T

he Forestry Ministry plans to set up a trust to pool grants and loans from donor countries for the purpose of cutting deforestation and forest degradation rates across the archipelago in order to combat climate change.

The money could also be used to protect biodiversity, support the livelihoods of forest-dependent communities and promote the sustainable management of forests, an official said Friday.

Director general of forest production at the ministry Hadi Daryanto said establishment of the trust was now at the phase of selecting the trustee but it was not yet clear who would receive the funds.

"Since we don't have a regulation on trust funds, the tax rate is high, at about 17 percent. As such, it is likely that investors will think twice before investing in the trust," he told reporters Friday.

He said the ministry was considering opening the trust overseas, where such funds are not be subject to tax. Norway, the US and Japan would be the main contributors to the trust, he went on.

"We hope that, during the visit of President Barack Obama, the US will be the first country to inject cash to the fund," he said.

President Obama is slated to visit Indonesia in June to sign a strategic partnership, which covers climate and forestry issues.

Indonesia is the world's third-largest forest nation with about 120 million hectares of rainforest.

The country experiences the fastest deforestation rate on the planet, with around 1.08 million hectares lost each year.

Data from the Forestry Ministry shows the deforestation rate between 1998 and 2000 reached 2.8 million hectares per year due to massive forest conversion, illegal logging and forest fires.

The total area of Indonesia's oil palm plantations for example, jumped to 6.1 million hectares in 2006 from only 1.1 million hectares in 1990.

The global forestry industry contri-butes about 20 percent of the world's CO2 emissions, thrusting the issue to the forefront of climate negotiations.

Despite having acknowledged the role of forests in dealing with climate change, no legally-binding treaty has been signed obliging rich nations to provide money to forest protection in developing countries.

The much-debated reducing emissions from deforestation and forest degradation scheme was expected to come into effect after 2012.

Indonesia has repeatedly blamed a lack of money for its poor forest protection record. Most people living in forested areas in the country live in poverty.

Member of the National Forest Council, Agus Setyarso said he disagreed with relying on donor countries to fill the trust.

"Donors usually have their own agenda for where the money goes. For example, donors want their money to protect forests through combating illegal logging. But the trust would not work purely toward that," he said.

"I think the money should come from Indonesian people who want to protect the forest".

Wirendro Sumargo from Forest Watch Indonesia said the government should first resolve long-standing forest problems, like overlapping licenses, before raising funds from donors to cut deforestation.

The government has a climate change trust fund to manage all financial aid from donor countries for Indonesia to mitigate effects of global warming.