Jakarta – Large areas of natural forest in Indonesia will be destroyed by 2007 due to logging by the country's two largest pulp producers, two environmental groups warned in a report released Monday.

The Center for International Forestry Research (CIFOR) and the World Wide Fund for Nature (WWF) said a study showed two indebted Indonesian pulp producers – Sinar Mas Group and Raja Garuda Mas Group – planned to clear almost 500,000 hectares of forest from Riau province by [text missing – JB].

"Indonesia's largest pulp producers ... rely heavily on unsustainable sources of fiber, much of which is obtained through the clear-cutting of natural forests," said CIFOR policy scientist Christopher Barr in the report.

Barr said the industry's seven-fold expansion since the late 1980s had proceeded far more rapidly than efforts to secure a sustainable supply of raw materials through the development of industrial pulpwood plantations.

Of the 120 million cubic meters of wood estimated to have been consumed by the pulp industry during 1988-2000, only 10 percent was harvested from the industrial plantations, the report said.

The groups said both Sinar Mas and Raja Garuda Mas have claimed that by 2008 all of their wood will be coming from sustainably managed plantations. But the WWF-CIFOR study projects that they are likely to fall far short of this target.

A spokesman for Raja Garuda Mas refused to comment, saying he and other company staff needed to study the report. A Sinar Mas spokeswoman could not be reached. Barr said both groups plan to clear large new ares in Riau on Sumatra island despite a government moratorium on new forest conversion since

"Both producers will face significant shortages of legally and sustainably harvested wood for at least the next seven years, and quite possibly well beyond," he said in the report.

The World Bank has said Indonesian forests were reduced by an annual average of some 1.5 million hectares between 1985 and 1997. By December 1999, Indonesia had only some 20 million hectares of forests left.

All four major pulp producers have been forced to pledge much of their assets to the Indonesian Bank Restructuring Agency to cover their huge debts. A Sinar Mas subsidiary, Asia Pulp and Paper Ltd., called a standstill in March last year on payments of interest and principal on 13.4 billion dollars of debt. The WWF-CIFOR study said IBRA is likely to use public funds to write off at least 70 percent of these debts.

"By writing off debts held by forestry conglomerates, IBRA will be giving these groups a substantial capital subsidy. This will place added pressures on Indonesia's forests by encouraging the companies to undervalue the forest resource," CIFOR director general David Kaimowitz said in the report.

Agus Purnomo, WWF Indonesia director, urged the government to "firmly uphold its moratorium on conversion of natural forests."