Govt permits joint venture in timber, pulp industry

Govt permits joint venture in timber, pulp industry

JAKARTA (JP): The Ministry of Forestry has licensed a joint
venture between the Bumi Raya Utama Group and the state-owned PT
Inhutani II to establish an industrial timber estate for the pulp
industry.

The license is the first to be issued since the government
reopened the pulp-centered timber estate sector to investors,
according to Bisnis Indonesia daily.

The planned 150,000-hectare timber estate will be established
in Sanggau, West Kalimantan, with an investment of up to Rp 2.2
trillion (US$964.9 million).

Inhutani II and Bumi Raya have reportedly signed a memorandum
of understanding for the establishment of the joint venture,
which will operate both the forest concessionaire and the
company's future wood-based plant.

Under the agreement, Bumi Raya will own 60 percent of the new
company's shares and Inhutani the remaining 40 percent.

Funds for the venture would be obtained from bank loan
syndication.

This is the first time a state-owned forestry firm has had
shares in a wood-based joint venture with a private company.

The Ministry of Forestry had previously closed the timber-
estate sector to new investors after licensing 13 projects for
environmental reasons.

However, it opened up the sector again to new investors in a
bid to boost pulp production -- the raw material in the paper
industry -- and to bring down prices of paper which had soared
earlier this year.

So far seven investors have reportedly expressed interest.

Many investors interested in establishing pulp and paper
plants had been denied licenses because the ministry has
stipulated that wood supply must come from timber estates grown
by concessionaires on normally unproductive, flat and empty land
with an area of at least 300,000 hectares or more.

Industries are not allowed to fell trees from existing natural
forests.

Minister of Forestry Djamaludin Suryohadikusumo said in June
he was doubtful that investors would be able to meet the
stipulation because there are very few areas in the country which
meet the government's requirements.

He said, however, that to ease investments, prospective
investors would be allowed to establish timber estates for pulp
production in areas of about 150,000 hectares.

He also stipulated that private investors should involve state
firms in the ownership of the new timber estates and pulp and
paper plants. (pwn)