Government mulls tax incentives for timber estates

JAKARTA (JP): The minister of forestry, Djamaluddin Suryohadikusumo, said yesterday he was looking at tax incentives to encourage investors to develop industrial timber estates.

"We are considering an incentive allowing industrial timber estates to delay the payment of their property tax until they fell the trees they have planted," the minister said after opening a national ministry workshop.

Djamaluddin said a delay in property tax payment would reduce financial burdens and was necessary to encourage concessionaires to speed up the planting of trees because log production in natural forests was declining.

He said the government had allocated part of its reforestation funds for interest-free loans to concessionaires to encourage the development of industrial estates.

"It is not feasible for concessionaires to develop industrial timber estates, which need 10 to 20 years before they can be harvested, with commercial loans from banks with interest rates of up to 20 percent per annum," he said.

The loan facility might help concessionaires halve their financial costs, he said.

The minister said the development of industrial timber estates outside Java during the past three years had risen 899,411 hectares to 2.02 million hectares.

Of this 811,679 hectares was for pulp wood, 718,903 hectares for furniture wood and 200,314 hectares had been developed in cooperation with transmigrants, he said.

Indonesia has about four million hectares of planted forests.

Java has 2.1 million hectares of industrial timber estates of which 1.097 million hectares are hardwood forests and 1.004 million hectares lumber tree forests.

Djamaludin said wood procurement from natural forests had dropped 22.5 million cubic meters a year in the current Sixth Fire-year Development Plan from 31.4 million cubic meters a year during the previous development plan.

"We expect the production will decrease further to 20 million cubic meters a year in the Seventh Five-year Development Plan," Djamaludin said.

Illegal timber cutting, overcutting by concessionaires, the conversion of natural forests to non-forest facilities like palm oil plantations and population expansion caused the decline, he said. (10)