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.