'Illegal logging troubles plywood industry'

'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.