New Guidelines for Forestry Area Borrow-Use

Ministry of Forestry Regulation No. P.18/Menhut-II/2011 on Guidelines for Forestry Area Borrow-Use (“Regulation”) has been issued to update the guidelines governing the use of forest areas for the purpose of non-forestry development. The Regulation consists of 18 chapters and 47 articles.

Under Article 4 forest areas can only be used for non-forestry development that has a strategic purpose, such as mining, electricity and water installations, telecommunication networks, public facilities, forestry industry related, public and toll road projects, as well as railways.

Similarly to the previous guidelines, Article 5 states that mining in protected forest areas can only be conducted underground (closed pit) and with methods that will not cause land subsidence, permanent change in the main function of the forest, or damage to the groundwater aquifer.

Pursuant to Article 7, companies must obtain a borrow use license to use a forest area. The license is granted by the Minister of Forestry, except for land size of 1 hectare or less, public utilities, and non-commercial activities – in which case it will be granted by the governor (Article 8).

Use of forest areas for mining activities that have a potential to cause significant impact over a wide area and also have strategic value, requires prior consent from the House of Representatives (Dewan Perwakilan Rakyat / DPR).

Mining activities in production forests can be performed on a maximum of 10% of the land size covered by the forest utilization license (Article 10).

An approval in principle to obtain a borrow use license will be issued only after compliance with the requirements set out in Article 16, which, among others, include a statement letter confirming the ability to pay the natural resource provision (PSDH), reforestation fund (DR) and compensation for trees cut, as well as other monetary obligations.

As provisioned under Article 29, borrow use license holders cannot change the name of the company or transfer the borrow use license without any prior consent from the Ministry of Forestry and may not encumber or secure the borrow use land to any other party. Failure to comply with this rule can result in the revocation of a borrow use license.

The Regulation repeals and replaces Ministry of Forestry Regulation No. P.43/Menhut-II/2008 on the same subject matter.

The Regulation has been in force since 4 April 2011.