Merging timber firms 'counterproductive'

JAKARTA (JP): Director General of Forest Utilization Titus Sarijanto said yesterday that merging state timber companies into a single entity would be counterproductive.

Titus also said that merging the six forestry companies under the control of the Ministry of Forestry and Plantations was not necessary because their respective financial performances were relatively strong.

"That fact that each company operates in different provinces complicates any proposed merger," he told the media at his office, adding that the large areas managed by the five state companies also posed a problem for any such move.

The ministry controls six state timber companies, PT Inhutani I to V and PT Perum Perhutani.

Inhutani I manages forests in East Kalimantan and Maluku, Inhutani II has operations in South and East Kalimantan, Inhutani III operates in West and Central Kalimantan, Inhutani IV oversees forests in Aceh, North Sumatra, West Sumatra and Riau, and Inhutani V manages forests in Jambi, South Sumatra, Bengkulu and Lampung.

PT Perum Perhutani manages forests in Java and East and West Nusatenggara.

A senior ministry official said yesterday that state timber companies PT Inhutani I through to V would not need to be merged into a single company because they were in good financial health.

But Titus said the ministry was still considering plans to merge PT Inhutani IV and PT Inhutani V, which both operate in Sumatra, due to their smaller operating areas and declining forest stocks on the island.

"We are still studying the feasibility of merging these two companies. Timber companies have to own large areas of land to support their efforts to managing forests in a sustainable manner, but overly large areas could be unmanageable," he said.

Speculation about possible mergers among the five state timber companies was triggered by the government's Jan. 15 agreement with the International Monetary Fund, which states that decisive action to restructure, close or privatize poorly performing state enterprises must be taken.

Over a dozen state companies under the auspices of the Strategic Industries Supervisory Agency (BPIS) are to be merged following the agreement. The government also plans to merge four state banks and 18 state companies under the control of the Ministry of Communications.

Titus said it was almost impossible to sell shares in forestry companies to the public because their main asset, the forest areas which they are licensed to exploit, belonged to the government.

"Forest concession holders have been given rights to exploit forests in their designated areas, but the forests remain government property," he said. (gis)