Pulp & Paper Industry in Indonesia 2011

INDONESIAN COMMERCIAL NEWSLETTER

January 2011

FORESTRY INDUSTRY NEEDS INVESTMENT MOMENTUM

The country's forestry sector has remained in the doldrums in the past years notably after the 1997/1998 monetary crisis. Timber production from natural forests has continued to be on the decline. Meanwhile, there has not been much headway made in the development of man-made forests.

Small diameters logs of fast growing trees from man-made forests have not been widely used by downstream sector of wood-based industry.

Timber trade is hampered by regulation requiring certificate of legal sources of timber. The timber prices in export market are not sufficiently attractive. In addition, there is growing allegation of mismanagement of natural forest, arbitrary felling of trees, and environmental destruction against Indonesia.

Investment is expected to increase in the forestry sector in 2011 with plans by large companies in integrated timber industry. A number of big conglomerates have sought investment license in the forestry sector especially to develop man-made forests since last year.

The government has set target for man-made forest development at 900,000 hectares in 2010-2014 including people's man-made forests and industrial man-made forests (HTI) 450,000 hectares, community forests (HKM) 400,000 hectares, and people's forests (HR) 50,000 hectares.

Forest management in Indonesia

In 2009, forest concessions (HPH) in Indonesia totaled 25.7 million hectares, down slightly from 26.2 million hectares in the previous year. .

The largest areas of HPH are located in East Kalimantan totaling 6.2 million hectares, followed by those in Papua totaling 5.5 million hectares, Central Kalimantan 4.1 million hectares and West Papua 3.8 million hectares.

Smaller HPHs or less than 1 million hectares are located in Central Sulawesi 854,245 hectares, Central Maluku 804,820 hectares, and Maluku 697,195 hectares.

In 2008, there were 308 HPH licenses issued by the government, down to 304 licenses in 2009

East Kalimantan has 87 licensed HPH companies , Central Kalimantan 58 HPH companies, Papua 27 companies and West Papua 22 companies .

Kalimantan has largest production forests

Sources of timber in Indonesia are mainly natural forests and man-made forests. Natural forests allowed to be exploited are located mainly in Sumatra, Kalimantan, Papua, Sulawesi, and Maluku. In 2010, the production forests totaled 16.9 million hectares divided into 200 areas under business licenses for the management of forest trees (IUPHHK). The production forests expanded from 15.4 million hectares in the previous year divided in 161 IUPHHK.

The largest IUPHHK of natural forests in Indonesia are found in Kalimantan and Papua. In 2010, in Kalimantan IUPHHK totaled 9.36 million hectares of natural forests and in Papua 4.87 million hectares. They were split into 127 IUPHHK.

East Kalimantan has 58 units of IUPHHK covering 4.41 million hectares of natural forests or the largest in the country. The second largest in Central Kalimantan with 52 units of IUPHHK covering 3.87 million hectares of natural forests.

Two other provinces - West Kalimantan and South Kalimantan - respectively have 15 units of IUPHHK covering 890.4 million of natural forests and 2 units of IUPHHK covering 186.8 million hectares of natural forests.

In Papua , natural forests, which are categorized as production forests that could be exploited for their trees, total 4.87 million hectares - including 12 units of IUPHHK in Papua covering 2.8 million hectares of natural forests and 12 units of IUPHHK in West Papua covering 2.07 million hectares of natural forests.

Other regions with potential forest areas include North Maluku, which has 566,600 hectares (11 units of IUPHHK); Riau 480,500 hectares (8 units of IUPHHK); Maluku 424,500 hectares (6 units of IUPHHK); and North Sumatra 341,200 hectares (7 units of IUPHHK).

East Kalimantan has largest man-made forests

Man-made forests with IUPHHK in Indonesia in 2010 were much smaller than natural forests. That year man-made forests totaled 5.66 million hectares with 128 IUPHHK or wider than 5.1 million hectares with 111 IUPHHK in the previous year.

Larger man-made forests are located in Kalimantan and Sumatra. Other islands have small plantations forests.

In 2010, man-made forests in Sumatra totaled 3.13 million hectares with 66 units of IUPHHK and in Kalimantan , there were 2.4 million hectares split into 54 units of IUPHHK.

In other islands man-made forests totaled 1.27 million hectares split into 8 units of IUPHHK - including 2 units in Sulawesi covering 63,200 hectares and in Maluku covering 64,568 hectares. Other islands have no production forests with units of IUPHHK.

East Kalimantan, which has the largest natural forests, also has the largest man-made forests with units of IUPHHK totaling 1.17 million hectares. West Kalimantan has 13 units of IUPHHK covering 598,505 hectares; South Kalimantan and 10 units of IUPHHK covering 429,755 hectares; and Central Kalimantan 193,139 hectares under 9 units of IUPHHK .

In Sumatra, South Sumatra has the larges licensed man-made forests of 1.02 million hectares or the second largest in Indonesia with 8 units of IUPHHK. Riau has 800,725 hectares with 24 units of IUPHHK. See the following table......

See list of contents>>