Reforestation fund management to be revised

JAKARTA (JP): The government will improve the management of its reforestation fund to ensure transparent fund collection and disbursement, Minister of Forestry and Plantations Nur Mahmudi Ismail said on Thursday.

Responding to results of an audit on the fund by independent auditor Ernst & Young, Nur Mahmudi acknowledged that there had been leakages and inefficiencies in management of the fund.

"We will improve fund management to help create an open administration system so that the fund is used and collected properly," he told reporters.

According to the audit result, the government lost US$5.25 billion due to inefficiency in collection and utilization of the fund over the past five years ending in March 1998.

To maximize fund collection, Nur Mahmudi said his office would end the existing system of self-assessment and self-reporting by concession holders, which he said did not have a proper control mechanism.

The government, he said, would implement the old system of employing government officials to calculate the amount of reforestation funds forestry firms have to pay to the government.

The government will also force delinquent companies to pay reforestation funds owing, he said.

"We will send three consecutive warning notices to the companies in order to collect those funds. If they ignore them, we will revoke their forest concessions," he said.

Reforestation funds are collected by the government from companies for every log cut in their concession areas to ensure sustainable forest management during their activities.

In a bid to improve management in the utilization of the fund, Nur Mahmudi said his office would strictly limit the use of funds for reforestation, and would no longer allow money from the reforestation fund to be used for other purposes.

In the past, under the Soeharto administration, reforestation funds were sometimes used as a cash source for various politically well-connected companies such as PT Kiani Kertas or activities funded by well-connected people such as the consortium which underwrote the last Sea Games.

Nevertheless, Nur Mahmudi said the government would not in the near future use the remaining funds, currently standing at Rp 4.1 trillion (US$585 million).

In addition, Nur Mahmudi said he would follow up on all suggestions presented in Ernst & Young's audit report.

Ernst & Young suggested in its report that the Ministry of Forestry and Plantations collect all money from the reforestation fund lent to various parties.

It also suggested that the ministry monitor both interisland and export movement of logs and maintain the balance between supply and demand of logs.

The ministry should also develop a reliable information and accounting system to ensure that all credits and debits of the funds are documented properly.

In the longer term, the government should introduce tax incentives to encourage more investment in the forestry sector.

The government also has been advised to establish a real estate investment trust to help small companies and community organizations to participate in sound forest management. (06)