New tax will reduce RI wood's competitive edges

JAKARTA (JP): The Association of Indonesian Forest Concessionaires (APHI) expressed concern on Thursday that the planned progressive levies to be imposed on timber companies will make Indonesian wood-based products less competitive in international markets.

APHI chairman Adi Warsita Adinegoro said the levies should be set at a level which would not increase the cost of logs and thus also the price of wood-based products.

"Basically we support the government's plan (to impose progressive levies), because the idea is beneficial to the promotion of a people-oriented economy.

"But the rate of taxation should be set at a level which will not reduce our competitiveness in the international market," he said.

APHI's treasurer, Zein Mansyur, said several main buyers of Indonesian wood products, such as Japan and the United States, currently imposed higher import duties on Indonesian wood-based products, because these products controlled the biggest share of the market in those countries.

"The import duties imposed on our wood-based products by the U.S and Japan are higher than those imposed on our rivals Malaysia and Brazil. In some ways it has already made our products less competitive than Malaysia's and Brazil's," he said.

He added that Indonesia controlled over 75 percent of the market for wood-related products in the U.S and Japan.

Zein also said that the government should find the right time to start imposing the new levies to avoid further burdening timber companies during the economic crisis.

"I'm not saying that it would be ill-timed to impose the levies now, but during the economic crisis there are many timber companies facing financial difficulties.

"We are still negotiating with the government on the rate and timing of the progressive levies in order to reach a win-win solution," he said.

He also warned that the new levies could lead to scarcity of timber in the domestic market, which would lead to declining exports and foreign exchange earnings from timber and related products.

The government's plan to impose progressive taxes on the country's timber companies was announced by Minister of Forestry and Plantations Muslimin Nasution after his meeting with President B.J Habibie last week.

The tax will be imposed on existing timber companies whose concession areas exceed the maximum limit set by the government in a new decree issued by the minister of forestry and plantations late last year.

Under the new regulation, each concessionaire will be limited to a maximum of 100,000 hectares in a province. Although concessionaires will be allowed to manage forests in other provinces, the total area under their management cannot exceed 400,000 hectares nationwide.

When the concession rights expire, the government will take over the areas and auction them according to terms set by the International Monetary Fund (IMF).

Most of the existing logging concessions owned by large timber companies will not expire for another 10 years.

Muslimin said the tax was mainly designed to speed up the process of relinquishing the big timber companies' control of the country's forests, adding that the government did not want to just cut their concession areas if the contracts had not yet expired.

He said the levies would be imposed on reforestation fees, forest royalties, levy and grant fees and performance bonds.

The government, he said, would introduce a system of progressive levying so that businesspeople controlling areas larger than the official limit would pay fees, royalties and other expenses at a higher rate than companies controlling smaller forest areas.

Adi said forest concessionaires welcomed all government moves to give common people greater access in managing forest resources, which for a long time were concentrated in the hands of big timber groups.

"But the moves should not make us lose our market share," he said.

However, Zein said the government should establish a more friendly system for the timber industry, saying it is the sector that will lift the country out of the current economic trouble. (gis)