JAKARTA, Jan 31 (Reuters) -
Indonesia's province of East Kalimantan has imposed a one-year ban on forest
destruction, a governor on the island of Borneo said on Thursday, citing the
need to curb mining and palm oil expansion and cut back on land disputes.
The move is a potential roadblock
for investors in Indonesia, who already face a thicket of overlapping
regulations at the provincial and federal levels.
But Indonesia, home to the world's
third-largest expanse of tropical forests, is under international pressure to
curb deforestation and destruction of its carbon-rich peatlands.
It is the world's biggest exporter
of thermal coal and the top producer of palm oil, with estates growing palm
sprawling across 8.5 million hectares and expected to add about 200,000
hectares a year.
"We have applied this
moratorium policy for new permits on forestry, mining and plantation since
several weeks ago and it will last for a year," East Kalimantan governor
Awang Faroek Ishak told Reuters, without giving a specific start date.
"We will stop issuing new
permits for forestry, mining and plantation business," he added.
"However, companies that have got permits before the moratorium (began)
can still continue their business activities as usual."
It was not clear if the ban covered
land included under an existing nationwide moratorium in place since 2011.
Another reason for the 2013 ban was
the 742 overlapping land cases and disputes in East Kalimantan between palm and
mining companies or local communities, Faroek said.
"I am responsible for providing
a conducive investment climate for investors," he added. "That's why
we take this measure aimed at creating a conducive investment climate
here."
East Kalimantan, recently ranked
fourth among Indonesia's 33 provinces in terms of infrastructure development
and quality of life, sits on about 40 percent of Indonesia's coal reserves or
8.5 billion tonnes.
Faroek, whose province produces
about two-thirds of Indonesia's coal, has previously called for an output cap
to promote sustainability.
REGIONAL VS CENTRAL GOVT
The East Kalimantan forest ban is a
sign of the problems faced by investors in Indonesia. The central government
shook up the resource sector last year with measures to tighten control by
centralizing the licensing process and taxing ore exports.
Indonesia is also now deciding
whether to extend a two-year ban on clearing forest that started in May 2011
and covers about a third of the country.
Provincial governments do not have
the authority to issue a separate forest moratorium policy, said Tofan Mahdi,
spokesman at Indonesia's largest listed plantation firm Astra Agro Lestari
"The (national) forest
moratorium will end in May this year but some NGOs and government officials
propose to extend the forest moratorium," Mahdi said in a text message.
"Some governors see this situation and take early action to support the
extension."
Palm oil companies such as Astra
Agro Lestari, Sime Darby , Wilmar International ,
Sinar Mas and BW Plantation ,
are some of the biggest in Indonesia and will contribute to the 27.5 million
tonnes of production forecast for this year.
Kalimantan is the second largest
contributor to Indonesia's palm oil production, with a share of 35 percent,
after Sumatra, which has a 55 percent share, said Joko Supriyono, secretary
general of the Indonesian Palm Oil Association.
Palm oil plantations now cover about
700,000 hectares of East Kalimantan and produce 2 million tonnes of output each
year, Supriyono added. Many investors see Kalimantan as the best and easiest
site for future expansion.
Provincial governor Faroek said the
figure was 1 million hectares, out of permits issued covering 2.4 million.
Still, it could be several years
before the effect of the ban shows up in production.
"If it goes through, the impact
will come in four to five years down the road," said Alan Lim Seong Chun,
research analyst with Malaysia's Kenanga Investment Bank. "Palm oil trees
take a minimum of three years to bear fruit."
