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Probe into use of funds for reforestation

Straits Times - June 14, 1998

Jakarta – President B. J. Habibie's government has begun a probe into the alleged use of the reforestation funds to finance businesses owned by former President Suharto's family and associates.

The Jakarta Post on Friday quoted Forestry and Plantations Minister Muslimin Nasution as saying that his office and the Finance Ministry were working together to ascertain whether there was malfeasance in the use of 1.2 trillion rupiah (S$175 million) from the reforestation funds prior to this April.

"During the investigations, I have ordered that further disbursement of the reforestation funds be frozen," Mr Muslimin added.

According to the Letter of Intent with the International Monetary Fund, the reforestation funds, including their interest, should be managed within the state budget and be used to develop forests and rejuvenate critical land.

"We will try our best to reallocate the misused funds to forest development," the minister told journalists after meeting environmentalists and non-governmental organisations (NGO) on Thursday. The environmentalists and NGO leaders saw him earlier to raise their concern over the alleged misuse of the funds.

Money from the reforestation fund comes from a mandatory fee imposed by the government on forest concessionaires to ensure that forests are managed in an environmentally sustainable manner. The size of the fee depends on the volume and type of timber felled.

The newspaper said Mr Suharto, during his tenure in power, issued several decrees ordering the Forestry Minister to allocate reforestation funds to various projects run by his family members and cronies which were not related to forest development.

The daily said that in 1996, Mr Suharto asked the ministry to set aside part of the interest of the funds – mostly deposited in state banks – to aid state aircraft manufacturer PT IPTN, which was then chaired by Dr Habibie.

According to earlier reports, IPTN received about 400 billion rupiah, which was later converted into the government's stake in the aircraft company.

Last year, according to audited reports issued by the Supreme Advisory Agency, Mr Suharto also instructed the ministry to set aside about 250 billion rupiah from the funds to help PT Kiani Lestari – a company owned by timber tycoon Mohamad "Bob" Hasan – for its pulp and paper factory.

The newspaper said that urea-pill fertiliser manufacturer, PT Ario Seto Wijoyo – a company owned by Mr Suharto's grandson, Mr Ari Sigit Harjojudanto – also obtained about 80 billion rupiah from the fund. Mr Muslimin said he did not know if the funds given to the companies had been repaid.