Forest royalties may be raised this year: Minister

Forest royalties may be raised this year: Minister

JAKARTA (JP): Minister of Forestry Djamaludin Suryohadikusumo
said yesterday that the government is likely to increase forest
royalties in the second half of the current (1996/97) fiscal year
if world prices of forestry products continue to increase.

Djamaludin said, however, that the royalties will remain the
same for the current fiscal year half starting April 1.

The government's decision not to increase the royalties, he
said, was made after calculating earlier this year that the
increase of world plywood prices by about 20 percent last year
had not exceeded the highest price reached in 1994.

"And because the levels of the royalties are determined, among
others, by price fluctuations on the world market, the government
decided not to increase the royalties for the first half of this
fiscal year," Djamaludin told reporters here.

Strong

"But if prices remain strong, or continue to rise, we can hope
to see forest royalties go up in the second half of the current
fiscal year," he added.

Forest royalties are among the fees that forest
concessionaires must pay in order to operate. The rates of forest
royalties are usually reviewed every six months.

The last time the government increased forest royalties was
last August, when royalties were raised between 9 and 27 percent
to reflect price rises on the world market and inflation.

The ruling, which was enforced through a ministerial decree,
became effective between Aug. 1, 1995 and March 31, 1996.

The government's decision not to increase the royalties for
the first semester of this year will cause the ruling to remain
effective until September.

Djamaludin said yesterday that forest royalties make up 6
percent of the price of forest products, which include logs,
resin and rattan.

He said that forest concessionaires must not consider the
royalties as an obstacle to becoming more competitive.

"Of course, forest concessionaires can only say they will
become less competitive if their competitiveness depends on the
price of raw materials... But they must learn to see another
aspect, efficiency, as the main factor determining competitive
strength," he said.

Djamaludin said that 45 percent of forest royalties currently
go to the local administrations for local forest development, 20
percent are paid as land tax, 15 percent go to the central office
of the Forestry Ministry for national forest development and 20
percent are paid to the state treasurer.

"In the end, the royalties go back to the forests and are used
to secure their sustainability," he said.

The government in fiscal 1995/96 collected Rp 430 billion
(US$186.96 million) in forest royalties. The provinces which
contributed the most were Central Kalimantan (Rp 95 billion),
East Kalimantan (Rp 87 billion), Riau (Rp 39 billion), West
Kalimantan (Rp 32 billion) and Irian Jaya (Rp 28 billion).

Djamaludin said the recent increasing concern for
environmental and social issues must encourage forest
concessionaires and forest-based industries to be willing to pay
more for forest development.

"They can't expect to keep seeking higher profits as they did
20 years ago, when the government first started issuing forest
concessions to the private sector," he said.

"Nothing is free. Paying for environmental and social damages
they have caused to the forests must now be seen as a cost, and
no longer a voluntary contribution," he said.

Djamaludin said the government can now monitor the companies'
activities by checking on their balance sheets which must comply
with the special standard accounting method for forestry-based
companies. The method was introduced last year.

The government presently requires forest concessionaires to
carry out a number of social and environmental activities in
order to continue operating. Such activities include "social
forestry" projects in which local people must be involved in the
concessionaires' activities. (pwn)