Timber firms told to give 20% stakes to cooperative

JAKARTA (JP): Timber companies will have to give at least 20 percent of their shares to cooperatives if they want their concessions to be extended, Minister of Forestry and Plantations Muslimin Nasution said here on Friday.

Muslimin said that the move was designed to involve cooperatives in logging operations and would be one of several preconditions for the renewal of concessions.

Muslimin said that the new regulation, a revision of Government Regulation No. 21/1970 which awards timber companies the sole right to exploit the country's forests, would give cooperatives and common people a greater opportunity to benefit from the country's forest assets.

"Under the new regulations we have added several prerequisites for the extension of logging contracts. Companies will have to give 20 percent of their shares to cooperatives and 5 percent to companies located in the same province as the concession or to the state-owned forestry firms PT Inhutani I to V ," he told reporters.

The new regulations are currently awaiting presidential approval. If that is forthcoming then the new measures will take effect by the end of this month, the minister said.

Muslimin said that timber companies would also be obliged to increase cooperatives' stakes by one percent every year.

"If they (the cooperatives) start with 20 percent stakes and the concession lasts for a further 35 years, they will have a 55 percent stake when the concession runs out," he said.

Muslimin said the new measures would also limit the ownership of forest assets. Each concessionaire will be limited to owning rights to a maximum of 100,000 hectares of forest in a province or 400,000 hectares nationwide.

He said that the government would honor the terms of all existing concessions, but thereafter renewals would be contingent on the new requirements being met. "If forest areas under their management exceed the maximum limit, some of their concessions will be offered to the public through an auction," he said.

The limits on ownership should allow the government to put 2 million hectares of forest up for auction by 2002 as concessions come up for renewal, he said.

Muslimin also said the government would conduct due diligence to assess the condition and potential of forest areas before putting them on offer to the public.

The government first began to award forest concessions to private companies through the 1970 Forestry Law, which grants concessionaires the sole right to cultivate and exploit forests in their concession areas. Concessions last for 20 years, but will be extended to 35 years under the new regulations.

At least 421 private timber companies currently own rights to exploit 51.5 million hectares of the country's forests. The six state forestry companies -- the five PT Inhutani enterprises and Perum Perhutani -- oversee logging operations on 4.9 million hectares.

Many parties have criticized the existing system for allowing a handful of large business groups to gain control of millions of hectares of the nation's forests.

The Association of Indonesian Concessionaires (APHI) has urged the government to place forest sector industries on a more certain footing.

APHI chairman Adi Warsita Adinegoro said that at least 186 timber companies whose logging contracts had ended were still awaiting a government decision on whether they would be extended.

"If the government wants to sever the contracts and offer the areas to the public, it must do so quickly because delays are costly for companies. They force companies to keep their heavy equipment idle in the forest," Adi said.

The delays have also caused a scarcity of logs on the domestic market because the operations of many timber firms have been brought to a temporary halt, Adi said. (gis)