Govt to shut down five state-owned forestry firms

Rendi A. Witular, The Jakarta Post, Jakarta

The government plans to liquidate five state-owned forestry firms, Inhutani I through to V, and transfer the firm's control of 9 million hectares of badly damaged forest to the local community and private firms, an official at the Ministry of Forestry said.

Ministry spokesman Tachrir Fathony told The Jakarta Post during the weekend that the ministry was now waiting for the President's approval to close the firms.

"We expect the President will give her approval soon," Tachrir said.

The liquidation plan was made after the companies' profitability declined in the past three years. In addition, the companies had also failed to rehabilitate forest areas damaged by unscrupulous forest concessionaires.

As an example, Inhutani I, whose operation covers a vast areas in East Kalimantan, Sulawesi and Maluku, saw a significant decline in net profit from Rp 59 billion (US$6.7 million) in 2000 to only Rp 15 billion in 2001.

Tachrir said the declining profit had caused the firm to be unable to properly perform its forest rehabilitation task.

Thus far, the five firms control some 6.5 hectares of badly- damaged forests and around 2.4 hectares of industrial plantation estate areas.

Tachrir said the firms could no longer perform sustainable forest management to produce logs for domestic and international markets as the firms' industrial plantation estates were not productive.

Tachrir said the Minister of Forestry M. Prakosa had proposed in late December to close the five forestry companies.

If the president approved the decision, the ownership of the forests would be transferred to the local community as community forest, if it is located near villages.

Remote forest areas will be auctioned to private firms to be turned into plantation estates.

Inhutani was first established by the government in 1972 to manage and protect the country's forests.

The tasks comprises setting up industrial plantation estates to supply timber for privately owned forestry companies, forestry-based product industries and rehabilitating damaged forest areas and conserving and sustaining production forest.

However, inefficient management and rampant illegal logging, which produces cheap timber, has impacted on the firms.