Tim Dodd, Jakarta – Indonesia's tropical forests are responsible for one of the country's largest export sectors – wood, pulp and paper products worth $7.5 billion in 1998.

But the abundant forests which produce this money-spinner are fast disappearing under pressure from illegal clearing and short-sighted resource management.

Each year for the past 13 years an estimated 16,000 square kilometres of forest, on average, has been lost. In 10 to 15 years the still-vast tracts on the islands of Sumatra and Kalimantan could be whittled away to nothing.

In crisis-torn Indonesia the fate of the forests is secondary to the urgent issues of preserving political stability, rescuing the banking system and alleviating poverty. But the situation is so worrying to the country's major aid providers that they have put the issue on the table for the meeting this week of the Consultative Group on Indonesia (CGI), which will fork out the $7billion needed to fund the budget deficit in the 2000 fiscal year.

The donors 20 countries including Australia and international institutions such as the International Monetary Fund and the World Bank have lifted forestry management to the level of other key issues they want Indonesia to address, such as improving corporate governance and developing the rule of law.

"It [forestry] is on the agenda as a specific item at the CGI. That is unusual," said Mr Tom Walton, the World Bank's resident forestry expert in Jakarta.

The meeting will probably see Indonesia agree to measures it can carry out relatively easily, such as better law enforcement against illegal loggers and more co-ordination between government agencies responsible for forest management.

Apart from the international pressure, the Indonesian Government has ample motive to stop the rape of the forests. Most of the logging is illegal, and this costs the Government $800 million in lost tax revenue each year.

Figures produced by the Tropical Forest Management Program a joint Indonesian-British program funded by Britain show that 75 million cubic metres of wood have been harvested a year in recent years. But the Forestry Ministry has, on average, issued permits for only 25 million cubic metres each year.

The forest fires of 1997 and 1998, which cast a pall over South- East Asia, alone destroyed at least 50,000 square kilometres of forest. Many of the fires were set by plantation companies which wanted to grow crops, such as palm oil, on the land. They got off scot-free.

Indonesia's wood industry comprising sawn timber, plywood, pulp and paper is far too large to be sustained in the long term without a radical change in forest management which shifts the emphasis on sustainability.

The industry has grown exponentially in the past few years due to massive investment. In the past 13 years $12 billion has been poured into pulp and paper, according to Mr Agus Purnomo, executive director of the World Wide Fund for Nature in Jakarta.

Now the industry is a victim of the economic crisis, not because it is unprofitable far from it but because the big conglomerates which invested in wood and paper were overextended. They went belly up when the crisis hit and were unable to repay their loans.

Many of these companies are now controlled by the Indonesia Bank Restructuring Agency, the government body which took over the assets of the failed banks and has the job of selling them to help fund the $130 billion bank rescue plan.

The agency has a dilemma in which it must choose between selling the logging companies which rely on illegal and unsustainable practices at their market value, or submitting to environmentalist demands to cut back the industry and forgo valuable cash which must then be borrowed.

The point of decision between environmental management and economic exigency will soon be reached.