Timber companies to be reduced to 50 by 2003

JAKARTA (JP): The government plans to consolidate the timber industry by reducing the number of forest concession holders from 437 to 50 within the next five years to boost efficiency, a minister said yesterday.

Minister of Forestry Djamaludin Suryohadikusumo said the consolidation measures were necessary for both state and private companies to strengthen their businesses.

He said it was better to have a smaller number of large timber companies than many weak ones. Mergers would make timber companies more competitive in the global market, he added.

"It would be better if Indonesian forests were managed by 50 big concessionaires, not by over 400 small concessionaires, due to the decreasing forest area and a more competitive market," Djamaludin said after a ceremony in which he received foreign aid to combat forest fires.

He said the merger of forest concession holders would improve the management of forests in a sustainable manner and would create stronger cooperation between timber companies.

"Managing larger areas of forests will be more profitable and more economical. Timber companies have to own large areas which can support their efforts in managing forests in a sustainable manner," he said.

He added that a smaller number of concession holders would make it easier for the government to supervise the industry.

Indonesia has 143 million hectares of forests, including 64 million hectares of productive forests. There are currently 437 private forest concessionaires managing 61.7 million hectares of forests under the auspices of the country's state timber companies.

The remainder of the nation's forest is directly controlled by the government through its six state timber companies -- PT Inhutani I to V and Perum Perhutani -- and the government's forestry services.

Djamaludin said another option to strengthen the timber industry was to list companies on the stock exchange.

Log export

Speaking to reporters after an inaugural ceremony for the appointment of new directors for the state timber companies, Djamaludin said the government's recent decision to reduce the export taxes of log exports to a maximum of 10 percent would not create a scarcity in the supply of logs in the domestic market.

"Most timber estates are tied in contracts to supply logs to local processed-wood industries. They have been joint partners for such a long time," he said.

He also said the decrease in the tax would not prompt timber companies to export their logs. Timber companies prefer purchasing processed-wood products which have a higher value, he said.

"Besides that, log prices in foreign markets are currently very low, about US$60 per cubic meter. It would not be profitable for timber companies to export logs nowadays," he said.

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

The government previously imposed an export tax of 200 percent on logs, aimed to encourage timber companies to fulfill local demand and to force buyers to purchase Indonesian local processed wood.

To dissuade companies from excessively exporting logs, the government announced a new regulation last month stating that concession holders and wood-processing industries were allowed to export logs or other wood products only if they have allocated at least 5 percent of their products to the domestic market. (gis)