Indonesia to Raise Forestry Fee by One-Third

On 5 April 2013, The Jakarta Post reported that Indonesia would soon raise the fees it charges for the commercial use of forest resources as the government seeks to increase non-tax income from the forestry sector. If enacted, the new tax is likely to affect forestry investment enterprises in Indonesia, as well as companies with mining and oil and gas exploration and production operations in forested areas.

**Indonesia’s Government Likely to Raise Forest Fees**
The Jakarta Post quoted Indonesia’s Forestry Minister Zulkifli Hasan as saying that the government would soon raise the forestry fee for mining, oil and gas exploration and production activities by 33 percent to four million rupiah (£269) per hectare per year, up from three previous million rupiah. While the aim of the new regulation is to increase non-tax income from the forestry sector, it would also affect activities such as prospecting for and production of minerals, oil and gas in forested areas.

Zulkifli also said that the forestry ministry was awaiting the finance minister’s signature to introduce the new regulation, which would replace the 2008 regulation on fees paid for commercial use of forest areas. Zulkifli added that the relevant ministries had agreed on the new fee and it was likely to be put into effect later in 2013. “We have calculated a new fee that won’t burden the existing companies,” the minister added.

**Companies Likely to Be Affected**
The Jakarta Post reported that as of February 2013, the Forestry Ministry has issued 471 permits for mining exploration covering 2.45 million hectares of forest area and 377 permits for production covering a total forest area of 370,883 hectares.
Among the companies likely to be affected by the new regulation are US-based gold miner Freeport McMoRan Copper & Gold Inc. (NYSE:FCX), operating on 212,950 hectares of forest, as well as PT Newmont Nusa Tenggara, operating on 87,540 hectares.

The Jakarta Post also quoted Tony Wenas, vice chairman of the Indonesia Mining Association (IMA), as saying that the increase was too big and would mostly affect companies which still needed to wait three to five years before entering production and reaping benefits.
**Forestry Sector Importance**
!m[New Regulations Likely to Affect Forestry Investment](/uploads/story/1816/thumbs/pic1_inline.png)

According to figures by consultancy company ITS Global, forestry and related products contribute about 3.5 percent to Indonesia’s gross domestic product, with the country being home to the world’s third-largest expanse of tropical forests. As recently reported by the Centre for International Forestry Research’s (CIFOR) Forest News blog, Indonesia’s resource-rich province of East Kalimantan, for instance, is looking to absorb $70 billion (£46 billion) in timber and forestry investment as well as investments from palm oil and mining companies by the end of the decade.
Even though forestry investment is an important contributor to Indonesia’s GDP, in 2011, the government imposed a two-year ban on clearing forest. As reported by the Jakarta Globe, with the moratorium due to expire later this year, the government is yet to announce what it plans to do next in this respect.