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)