HTI deregulation is not enough: APHI

HTI deregulation is not enough: APHI

P.C. Naommy, The Jakarta Post, Jakarta

Industry players welcomed the issuance of new regulations on
industrial timber plantations (HTI), saying the new rulings would
solve some of the problems in the sector.

"The deregulation will resolve the bureaucratic and financial
difficulties faced by industrial players," said Nana Suparna of
the Indonesian Forest Concessionaires Association (APHI),
referring to ministerial decrees No. 46/2004 and 47/2004.

Ministerial Decree No. 46/2004 allows a private company to
raise its stake in an HTI it jointly owns with state-owned
companies by injecting new capital into the joint venture.

"This policy will entice investors to put more funds into
joint HTIs since they can earn shares," Nana said.

He also welcomed Ministerial Decree No. 47/2004, saying that
by allowing merger and acquisition opportunities, the new ruling
would open the door for new investors to join timber plantations
and also help companies with financial problems obtain funds.

However, Nana emphasized that these new policies were not
enough to answer the basic problems in the sector -- the lack of
legal and land assurances.

"The lack of law enforcement and security assurances over land
ownership and illegal logging have lessened investors' appetite
for the business," Nana told The Jakarta Post over the weekend.

Nana said the plantation business in Indonesia was not the
business of choice for investors in the forestry sector, pointing
out that only two million hectares out of eight million hectares
of total licensed timber areas had been planted so far.

He said that for businesses like HTIs, which promise returns
on investment over the long term, security assurances were badly
needed.

"In the timber business, people have to wait about six to
eight years for the plantations to yield wood for the pulp
industry, or about 30 years if the wood is meant for the
carpentry industry," he said.

The country's timber industry has been in the doldrums for
several years due to illegal logging, which has been on the rise
since the downfall of former president Soeharto.

Elfian Effendi, the executive director of Greenomic, a non-
governmental organization whose core interest is in forestry
policy and economics, said the government had failed to uphold
its own regulations regarding the forestry sector.

He cited cases in the timber plantation sector, such as the
improper use of reforestation funds by companies.

The funds are provided by the government to help companies
start timber plantation businesses. In many cases, the funds were
improperly used to subsidize a wide range of activities unrelated
to forestry.

According to data compiled by Greenomic, the total arrears for
reforestation and forest resource royalties reached Rp 1.28
trillion in 2003, with the biggest amount from Kalimantan
province, which accounts for 56 percent of the total national
arrears, or Rp 1.2 trillion in the period from 2001 to 2003.

Elfian added that unsustainable forest management and illegal
logging had caused major problems for the country's most valuable
natural resources.

Citing data from the Ministry of Forestry and the Ministry of
Settlement and Infrastructure, Elfian said that from a total
income of only Rp 16.4 trillion from the forestry sector in the
last six years, the government had to withdraw Rp 10 trillion in
just four months to cover losses caused by the floods in 2003.

New rulings to boost HTI sector

1. Ministerial Decree No. 46/2004: Allows companies to raise
stake in HTI jointly owned with state companies by injecting
funds in the joint venture.

2. Ministerial Decree No. 47/2004: Allows mergers and
acquisitions in the HTI sector.

3. Ministerial Decree No. 44/2004: Simplifies licensing
procedures for companies to obtain forest utilization licenses.
They are, among others, allowed to apply for licenses without
submitting a feasibility study to the Ministry of Forestry.

4. Ministerial Decree No. 45/2004: Simplifies procedures for
companies to submit annual working plans.

5. Ministerial Decree No. 43/2004: Allows companies to reschedule
payment of reforestation funds.