Forestry fund audit set to wind up by June

Forestry fund audit set to wind up by June

JAKARTA (JP): International auditors are expected to complete
audits of reforestation funds and forest royalties before the
June general election, a senior World Bank official said on
Tuesday.

World Bank country director for Indonesia Dennis de Tray said
his institution would finance the auditing, including payment to
the international auditors.

"The international auditors will work together with BPKP (the
Development Finance Comptroller). The auditing process is
expected to be completed before the planned general election in
June," he said after meeting with Minister of Forestry and
Plantations Muslimin Nasution.

De Tray dismissed speculation that the hiring of international
auditors was pushed by the International Monetary Fund (IMF) and
the WB because the two institutions doubted BPKP's independence
in auditing the funds.

"No, no. It is simply because right now there is a lot of
distrust between the people of Indonesia and the government. So
we are trying to help the Indonesian government rebuild the trust
by making people sure that the processes are clean and
transparent."

Auditing of reforestation funds by independent international
auditors is stipulated in the Supplementary Memorandum on
Economic and Financial Policies, a reform package agreed to by
the government with the IMF in exchange for emergency funds of
US$49 billion.

The IMF targeted the reforestation fund because much of the
money, instead of being used to finance the country's
reforestation projects, was rerouted in the past to non-forestry
projects, including the national passenger jet project.

De Tray said he discussed with Muslimin several important
issues, such as future policies concerning reforestation funds,
including the use of bank guarantees to ensure timber companies
pay their funds and royalties on time, and also the export tax on
logs.

Muslimin said he had requested the IMF agree to postponing the
reduction on the export tax on logs from 30 percent to 20
percent, originally required by the end of 1998, due to the
declining log supply on the domestic market.

"Timber looting and smuggling are rampant in our country since
the economic crisis began. If we lower the export tax now, I
believe that the looting will continue and our forests will
continue to shrink.

"Besides, our wood processing industries are currently facing
a scarcity of logs. So we have lobbied the IMF to delay the
reduction of export tax on logs until our processing industries
could work more efficiently. The decision is still being
discussed."

The ministry's Director of Supervision and Distribution of
Forest Products Walter Nadapdap said local wood processing
industries faced severe shortages of logs with demand exceeding
supply.

"Demand has reached 57.18 cubic meters while supply stood at
4.8 million cubic meters."

Walter said the country's 1,701 sawmill companies, to operate
optimally, would need 26.57 million cubic meters of logs
annually, the 105 plywood industries 16.3 million cubic meters
and the six pulp and paper firms 14.31 million cubic meters.

The country's log supply only reached 45.8 million cubic
meters last year, 28.9 million cubic meters of which came from
natural forests, 9.9 million cubic meters from wood use permits
and seven million cubic meters from timber estates.

In June, as part of its agreement with the IMF, the
government replaced the technical ban on log exports with the 30
percent export tax, with a staggered reduction system to 20
percent by the end of 1998, and 15 percent by the end of 1999.
(gis)