Selling logs overseas less profitable

Selling logs overseas less profitable

JAKARTA (JP): Few timber companies have sold logs to the
international market despite the government's recent decision to
ease log export restrictions, a minister said yesterday.

Minister of Forestry and Plantations Sumahadi said selling
processed wood products was now more profitable than exporting
logs.

"Indonesian timber companies mostly supply logs to their own
processing industries because it will be more profitable for them
to process the wood and then export it (rather) than exporting
logs," the minister said.

Most of the country's timber companies have their own wood-
processing industries, such as plywood factory, sawmill or
furniture producer.

The minister said the timber estates, especially those which
also operate plywood industries, focused on efforts to market
unsold plywood products which reached 1.5 million cubic meters as
of March.

He said the prices of processed-wood products had started to
increase again in Japan and South Korea as their economic
recovery began to prop up demand.

Demand and prices for wood and wood-related products from the
two countries, the main buyers of Indonesian wood products, had
dropped sharply in the past six months because their property
sectors, the main users, were hit hard by the currency crisis.

The government reduced export taxes on logs, sawn timber and
rattan to a maximum 10 percent from Feb. 1 as a part of reforms
agreed to with the International Monetary Fund.

The government previously imposed an export tax of 200 percent
on logs aimed at encouraging timber companies to fulfill the
domestic demand and to force buyers to purchase Indonesian
processed wood.

The high tax had resulted in rampant smuggling and illegal
timber cutting in past years.

To dissuade timber companies from excessively exporting logs,
the government issued a regulation on Jan. 21 stating that timber
companies were only allowed to export logs if they have allocated
at least 5 percent of their logs to the domestic market.

"Export of wood and wood-related products is expected to
increase again this year due to the lower export tax," he said.

Export of wood and wood-related products dropped by about 25
percent last year to US$6.24 billion from $8.3 billion in 1996
due to lowered demand and lower prices. (gis)