Govt may set up alternative forestry financing
Govt may set up alternative forestry financing
Annisa S. Febrina, The Jakarta Post, Jakarta
With the goal of helping the ailing forestry industry, the
government plans to set up an independent financing institution
to revitalize and support timber-processing companies with fresh
funds.
"The alternative financing institution will help provide the
much-needed funding to revamp the industry's aging machinery,"
Ministry of Forestry director general of forestry production
development Hadi Pasaribu said on Thursday.
Aging machinery is the reason for inefficiency in most timber-
processing firms and most of the equipment is not suited for the
increasingly smaller logs produced nowadays, Hadi explained.
The forestry ministry announced earlier in its assessment of
the national timber industry that only 14 out of 140 registered
companies showed fairly good financial and environmental
performance.
However, most of the 14 best performing companies had an
efficiency rate of some 50 percent, a joint study from
environmental group Greenomics and Indonesian Corruption Watch
(ICW) revealed.
A timber processing company with an efficiency rate of 50
percent can only process half of the raw material it consumes,
leaving the rest as waste.
The same resource-based industry in developed countries,
utilizing a newer generation of machinery, produces almost zero
waste.
Hadi said that replacing the machines would cost millions of
dollars.
Unfortunately, banks are reluctant to provide loans due to the
industry's notorious environmental image, Greenomics executive
director Elfian Effendi said previously.
"We have had discussions with the World Bank to help provide
the starting fund through soft loans," Hadi added.
The bank's environmental division head was unavailable for
confirmation on Thursday.
Other sources of startup funds will come from the ministry's
forest rehabilitation funds, estimated to reach Rp 5 trillion
(around US$500 million) this year. The forestry ministry collects
a certain percentage of revenue quarterly from timber-processing
companies to rehabilitate natural forests.
However, the reallocation of the fund will still need the
approval of the House of Representatives.
The setting up of the financing institution is part of the
government's effort to revitalize its forestry industry.
However, aside from solving the problem of financing, the
companies themselves must made a commitment to restructure their
businesses, Minister of Forestry M. S. Kaban said.
"They will have to start thinking about inviting investors and
seeking alternative materials to timber," Kaban said, pointing to
China and Malaysia that have begun using bamboo and other
available resources.