Auction opens for forestry concessions

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)