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Information in: Español - Français - Deutsch - Português - Russian - Japanese - Svenska - Italiano - Suomi
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INDONESIA: Wood-processing Industry under Scrutiny The Indonesian wood-processing industry is dependent on illegal logging for more than 70 per cent of its consumption of domestic raw timber, casting doubt over the long-term viability of one of the country's biggest non-oil export earners, according to new UK-funded research. The findings are likely to shock foreign creditors of an industry heavily indebted to foreigners, and also investors who had regarded the sector as one of Indonesia's safe havens. Indonesia has been staggering since 1997 under the weight of an economic crisis caused by the depreciation of its currency, the rupiah. "The forestry and estate crops sector presents particular risks because the long-term sustainability of raw materials is uncertain," a forthcoming study from the Indonesia-UK Tropical Forest Management Programme said. The study, "Corporate Debt and the Indonesian Forestry Sector", is being conducted under the auspices of Indonesia's forestry ministry. Several of the conglomerates named in the report are among Asia's top pulp and paper and plantation companies, including Singapore-based Asia Pulp and Paper Co, which has more than $9bn in foreign debt. But the worst offenders are those linked to the government of former president Suharto, including Barito Pacific and companies once controlled by one of his close business associates, Mohamad "Bob" Hasan, the report said. The report says banks and foreign export credit agencies helped to fuel investment in the wood-processing sector during the boom years of the 1990s without conducting proper evaluations of the risks. The government, meanwhile, offered producers cheap credits and subsidies, allowing them to earn above normal profits by keeping the domestic price of raw materials inordinately low. The country's pulp and paper sector, for instance, invested $8bn between 1988 and 1997 to raise capacity to more than six times previous levels. But instead of developing plantations at the same pace, most producers were obtaining a large portion of their raw material by clear-cutting natural forests, the report said. "This strategy is both unsustainable and in many cases also illegal," it said. Another report from the Indonesia-UK Tropical Forest Management Programme, entitled "Illegal Logging in Indonesia", said official data indicated that Indonesia consumed more than 78m cubic metres of domestically- sourced logs in 1998 despite the fact the official supply was only about 21m. The cost to Indonesia's environment has been immense. Analysis by the World Bank in Jakarta shows that the country lost an average of about 1.5m hectares of forest cover per year between 1985 and 1997, leaving only about 20m hectares of quality production forest available today. The problem runs to the roots of Indonesian politics -many of the many illegal logging rackets are believed to receive protection from the influential military. The World Bank sought to link important reforms of the industry with aid as part of a $500m loan to Indonesia in April. But most donor agency sources admit many of the conditions have yet to be properly implemented.
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