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)