Forest agency wants tax exemption for imported timber

Rendi A. Witular The Jakarta Post Jakarta

The newly established Forestry Industry Revitalization Agency (BRIK) is urging the government to grant a tax break to local timber-related industries in the import of logs to maintain competitiveness of their products in the export market.

BRIK head Soewarni told The Jakarta Post that the agency had also been talking with the Directorate General of Customs and Excise to seek ways to smooth the import clearance procedure for the raw material.

She explained that timber-related industries had been forced to import logs after the government drastically limited logging at home in a bid to protect the country's old-growth forests.

"The government urges us to use imported logs to fill the industry's timber needs and capacity. But the effect is that our products will not be competitive for export because of the higher cost," Soewarni said.

She said that imported timber was subject to a 7.5 percent value-added tax, 10 percent import duty and a 7 percent income tax.

She added that the industry had often been forced to pay illegal fees and deal with long bureaucratic delays at the customs office.

To expedite import clearance, Soewarni said that the agency had proposed to the Directorate General of Customs and Excise to allow imported logs to pass through the green lane without being subjected to a customs inspection.

The timber-related industry has been one of the country's major export earners. Some 60 percent of export earnings comes from the plywood industry.

However, from 2000 to 2002, annual export earnings from the timber industry only totaled about US$4 billion per year on average, compared to the average figure of $8 billion per year from 1997 to 2000.

The government's policy to limit logging will drastically cut the supply of logs, particularly for the plywood industry. This has forced the industry to look for logs overseas. The government has also intensified measures to curb illegal logging, which has further limited the availability of raw material at home.

This year, the Ministry of Forestry has decided to curtail the supply of timber to only 6.8 million cubic meters from last year's 12 million cubic meters.

This decision had been strongly protested by the plywood industry because their huge production capacity of 30 to 40 million cubic meters per year needs a large amount of timber.

The new policy will inevitably force costly machinery to become idle.

The incredibly huge discrepancy between supply and demand, which devours wood much faster than forests can grow, is the main stimulus that leads to illegal logging.