"The bidding prices, together with the technical proposal, must be received by the tendering committee within 60 days after the briefing day," he said.

The prospective bidders are also obliged to submit auction costs, which is 10 percent of the projected net profit in their proposals.

The successful companies must pay the government at least 10 percent of their annual net profit gained from exploiting the concessions areas. The payment of the contribution together with other forestry fees such as reforestation fees, royalty resource tax and concession fees are requirements to obtain an annual working plan.

Waskito said the tender committee would assess the bidding prices proposed by the companies and would then select three candidates for each concession to the minister of forestry.

"The minister will then choose the winner for each concession and the director general of forest utilization will publicly announce their names within seven working days," he said.

Waskito, whose office is under the forestry and plantation ministry, said auctions would be open to all cooperatives and private or state timber companies, which met the stipulated requirements.

He said the government would pay more attention to technical factors, such as the companies' ability to manage the forest in a sustainable manner, rather than just financial issues.

The auction is a marked shift from the government's customary policy of granting forest concessions without a competitive tender.

The government earlier planned to introduce the auction system by the end of July last year in compliance with the reform agenda agreed to with the International Monetary Fund.

It was repeatedly rescheduled to the end of 1998, and finally to the first quarter of this year.

The government first began to award forest concessions to private companies in 1971 under the Forestry Law, which grants concession holders the sole right to cultivate and exploit the forest in their concession areas.

The move led to a concentration of the country's forestry assets in the hands of a small number of business groups.

Waskito said at least 291 private companies are actively involved in logging activities on 33.9 million hectares of forests. (gis)