Govt increases forest royalties by 10 percent

Govt increases forest royalties by 10 percent

JAKARTA (JP): The government increased forest royalties by 10
percent yesterday after taking into account the favorable prices
of log and plywood on the international market.

Minister of Forestry Djamaludin Suryohadikusumo said yesterday
the new royalties, stipulated under Ministerial Decree No. 172,
1997, would take effect today and be in force until March 31,
1998.

Djamaludin said log and plywood prices on the international
market were a high US$500 per cubic meter from about $350 several
months ago.

"I think this gives us reasonable cause for asking businesses
to set aside part of their profits to pay higher royalties," he
told a press conference.

He was accompanied yesterday by executive chairman of the
Association of Indonesian Wood Panel Producers, Tjipto
Wigjoprajitno, and executive chairman of the Association of
Indonesian Forest Concessionaires, Hendro Prastowo.

Djamaludin said, however, royalties on wood chips, timber
derived from industrial timber estates and forest byproducts --
otherwise known as nontimber products -- would not be increased.

"Prices of pulp, which is made from wood chips and waste
timber, fluctuates periodically on the market ... They reached
$900 a ton several months ago but then fell to only $350 a ton
and have not increased since," Djamaludin said, explaining why
royalties for wood chips remained the same.

He said the government also intended to encourage the
establishment of timber estates as a source of raw material for
industries and thus decided against increasing royalties on
timber estate products.

He said royalties on forest byproducts or nonforest products
were not increased because products in this category were mostly
processed by small businesses and used for domestic consumption.

Nontimber products include rattan, turpentine, birds nest,
bark, bamboo and honey.

Forest royalties are among the fees that forest
concessionaires must pay in order to operate.

Together with reforestation funds, they are designed to
guarantee that concessionaires manage their forests in an
environmentally sustainable manner.

Djamaludin said the government did not increase reforestation
funds as the funds would soon be incorporated as government
nontax revenue. The bill on nontax revenue is currently being
deliberated by the House of Representatives and is due for
approval later this year.

The new royalties for meranti timber (Shorea), which is mostly
used for plywood, now range between Rp 23,000 and Rp 28,500 per
cubic meter.

Royalties for ebony and sandalwood now range between Rp
280,200 and Rp 339,500 per ton and for teakwood between Rp 8,500
and Rp 32,700 per cubic meter, depending on log diameter.

Djamaludin said the government expected to increase its
revenue from forest royalties by Rp 50 billion ($20.8 million) as
a result of the royalty increase.

Forest royalties collected in the 1996/1997 fiscal year which
ended yesterday stood at Rp 527 billion, up from Rp 430 billion
in 1995/1996.

Forest royalties currently make up about 6 percent of the
prices of forest products.

Their amount depends on the type of product and its origin,
meaning that the same species of timber may be subject to a
smaller royalty if it came from a region with poor infrastructure
than if it came from an area with sound roads and transportation
facilities.

The government usually reviews the royalties after comparing
prices on the international and domestic market every six months.

The government last raised the mandatory royalties by 10
percent last October to reflect price rises on the world market
and inflation.

The government during the January to December period of last
year managed to collect Rp 592.78 billion ($247 million) in
forest royalties, up from Rp 539.33 billion in 1995 and Rp 428
billion in 1994.

The provinces which contributed the most during the 1995/1996
fiscal year were Central Kalimantan (Rp 95 billion), East
Kalimantan (Rp 87 billion), Riau (Rp 39 billion), West Kalimantan
(Rp 32 billion) and Irian Jaya (Rp 28 billion).

The government decided not to raise the royalties during the
April to September period of last year because of unfavorable
plywood prices at that time.

Forty-five percent of the forest royalties are currently paid
to local administrations for local forest development, 20 percent
as land tax, 15 percent to the forestry ministry's central office
for national forest development and 20 percent to the state
treasurer. (pwn)