Govt asked not to cut log export tax further

JAKARTA (JP): Legislator Umbu Mehang Kunda has called on the government to delay the reduction of the export tax on logs to guarantee a sufficient supply for local wood-processing companies.

Umbu, the chairman of House of Representatives Commission III for agriculture, forestry and plantations, transmigration and food affairs, said maintaining the existing export tariff would encourage exports of processed wood.

"The government should renegotiate with the IMF (the International Monetary Fund) the agreement on the export tax on logs but it should not contravene the government's reform program agreed earlier with the IMF," Umbu said Tuesday.

He said that a further cut in the export tariff would encourage timber companies to export their logs rather than processed wood.

The government imposed a 200 percent export tax on logs in recent years before easing it to comply with the program agreed with the IMF.

In accordance with economic reform programs signed Jan. 15 with the IMF, the government agreed to reduce export taxes on logs, sawn timber and rattan to 30 percent by the end of June, 20 percent by the end of December this year, 15 percent by the end of December 1999 and 10 percent by December 2000.

"If the tariff is cut further, Indonesian wood-processing industries will be on the verge on bankruptcy due to the scarcity of logs. Besides, it will lead to the further destruction of the country's forests," he said.

"Exporting logs is a setback for Indonesian timber companies. So, I urge them to prioritize domestic demand."

He said timber companies should be allowed to export only after local demand had been met.

The Indonesian Forestry Society said earlier this month that local wood-processing industries were currently operating at only 30 percent to 40 percent of their production capacity due to the scarcity of logs.

The situation will get worse if timber companies exported their logs without considering local demand, it said.

The Association of Indonesian Wood Panel Producers (Apkindo) said that the reduction of the export tax on logs would only benefit foreign wood-processing industries.

Apkindo's production director, Martias, said wood importers such as the United States and European countries were imposing high import duties on Indonesian plywood.

"It is not fair because we've reduced the export tax on logs but are still burdened by high import duties," Martias said. (gis)