Wed, 14 Sep 1994

Forestry to adopt better accounting method

JAKARTA (JP): The forestry industry is expected to adopt a standardized accounting method by the end of this year, says Minister of Forestry Djamaloedin Soeryohadikoesoemo.

"The Ministry of Forestry will cooperate with the Association of Indonesian Accountants and some experts from universities to formulate the standardized accounting methods," Djamaloedin told reporters on Monday.

He said standardization is needed to determine the precise level of economic rents that the government or communities can derive from forest concessions to timber companies.

Indonesian forestry regulations stipulate that timber estates are state properties which are given out to concessionaires for a limited period of time.

For the forest industry, economic rents can be regarded as earnings in excess of total production costs including operating expenses, depreciation, overhead and transportation costs.

In Indonesia, such earnings are usually obtained from forest royalties, reforestation funds and corporate taxes from timber companies.

"Today we have no uniformed way to define the rents," said the minister.

"I expect that the new accounting method will lead to a levies collecting mechanism which is closely related to the fluctuation of the prices of forest-based products," he said.

Indonesia, which currently has 113 million hectares of forests with reserves of some 2.4 billion cubic meters of timber, last year exported US$5.47 billion worth of wood products, accounting for 14.86 percent of the country's total exports.

Forestry economic experts Don Fletcher and Simon Henderson argue in their joint paper that the absence of a large domestic log market and the existence of transfer pricing between concessions and integrated processing industries make the estimation of the real value of roundwood "contentious" and "open to manipulation."(hdj)