Cut in log export tax fails to attact local timber firms

JAKARTA (JP): Selling logs overseas remains unprofitable despite the slashing of the export tax on the commodity, a senior forestry official said here yesterday.

Director General of Forest Utilization Harnanto H. Martosiswojo said the recent cut in the export tax to 30 percent from 200 percent should theoretically have boosted exports of the commodity.

In fact, none of the country's timber companies had so far sold their logs in international markets, he said.

Harnanto said companies still preferred selling their logs at home because the reference export prices set by the Ministry of Industry and Trade as the basis in collecting the export tax was still too high.

The floor or reference price of logs for exports is set at US$120 per cubic meter.

"At the exchange rate of Rp 15,000 per dollar, the log price in terms of rupiah reaches Rp 1.8 million," he said.

"It is too high and unprofitable for timber companies."

He added that with the current export tax, timber companies had to pay $36 for every cubic meter of logs they exported.

"I have suggested the Ministry of Trade and Industry lower the standard price by taking into account the international and domestic prices on logs or by setting a standard exchange rate."

Harnanto said many timber companies were also uninterested in selling their lumber overseas because they had their own supply.

Most of the country's timber companies have their own wood- processing industries, such as plywood factories, sawmills or furniture producers.

In accordance with economic reform programs agreed to with the International Monetary Fund and signed on Jan. 15, the government would reduce export taxes on logs, sawn timber and rattan to 30 percent by the end of June, 20 percent by the end of December this year, 15 percent by the end of December 1999 and 10 percent by December 2000.

The government previously imposed an export tax of 200 percent on logs in an effort to encourage timber companies to fulfill the domestic demand and to force buyers to purchase Indonesian processed wood.

Minister of Forestry and Plantations Muslimin Nasution issued a decree yesterday on a requirement that must be met by log exporters.

According to the decree, timber companies are obliged to conduct an environmental impact analysis of their logging operation before being allowed to export their lumber.

Exporters must also prove that they have paid the reforestation funds and the resource rent tax to the government.

The decree also stated that logs have to be felled from forest concession areas, timber estates, forests managed by the local people and plantations, but not from natural or virgin forests.

In a related development, AFP reported yesterday the Malaysian government has decided to lift the ban on importing Indonesian logs and sawn timber.

Malaysia's Primary Industries Minister Lim Keng Yaik said that the decision was taken to adjust in accordance with changes made by Indonesia.

"We are watching and monitoring the Indonesian policy and will adjust accordingly. Indonesia has reduced the export tax on logs to only 30 percent of the FOB prices."

He added that Indonesia had reduced its sawn timber export levy to $250 from $500 per cubic meter.

Malaysia barred the import of Indonesian logs and sawn timber early last year in a bid to cut the rampant smuggling and illegal timber trading which had soared due to the high export taxes. (gis)