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)