CIFOR calls on govt to put off forest firm assets sales

CIFOR calls on govt to put off forest firm assets sales

Agence France-Presse, Jakarta

Foreign donors must ask the Indonesian Bank Restructuring Agency (IBRA) to delay the sale of forestry companies at cheap prices because it would only lead to further deforestation, an environmental group said Wednesday.

The sale of forestry companies linked to dissolved banks by IBRA would allow those companies or their associates to buy them back cheaply, said David Kaimowitz of the Center for International Forestry Research (CIFOR).

Such cheap purchases would allow them to get future new loans to expand their forestry activities, when pulp and plywood mills were already devouring wood much faster than forests can grow, Kaimowitz added.

IBRA manages assets of banks closed by the government due to liquidity problems or insolvency after a series of loans by the central bank between 1997 and 1999.

Much of the central bank's liquidity assistance to numerous private banks hit by the regional financial crisis were misused by the recipients for foreign exchange speculation, lendings to affiliated businesses -- including forestry-related companies -- and repaying subordinate loans.

Past state audits have shown more than 95 percent of the Rp 144.5 trillion (US$16.3 billion) in credits has been misused.

Kaimowitz said foreign donors grouped in the Consultative Group on Indonesia (CGI) who will hold their annual meeting later this month should ask IBRA to postpone the sales despite its short-term aim to improve Indonesia's economy.

Indonesia has made past commitments to CGI to speed up privatizations and sales of assets of debt-ridden companies in return for new loan programs.

He said some 11 percent of the loans IBRA was selling were debts owed by forestry-related companies.

But the agency's aim to sell the loans of the indebted forestry companies at 10-12 cents to the dollar would spark the buy back, Kaimowitz warned.

"Of course they want to buy these loans at these prices. We don't have any solid proof of this but we suspect very strongly that the people who will end up buying these loans are the company themselves so they will be able to wipe off their books, something like 90 percent of their debts," he said.

Then the companies will "go out and borrow money again making the problems that much worse."

He said CIFOR -- which serves as a technical advisor to the Indonesian forestry ministry -- would raise the issue with the World Bank and the International Monetary Fund (IMF) at the CGI meeting.

The sales must be postponed "until the other agencies that are involved in this process -- the forestry ministry, the coordinating minister of economy -- have the ability to go through and see which of these companies should actually be downsized and have their licenses revoked."

"Once the government sells of these loans, it will be very difficult for the country to meet its previous CGI commitments and close the companies because the country itself would have just sold the loans and the companies would come back and say that they have the right to operate," he said.

During the rule of former dictator Soeharto, the government took control of forests and dispensed huge tracts for his family and cronies to exploit.

A report compiled last year by the World Resources Institute, Global Forest Watch, and Forest Watch Indonesia Reports said Indonesia was now losing nearly two million hectares of forest annually -- an area half the size of Switzerland.

Forest cover fell from 162 million hectares in 1950 to only 98 million hectares in 2000, they said.