More than 20 firms bid in first forest auction

JAKARTA (JP): More than 20 private companies, cooperatives and state timber firms have applied to join the country's first ever auction of forest concessions to be held early next month, a senior official at the Ministry of Forestry and Plantations said.

Directorate General of Forest Utilization Waskito Soerjodibroto said that the government would auction three forest concessions in Central Kalimantan, Irian Jaya and Bengkulu early next month.

The concessions to be auctioned in Central Kalimantan and Irian Jaya cover around 100,000 hectares each, while the concession in Bengkulu covers 50,000 hectares.

"But I cannot reveal the locations of the concessions in order to avoid looting in the areas," he said.

"So far, more than 20 companies, both private and state-owned, and also some cooperatives, have applied to my office to take part in the auction. Next week, we will formally open the tender process by announcing the requirements of the auction in several large-circulation dailies. After that, I hope more companies will apply."

Waskito said prospective bidders should submit their applications to him in his capacity as the head of the tender committee.

"The bidder's application should provide important information, including the technique it will use in managing the forests," he said.

The bidders, he said, should also employ staffs of forestry experts, be financially sound and be active in agribusiness or the forestry business.

"After announcing the names of the bidders who meet our requirements, we will brief them on the mechanisms of the auction and then we will show them the concession areas in late February. After that, those taking part in the auction must submit their bids," he stated.

Waskito said the ministry's preferred prices for the concessions would be based on the forest's potential yield -- factoring in the number of trees and the current price of logs -- and the forest's function, including if it is a water catchment area and the biodiversity of the forest.

Prospective bidders will be obliged to provide a performance bond or bank guarantee in an amount commensurate with the potential yield of each concession area.

The bank guarantee is necessary to ensure companies or cooperatives pay their reforestation funds and forest royalties, he said.

Waskito said the tender committee would propose three winning candidates for each concession to the minister of forestry.

"The minister will then choose the winner for each concession and report his choices to the finance minister and other related ministers."

Minister of Forestry and Plantations Muslimin Nasution said a scoring system would be used in awarding logging contracts to ensure that only parties displaying a strong commitment to protecting the environment and empowering local people would win.

He said timber companies and cooperatives would be scored according to their ability to meet several requirements, such as involving local people in the management of the concessions.

"For example, cooperatives, small companies and timber companies with a good track record will be given a higher score. Whoever gets the highest score will get the logging contract. If a cooperative receives the same score as a timber company, the cooperative will win," he said.

Waskito said that only areas left vacant by suspended timber companies would be open for bidding because the government would not open any new forest areas to logging operations.

He said the concessions to be auctioned still possessed virgin forests and productive logged-over areas. In Bengkulu, where the area of virgin forest is very limited, the logging rights might be focused on developing timber estates.

The auction is a marked shift from the government's customary policy of granting forest concessions without a competitive tender.

The government first began to award forest concessions to private companies in 1971 under the auspices of the Forestry Law, which granted concession holders the sole right to cultivate and exploit the forest in their concession areas.

The move led to a concentration of the country's forests in the hands of a small number of business groups.

At least 389 private companies are involved in logging activities on 51.5 million hectares of forest, but most of the companies operate under 33 leading business groups.

Under the government's new regulations, each concessionaire will be limited to a maximum of 100,000 hectares of forest in a province. In addition, they can only control 400,000 hectares of forest nationwide. (gis)