* Regional governor aims to provide good investment climate
* East Kalimantan move highlights regional-central govt
* Doubts cast over whether regional governments can issue
By Michael Taylor and Yayat Supriatna
JAKARTA, Jan 31 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
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
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
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."