Friday, 19 June 2009

Forestry industries show green shoots

Benget Besalicto Tnb. , The Jakarta Post , Jakarta | Fri, 06/19/2009 / Business

Forestry-related industries are springing back to life with new investment in the first five months of the year reaching Rp 1.2 trillion (about US$116 million), thanks in part to the government's regulatory reforms in the sector, a Forestry Ministry official says.

The figure is higher than the total investment of Rp 861 billion made by 11 companies in all of last year.

The Ministry's director general of production development Hadi Daryanto said that between January and May of this year, 14 firms have applied for and secured licenses to develop new forestry areas worth Rp 851.6 billion, while 4 firms are set to invest up to Rp 366 billion to expand industrial production capacity.

"They will produce sawn timber, plywood, veneer, and wood chips in Sumatra, Java, Kalimantan, Sulawesi, and Papua. These new investments will enable these companies to also employ about 65,000 workers," Hadi said.

The 18 companies are PT Moranaga in North Sumatra, PT Papua Indonesia Lestari in Papua, PT Selemoi Timber Indonesia in West Papua, PT Elbana Abdi Jaya in South Kalimantan, PT Elbana Abdi Jaya in South Kalimantan, PT Wahana Lestari Makmur Indonesia in South Sumatra.

Also PT Cipta Wijaya Mandiri in Central Java, PT Sejahtera Usaha Bersama in East Java, PT Bagus Jaya Abadi in West Papua, PT Rimbawan Agung Pratama in Central Java, PT Kutai Timber Indonesia in East Java, PT Lestarindo Utama Karya in Jambi, PT Sarana Bina Semesta Alam in in East Kalimantan, PT Belinto Morida Wahana in North Sumatra, PT Uniraya Timber in West Papua, PT Siang Cahaya Makmur in East Kalimantan, PT Inne Donghwa Development in East Kalimantan, and PT Rante Mario also in East Kalimantan.

The Ministry, Hadi said, has been embarking on reform to encourage new investment in the sector, which had been in the doldrums for the past several years.

The regulatory framework reform mostly centers on an easier and simpler licensing process. Among the examples is that companies need no longer apply for new licenses if they wish to develop new and innovative products, such as wood pellets.

Hadi also said that currently a number of Korean companies have produced plans to develop more than 700,000 hectares of industrial forests in Indonesia.

"Of the total industrial forests, more than 200,000 hectares will be developed to produce raw materials for making biomass to meet increasing needs in Korea," he told The Jakarta Post earlier this week.

According to him, as Korea is pursuing an economic policy of "green" growth, the country will substitute about 5 percent of its total 8 eight million tons of annual coal demand with biomass in the near future.

"We already have a Korean company developing a wood pellet plant in Wonosobo, Central Java with a total investment of $9.3 million. But currently due to the problem of raw material supply they can only produce 48,000 tons per year," he said, adding that just 200 grams of wood pellets could produce 1 Kwh of electricity.

This reform has led to the banking sector becoming willing again to engage in the forestry business, which had long been considered as a sunset industry, Hadi said.