Indonesia has become the world’s leading plywood source. The boom, however, may be short-lived unless timber companies stall the rush for quick profits and start practicing forest conservation.

ACROSS THE obstacle-strewn expanse of the Mahakam River, the insistent whine of buzz saws from P.T. Inhutani I’s sawmill in Samarinda cuts the thick tropical air, emphasizing the vitality of Indonesia’s biggest non-petroleum business: plywood.

Fifteen years ago, says one of Inhutani I’s managers, Mochamad, ~this factory was very big."

Today, he explains, gesturing to the burgeoning competition of C.V. Sumber Alam’s rattan plant to one side, P.T. Samarinda Sawmill to the other and dozens more wood-processing plants lining the wide river’s shores, the company is small by comparison.

In fairness, Inhutani I’s main plywood operation is now located in Tarakan, far away across Borneo’s still-formidable Jungles. But the growth of the plywood industry that Mochamad speaks of is undeniable.

Since banning the export of uncut logs in 1985, Indonesia has become the world’s leading source of plywood. As a result, a plethora of related businesses has sprung up to give once-sleepy backwaters such as Samarinda in East Kalimantan a new lease on life.

The boom, however, may not last as long as planners had Initially hoped. Now that the 20-year timber concessions Jakarta began granting in 1967 are expiring, the industry Is finding itself saddled with transportation troubles and environmental restrictions that are the consequences of a rush for quick profits a generation ago.

Logs floating down the Mahakam from the interior take longer and longer to arrive these days because they are being cut farther away as forest areas are depleted.

More daunting still is the shortage of wood to feed the country’s 300 sawmills and 100 plywood factories, most of which have been erected in Kalimantan since the ban on raw log exports.

Trees, it is turning out, aren’t the easily renewable resource many Indonesian logging companies once thought. The companies are already having trouble delivering the 24 million cubic meters produced each year. Demand by the year 2000 will call for annual log production of 70 million cubic meters.

The government has belatedly recognized this "problem of increasing gravity," Minister of Finance Johannes Sumarlin told the Asian Development Bank last year in pleading for special reforestation assistance.

"Rebuilding forests is expensive," Sumarlin said, "and takes decades to accomplish. We recognize that we ourselves — especially our own private sector forest users — must assume part of the responsibility but we also believe programs of reforestation require long-term funding on terms that should be supported both at the multilateral and bilateral levels."

The World Bank, noting the annual 900,000-hectare reduction In Indonesia’s forests, was sufficiently convinced of Indonesia’s plight to lend the country US$34 million last year to upgrade forest conservation.

But the true test will be the performance of the more than 500 concession holders authorized to cut trees. Setting the example for the rest is Inhutani I, a state-owned enterprise established in 1972 that is finding its new niche In the growing of trees.

"As an agent of development, we should be a model for private enterprise," says Inhutani I’s president, Wahjoedi.

Wahjoedi is annoyed by the performance of concessionaires who have left vast tracts of Borneo’s rain forest bare and rotting. He contrasts their slapdash methods with his company’s emphasis on scientific planning.

"We work with the foresters who are professionals," Wahjoedi says. "Many of the private operators are non-foresters. Their basic interest is to take the wood from the forest and take their financial returns as soon as possible."

To that end, many forest-product operators looking for quick profits have favored clear-cutting, a practice that promotes rapid erosion and drastic increases In soil temperature.

But clear-cutting removes the conditions that give birth to tall, hardy trees. The land left bare reflects the sun’s heat into the atmosphere, inhibiting the rainfall necessary to the continued health of surrounding forest. Thus, even those companies that cut selectively, taking only the high-quality hardwood known as meranti — which is favored by most manufacturers — feel the impact.

With the number of logging concessions spiraling to 573 in 1988 from 69 in 1969, more than 80 percent of the country’s 64 million hectares of designated production forests has already been selected. With another eight million hectares scheduled to be parceled out in the coming decade, a new approach is long overdue, critics say.

Inhutani I’s Wahjoedi says change Is occurring. "We not only harvest the forest," he explains. "We look for substantial yields. We manage the logging operations to take into account the renewal principle."

That principle recognizes a rotation of 35 years to allow for new growth to replace old. Wahjoedi sees it as a simple business decision.

"The intention is economical, not environmental," he explains. "If we go on as we have in the past, there will be a shortage of raw materials eventually."

With forest products accounting for US$2 billion in export revenue, the Indonesian government simply can’t allow that to happen. The country’s steady movement toward an export orientation has been accompanied. according to some observers, by a new maturity that takes into account the long-term effects of natural-resource depletion.

"Environmental concerns are being taken seriously at high levels," Jakarta-based analyst Jim Castle says. "But pushing it down to the implementation level in the provinces is difficult."

Inhutani I has been helping in the educational process with its ambitious research project in East Kalimantan, which is conducted In cooperation with the Dutch agricultural agency Tropenbos.

The company employs about 100 people in Berau, a remote concession area in East Kalimantan, to clean brush and unwanted trees and plants from the floor of a 5,000 hectare tract of primary forest. The project gives the favored meranti trees more sunlight and room to grow — which they have, at a rate of one centimeter in diameter a year, or 20 percent faster than when the program commenced eight years ago.

MUHANDIS Natadiwirya, chief of Inhujani I’s forestry development division, says the uncluttered stands of meranti may eventually increase their diameters by two centimeters yearly, thus reducing the time it takes for a tree measuring 40 centimeters in diameter to double its girth in 30 years instead of 50.

Some environmentalists argue that such managed stands are still an intrusion on the natural order. But Indonesia’s development effort depends on the revenue timber generates.

"These industries need raw materials," Inhutan I’s Wahjoedi says. "If we go on as we have in the past, in the year 2000 maybe there will be a shortage of sawmills. This must be prevented."

The government’s solution is to Increase its emphasis on manmade forests. Plans to turn unproductive lands into new timber farms at a rate of 300,000 hectares a year have been designed to meet a goal of six million hectares of tree plantations producing 92.4 cubic meters of wood by the end of the current five-year plan in 1994.

Even the skeptics at SKEPHI, the Indonesian forest-conservation network, concede that "this ambitious plan may be possible," given advances in science and management.

The tree farms are composed of fast-growing species — acacia, eucalyptus and meranti. Some industry executives believe these "super-trees, whichh are capable of yields double and even triple the historic average, are "the forests of the future."

Timber estates are being officially encouraged through a plan announced by Forestry Minister Hasjrul Harahap to provide equity funds for their development. Using the US$4 per cubic meter collected from concession holders for reforestation, the government will provide economic incentives as well as technical guidance.

Hasjrul acknowledged in introducing the equity plan that the timber-estate development program in place since 1984 has been ineffective, with less than 100,000 hectares planted by the end of 1988. He attributed the failure to Inexperience, ignorance about suitable species and the reluctance of many concessionaires to participate.

Charging that huge sums of money from wood-products revenue have been lost to Indonesia’s treasury In the form of "private profit, bribes or ‘unofficial’ expenditures," SKEPHI is campaigning for a more accountable system of managing the new timber.

The problem, the organization’s Hira Jhamatani says,is that "logging concessions have been given out to non-professionals - and not even to businessmen who might look at them as long-term investments."

Wartono Kadri, SKEPHI’s director-general of land rehabilitation and reforestation, says the almost 100 companies which have expressed interest in developing new timber estates will be evaluated on the basis of their financial and technical capability, in accordance with Jakarta’s push for a more efficient national economy.

Tighter management will help, industry executives say, but the logging companies’ problems extend beyond Indonesia’s borders. The primarybuyers of tropical hardwoods —Japan, the United States, Europe and, to a lesser degree, South Korea — have driven hard bargains on price.

"(The position of the big buyers) is quite strong," concedes Inhutani I’s Muhandis. "Everyone knows we need to keep producing wood products."

Fluctuating prices for sawn logs have played havoc with Muhandis’s efforts to manage production, while devastating fires made worse by overcutting of the forest have cut into the log supply.

P.T. Meratus Kalimantan Timbet churns out approximately 5,000 cubic meters of sawn logs each month, but its forest concession is "finished," sawmill manager Harri Pusono says.

The company has agreed to an arrangement with Inhutani I to process logs supplied by the state enterprise. Increasingly, high-quality logs more than 100 centimeters thick are difficult to find. The average size now is 80 centimeters.

Since the heart of a log is too soft to be of export quality, that means less wood per log. While domestic demand has risen steadily, the price such inferior wood draws — about US$60 per cubic meter — isn’t enough to sustain the operations in place along the Mahakam..

Should tree farms such as those Inhutani I is nurturing fill the niche sought by the government, the improved wood-processing plants could pay dividends. Inhutani I’s antiquated mill still cuts 600 logs daily for shipment to voracious consumer Japan, but it has also diversified into other products that bring a value-added increase to the company’s profit, such as laminated window and door moldings.

Inhutani I’s Samarinda operation has expanded from just cutting and gluing the moldings to completing the entire product, using imported West German machinery to press the decorative moldings.

Still, Indonesia’s best position in the world of wood is still as a primary producer. Inhutani I’s Wahjoedi sees his company graduating to the manufacture of decorative plywood and furniture, but he knows none of the advances the government plans can come about unless the supply of good wood is replenished.

"We are optimistic," he says. "Although there is damage to our forests, there is much more there. We now know how to grow the right trees. We have the technology. We can do it ourselves. We are catching up."

- Chris Vaughan

Source : Far Eastern Business, July, 1989

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