Investment in Forestry Sector Surges On Relaxation of ‘Burdensome’ Rules

June 14, 2009 Arti Ekawati The Jakarta Globe

“Forest management must not only be seen only in terms of how much investment we get, but also the ecological effects,” said Elfian Effendi, an environmental activist from Greenomics. (Photo: Mast Irham, EPA)

Investment in Forestry Sector Surges On Relaxation of ‘Burdensome’ Rules

After the revoking of a number of regulations on firms operating in the forestry sector, the Forestry Ministry says that new investment increased rapidly from January to May, compared with the year-earlier period.

An activist, however, has warned the ministry to be more careful about issuing investment licenses and not to chase short-term gains at the expense of the environment.

Based on Forestry Ministry data, investment in the sector from January to May reached Rp 1.2 trillion ($118.8 million), consisting of 14 new projects and the expansion of 4 existing projects. During the year-earlier period, investment amounted to Rp 21.2 billion.

Hadi Daryanto, the ministry’s director general of timber-industry development, acknowledged that the increase in investment was closely related to decision to relax some regulations seen as burdensome by investors.

“As the financial crisis assailed Europe and America last year, we tried to increase investment in the country’s forestry sector by, among other things, revoking regulations that were a problem for investors,” Hadi said on Friday in Jakarta. “It has apparently worked.”

One of the new investments is by a South Korean company, which has established a biomass production plant. “PT Solar Park Indonesia invested about $6 million in the biomass project, which uses waste products from sengon trees,” Hadi said.

However, Elfian Effendi, an environmental activist from Greenomics, warned the government that an increase in the value of investment was not the only measure of success in managing the sector.

“Forest management must not only be seen only in terms of how much investment we get, but also the ecological effects,” Elfian told the Jakarta Globe on Sunday.

While he agreed that burdensome regulations should be revoked, he warned that this should not be done at the cost of the environment.

For example, he said, the ministry has recently reduced the minimum diameter of trees that can be felled from 50 centimeters previously to only 40 now.

“The step is a controversial one as it could quickly lead to more destruction of forests. It doesn’t reflect basic sustainable forest management,” he said, adding that he failed to see any relation between the global crisis and the decision to allow younger trees to be felled.

Cutting younger trees, Elfian said, was not only damaging to the environment, but also failed to produce any meaningful economic benefit because of the poor quality of the wood.

Among the other regulations abolished this year are a requirement for companies to produce annual forest management work plans and a prohibition on the expansion of forestry plantations supplying timber processing industries.