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Print articleIndonesia - New Forest Explotation Scheme for Non-forestry Companies
November, 2008 -
Government Regulation No. 2 of 2008 regarding the Types and Rates of Non-tax State Revenue Derived from the Utilization of Forest Areas for the Development of Non-forestry Activities Applicable to the Department of Forestry ("GR No. 2/2008") introduces a new scheme of forest exploitation fees for non-forestry companies such as those engaged in mining, oil and gas, geothermal power and telecommunications companies conducting activities in forest areas.
Basically they are no longer required to provide a replacement area as compensation, but instead they must now provide monetary compensation.
Under the old scheme, a company wishing to enter into a borrow to use agreement had to provide compensation in the form of a replacement area located outside the forest area which would become a forest area covering twice the utilized forest area if located in a province with forest areas amounting to less than 30% of its total land area. If the utilized area is located in a province with a forest area of thirty percent (30%) or more of its total land area, the total compensation area had to be the same size as the utilized forest area. This compensation under the old scheme was very difficult and time consuming to effect.
Under the new scheme, for the utilization of, among others, protected forest areas for vertical open pit mining, GR No. 2/2008 requires an annual per-hectare payment of IDR 2,250,000, while for horizontal open pit mining, the annual per-hectare payment is IDR 3,000,000. Permits for utilization of a protected forest area have only been granted to 13 companies which obtained their contracts of work prior to the enactment of the Forestry Law in 1999.
Please note that under GR No. 2/2008, users of forest areas for the development of non-forestry activities who settled their area compensation obligations before the promulgation of GR No. 2/2008 will not be subject to the new Non-tax State Revenue (i.e. there will be no double obligations).
The promulgation of GR No. 2/2008 has given rise to some public controversy and we have heard that some environmental activists or non-governmental organizations intend to petition the Government to review the promulgation of GR No. 2/2008 or file for a judicial review in the Supreme Court. According to them, this regulation will only encourage more companies to exploit forests and lead to more deforestation.
Basically they are no longer required to provide a replacement area as compensation, but instead they must now provide monetary compensation.
Under the old scheme, a company wishing to enter into a borrow to use agreement had to provide compensation in the form of a replacement area located outside the forest area which would become a forest area covering twice the utilized forest area if located in a province with forest areas amounting to less than 30% of its total land area. If the utilized area is located in a province with a forest area of thirty percent (30%) or more of its total land area, the total compensation area had to be the same size as the utilized forest area. This compensation under the old scheme was very difficult and time consuming to effect.
Under the new scheme, for the utilization of, among others, protected forest areas for vertical open pit mining, GR No. 2/2008 requires an annual per-hectare payment of IDR 2,250,000, while for horizontal open pit mining, the annual per-hectare payment is IDR 3,000,000. Permits for utilization of a protected forest area have only been granted to 13 companies which obtained their contracts of work prior to the enactment of the Forestry Law in 1999.
Please note that under GR No. 2/2008, users of forest areas for the development of non-forestry activities who settled their area compensation obligations before the promulgation of GR No. 2/2008 will not be subject to the new Non-tax State Revenue (i.e. there will be no double obligations).
The promulgation of GR No. 2/2008 has given rise to some public controversy and we have heard that some environmental activists or non-governmental organizations intend to petition the Government to review the promulgation of GR No. 2/2008 or file for a judicial review in the Supreme Court. According to them, this regulation will only encourage more companies to exploit forests and lead to more deforestation.
