Indonesian Government: Production forests will reach 10m hectares by 2014

The government is optimistic its production forests (HTI) will span over 5 million hectares by the year-end, and over 10 million hectares by 2014 as targeted, because the forestry industry can now resort to financing supported by government, an official says.

The director general of forest product development at the Forestry Ministry, Hadi Daryanto, on Monday said the ministry had recently issued a regulation allowing trees planted on production forests by forestry companies to serve as collateral for bank loans.

In the past, banks were reluctant to provide loans for the forestry industry.

"We are now making it safer for banks to grant loans to forestry investors. If forestry companies default on their loans, banks can take over their forest production licenses by asking for the forestry minister's permission," Hadi told The Jakarta Post.

Previously, trees could not be used as collateral and forest industry licenses could not be transferred to other entities.

By 2014, Hadi added, production forests were expected to produce 100 million cubic meters of wood products, far above the total demand for Indonesian wood-based products.

Indonesian pulp and paper companies uses most of Indonesia's wood production as raw materials, and still source half of their raw materials from natural forests. However, by 2014, the government will no longer allow those companies to source their wood supplies from natural forests.

Indonesia's total demand for wood products, including plywood, furniture, wood block and wood craft products, is around 50 million cubic meters per year, based on industrial data. About half of it is still supplied from natural forests, while only 30 percent comes from the HTI. The rest is sourced from community forests (HTR) and others types of forests. At present, Indonesian forests span across 4.3 million hectares.

Hadi added cheap financing was also made available to forestry investors to help them develop their production forests. "The government is providing funding under *the so-called* BLU scheme, *supported by* two international agencies that are ready to give cheap loans to Indonesian forestry investors," he said.

The government is allocating around Rp 1.4 trillion this year through BLU (Balai Layanan Umum), which functions as a revolving fund that can be used by forestry investors, offering loans at very low interest rates.

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Issued by:  The Jakarta Post

Author: Benget Besalicto

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Issue date: August 11, 2009

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