Nordic Footprint

1 Dec

Nordic companies’ pulp operations in Thailand and the impacts.

By Chris Lang. Published in Taiga News Issue 37, Winter 2001.

It is not just the boreal forests that are impacted by the pulp and paper industry based in the boreal region. Many northern companies supply machinery and “expertise” in developing countries in the south, and thus have much bigger footprints than we might expect. The example of Scandinavian operations in Thailand gives us a flavour of what is involved.

In the last two decades, the pulp and paper industry in Thailand has expanded hugely to an industry producing almost 4 million tonnes a year (t/a) of paper and board, dependent on eucalyptus plantations to supply the raw material. The impact on Thailand’s communities and forests has been severe. When forests and woodlands are converted to eucalyptus plantations, villagers’ livelihoods are endangered as they lose a source of food, medicine and firewood. Water sources dry up, rice crops near the plantations fail and villagers lose grazing land.

Despite these impacts, funding from aid agencies in Canada, USA, Japan, Australia, Scandinavia as well as the World Bank and the Asian Development Bank has helped the expansion of the pulp and paper industry in Thailand. During the 1990s, several new pulp and paper mills started operations in Thailand: Siam Cellulose (1992), Phoenix II (1994) and Advance Agro (1996). All three new mills are designed to use eucalyptus as raw material and all three use technology and machinery from Northern countries.

Phoenix’s first production line started up in 1982. The consulting engineer for the 70,000 t/a mill was the German–Austrian company, Klockner-Voest, and the pulping technology was supplied by the Swedish company, Kamyr. Phoenix’s second mill opened in 1994, at a cost of US$240 million. The financing included an US$80 million loan from several Scandinavian banks, led by Leonia Bank of Finland and guaranteed by Finnvera, the Finnish Export Credit Agency. The Finnish government pays all the loan interest due to Leonia Bank: it is the largest concessionary loan ever granted by the Finnish government.

Advance Agro is the largest fully integrated pulp and paper manufacturer in Thailand and exports 70% of its production. Two years ago, Stora Enso bought up 19.9% of Advance Agro. Under the deal Stora Enso is assured of a market for at least 12,000 tonnes of long-fibre pulp from its mills in Europe and gets exclusive international marketing rights of Advance Agro’s products outside Japan.

A series of Scandinavian companies has won lucrative contracts to deliver machinery, equipment or technical services on pulp and paper projects in Thailand, including Ahlstrom, Sunds Defibrator, Nopon Oy, Valmet, Kvaerner and Jaakko Pöyry. In addition to funding specific pulp and paper mills, Scandinavian aid has helped promote industrial forestry and the pulp industry in general. The Thai Forest Sector Master Plan (TFSMP), completed in 1994, was funded by the Finnish government and carried out by Jaakko Pöyry. The TFSMP had an overwhelming bias towards industrial forestry and the pulp and paper industry and aimed to formulate the relevant policies and to develop institutions to implement the plan. Pöyry’s recommendations included handing over 4 million ha of farmers’ land to private companies for tree plantations to feed the pulp and paper industry.

The plan was opposed by Thai NGOs and was never implemented by the Thai government. In 1995, the Finnish International Development Agency commissioned the World Conservation Union (IUCN) to carry out a review of the TFSMP. The review pointed out “serious flaws” in the plan, and stated “if implemented either partially or in full, the plan would have many widespread, permanent social, economic and environmental impacts”. IUCN’s review team also pointed out that “the project was established with serious flaws in its design and methodology”, with 80% of consultancies going to international consultants who were “almost exclusively Finnish or Swedish and none spoke Thai”. Yet the flow of cash from the north continues to this damaging industry. Phoenix is currently planning to expand its pulp and paper mill, and the company is again looking to gain export credit from the Finnish and Swedish governments.

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