Kiani Lestari gets reforestation funds for its pulp factory

JAKARTA (JP): Minister of Forestry Djamaludin Suryohadikusumo confirmed yesterday that his ministry had lent Rp 250 billion (US$108.70 million) in reforestation funds to PT Kiani Lestari for its pulp and paper factory.

Djamaludin said the loans were given to the company "to save state funds" in Kiani Lestari's pulpwood estate, which was ready for harvest.

"If we don't help (the factory), the seven-and-eight-year-old timber at Kiani Lestari's pulpwood estate cannot be harvested and the government will suffer losses, because it has a 40 percent stake in the timber estate," he told reporters.

He said the ruling did not only apply to Kiani Lestari, which is controlled by timber baron Mohamad "Bob" Hasan.

"The government may provide loans from reforestation funds to pulp and paper companies whose pulpwood estates were built (partly) using reforestation funds," Djamaludin said.

But he said the funds should be complementary.

"Eighty percent of a factory's construction should be paid for by a company's own sources... so it does not rely too much on reforestation funds," he said.

Reforestation funds would comprise only 20 percent of the total investment in a factory, and they would be granted after construction has been completed, he said.

According to regulations, reforestation funds -- which are raised from concessionaires' fees -- should only be used for developing timber estates.

Bob Hasan signed a syndicated loan last May to finance the construction of Kiani Lestari's pulp plant in the East Kalimantan village of Mangkajang in Berau regency.

Bank Negara Indonesia 1946 arranged the US$410 million syndicated loan, and Bank Dagang Negara and Bank Umum Nasional were co-arrangers.

According to reports, President Soeharto issued a presidential decree earlier this month instructing the Ministry of Forestry to loan reforestation funds to Kiani Lestari's pulp factory.

Djamaludin acknowledged yesterday that the decree existed.

Bob Hasan said the loan would help pay for the $930 million factory: $520 million of the would be self-financed by the company.

The 3,400-hectare factory, expected to produce up to 1,500 tons of pulp a day or 500,000 tons a year, is to start production in early 1997.

Raw material for the Kiani Kertas factory is expected to come from Kiani Lestari's 180,000 hectares of pulpwood plantations in East Kalimantan.

Djamaludin said the loans to Kiani Lestari would have an annual interest rate of 6.7 percent and a maturity of eight years, including a three-year grace period.

"This is not government equity participation or a joint venture," he stated.

He said the government would not provide loans for the factory's construction if the company's pulpwood estates did not use reforestation funds.

"Factories such as (those belonging to) PT Riau Andalan Pulp and Paper and PT Indah Kiat cannot get the loans because they built their timber estates with their own resources," he said.

Riau Andalan and Indah Kiat are owned by Sukanto Tanoto and Eka Tjipta Wijaya, respectively.

Djamaludin denied that the government was favoring Bob Hasan who has close ties with President Soeharto.

"It's only because they have the factory... If Barito Pacific has a factory, it may ask for the same facility," he said.

But he acknowledged there were no ministerial decrees to regulate loans from reforestation funds. (pwn)