Monday, August 27, 2007

Industry minister backs Kadin's initiative in logging dispute

Saturday, August 25, 2007

The Jakarta Post, Jakarta

Industry Minister Fahmi Idris has lent his support to the initiative by the Indonesian Chamber of Commerce and Industry (Kadin) to ask President Susilo Bambang Yudhoyono to resolve an embarrassing dispute over logging between the National Police and the Forestry Ministry.

Speaking Thursday during a press conference at the Industry Ministry, Fahmi said that all of the stakeholders in the pulp and paper industry would meet soon to resolve the dispute in order to provide a healthy business climate for the industry without undermining the legal process.

"The government and Kadin share the same concern about the pulp and paper industry. Therefore, we will invite all stakeholders to look for a solution in the next few weeks," said Fahmi.

As part of the fight against illegal logging, the National Police have been conducting a series of operations, labeled overeager by the industry, that have resulted in the halting of the operations of many pulp and paper firms and their suppliers in Riau province. As a result, the country's two biggest pulp and paper companies, PT Indah Kiat Pulp & Paper and PT Riau Andalan Pulp & Paper, are faced with a serious shortage of raw materials.

Fahmi said that while the ministry supported the implementation of Presidential Decree No. 4/2005 on the eradication of illegal logging, he was concerned about the investment climate in the forestry industry, which is one of the five industries that contribute the most to the country's exports.

"The implementation of the decree has disrupted the pulp and paper industry, and has led to a decrease in production volume. Therefore, we are impartially trying to find a solution. While we support the war against illegal logging, we also need to protect industries that provide our exports," said Fahmi.

The value of pulp and paper exports in 2006 amounted to about US$3.5 billion out of $8 billion for the entire forestry sector.

The pulp and paper industry employs some 249,000 people in 14 pulp and paper factories in Riau, South Sulawesi, North Sumatra, Jambi, East Kalimantan and Aceh.

Kadin chairman MS Hidayat, who accompanied the minister at the conference, said that the dispute between the National Police and the Forestry Ministry, which has been going on for eight months, could cost the two companies as much as US$2 billion due to the decline in production.

He said that Kadin supported law enforcement, but also pointed to confusion between illegal logging and legal logging.

"Some companies that have legal permission from the state for logging have become the target of arbitrary police actions. Police cordon off their equipment, concessions and processing facilities without sufficient evidence," argued Hidayat.

He warned that if the dispute continued, the two companies would be out of raw materials by October, and might have to resort to massive layoffs.

He added that the dispute showed there was still no legal certainty in Indonesia -- something that had serious implications for the investment climate. (02)

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