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The tales of two bad concessionaires

Down To Earth - August 29, 1997

The Dayak Besar Group controls forest concessions of around 200,000 hectares and a number of timber mills in East Kalimantan. Poor management prompted the government to ban two of its subsidiaries, PT Dayak Besar Vincent Timber Co. and PT Gelora Dayak Besar, from transporting logs and sawn timber from their forest concessions in East Kalimantan to their wood-based industries.

Dayak Besar's concessions ended in 1992, but the forestry ministry issued a temporary extension on condition that the Group establish a joint-venture with the state-owned forestry firm. The agreement was cancelled, however, when Dayak Besar closed down its office.

The group was declared bankrupt in 1995 with debts amounting to Rp350 billion (US$152 million) of which the majority was owed to state-owned Bank Rakyat Indonesia. It also owes a large amount of money, including unpaid reforestation fees to the government.

Business tycoon Probosutedjo (a half-brother of President Suharto) agreed to take over the debt-ridden companies of the Dayak Besar group last year, but in March announced his decision to back out of the deal. His comments give a hint of the havoc caused by the logging company:

"...it turns out I have to pay those huge debts with nothing left of the forests to manage. Where would I get the money?" (Jakarta post 4/3/96)

Djajanti Group – soft punishment In February this year the government announced that it had decided to revoke the licences of three Djajanti Group concessionaires after finding proof that its downstream subsidiary PT Nusantara Plywood was involved in using illegal timber. Nusantara Plywood, based in Gresik, East Java, has also been fined Rp 1.3 billion (US$567,685). The concessions are in Central Kalimantan and cover around 300,000 hectares.

Djajanti, owned by Burhan Uray, is one of Indonesia's biggest timber groups. It currently holds 25 concessions which cover 2.8 million hectares of forests in Kalimantan, Maluku and West Papua (Irian Jaya). The West Papua concessions provide logs for a massive plywood mill in Maluku.

Revoking concessions, however, is not as bad for the company as it sounds, however. The company will continue operating the concessions under a two-year cooperation agreement with state-owned PT Inhutani III. This is to prevent mass lay-offs of workers and to ensure log supplies to the Nusantara mill. Under the arrangement, PT Inhutani III will take over management of the concessions while logging and other field activities will be carried out by the Djajanti workforce. After the two-year period, the two companies may decide to set up a joint venture. Logs produced under the joint cooperation will supply the Nusantara Plywood plant.

Two other concessions (but not those in West Papua) due to expire this year will not be renewed, according to Djamaludin. (Jakarta Post 14/2/96, Republika 14/2/96)

[This was part of a larger report on the state of the forests in Indonesia. Copies of this available on request.]