More than 20 firms bid in first forest auction

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)