Forests represent a potentially vast source of wealth in Indonesia. Of the 105 million ha (259 million acres) of forests, nearly threefourths are in Kalimantan and eastern Indonesia. The more accessible forest areas of Sumatra and Kalimantan furnish the commercially cut timber for domestic consumption and export. Indonesia has over 4,000 species of trees, including 120 types of hardwood suitable for commercial use. Timber estates produce fast growth species such as pine, eucalyptus, albizia, and acacia for the pulp and paper industry. Practically all forestlands belong to the state. In Java, excessive cutting has caused soil erosion, aggravated floods, created water shortages, and damaged some irrigation facilities. Replanting and rehabilitation of the Javanese forests and reforestation in the Outer Islands are promoted as part of the nation's "regreening program." Teak and other tropical hardwoods are the most valuable species, but there is hope of obtaining wood pulp from pine and bamboo and commercial timber from new plantings of fir and pine.
Indonesia is the largest producer of tropical hardwood plywood in the world. Export sales of processed wood in 2001 amounted to $3.3 billion, representing 9.6% of all Indonesian exports. Production of sawn wood in 2000 totaled 2.4 million cu m (85 million cu ft); plywood, 7.2 million cu m (254 million cu ft); and particleboard, 213,000 cu m (7.5 million cu ft). About two-thirds of the timber output is exported. French, Japanese, US, and Philippine interests have large investments in the timber industry. Indonesia is the world's second largest producer of tropical hardwood logs and lumber, after Malaysia. Due to a hardwood log export ban enacted in 1985 to protect rapidly diminishing forests, Indonesia has exported no logs since then. Prohibitive export taxes imposed in 1990 have all but eliminated tropical hardwood exports, in order to conserve declining forest resources for production and export of higher value items such as plywood. However, an estimated 30 million cu m (1.1 billion cu ft) of illegal logging occurs annually, of which an estimated 10 million cu m (353 million cu ft) is illegally exported.