'Illegal logging troubles plywood industry'

Adianto P. Simamora, The Jakarta Post, Jakarta

The Indonesian Plywood Association (Apkindo) said rampant illegal logging had created serious difficulties for the country's plywood industry with many companies going out of business during the past couple of years.

Apkindo chairman Martias said on Tuesday that the logs had been smuggled out of the country particularly to Malaysia and China allowing plywood companies there to enjoy lower production costs because the cheaper illegal logs were not burdened with forestry-related charges.

"Around one third of 115 local plywood factories have closed their operations mainly due to the rampant illegal logging," he told reporters on the sidelines of a seminar.

He warned that without immediate action to curb illegal logging, more plywood companies would go bankrupt.

He said that domestic plywood companies had been losing the market share at home because overseas plywood makers were flooding the home market with cheaper plywood made from Indonesian logs.

"Imported (plywood) products now control 60 percent of domestic market," he said.

He added that the influx of cheaper imported products from Malaysia and China had put a pressure on the price, now hovering at around US$200 per cubic meter.

The international plywood price now stands at about $250 per cubic meters.

Martias also said that the country's plywood exports had declined to 6 million cubic meters last year from 8 million in 1997.

"China has became one of the plywood exporters to Indonesia by using logs illegally purchased in this country," Martias said.

China in the past imported around 1.1 million cubic meters of Indonesian plywood per year.

Illegal logs procured by China are believed to come from Jambi and Riau provinces, while those going to Malaysia come from East Kalimantan and West Kalimantan.

According to one estimate, illegal logs sold to Malaysia and China reached 300,000 cubic meters per year.

Director General of Foreign Affairs at the Ministry of Trade and Industry Sudar SA said last week that the government was planning to impose a permanent ban on log export to protect forest resources.

The government eased restrictions on log exports in 1998 by slashing export tax from 200 percent to 10 percent as part of an agreement with the International Monetary Fund. The policy prompted logging companies to sell logs overseas to obtain hard currency.

Analysts said that in addition to the illegal logging activity, the plywood industry has also been hit by the global economic slowdown and the lack of funding from domestic banks to provide working capital particularly to replace old machinery.

Martias admitted that the lack of bank loans and security disturbances in certain areas had been a problem.

"The increase in fuel prices, electricity rates and the regional minimum wage has also hampered the development of plywood industry," he said.