Indonesia: The insatiable appetite of the pulp industry

22 Dec

Not satisfied with destroying vast areas of forests on Sumatra, the pulp industry in Indonesia is expanding to Kalimantan.

By Chris Lang. Published in WRM Bulletin 101, December 2005.


Based on a presentation by Rully Syumanda and Rivani Noor at an International Meeting on Plantations, 21-25 November 2005 in Vitória, Espírito Santo, Brazil (organised by WRM/FASE-ES/GJEP).




Asia Pulp and Paper (APP) is one of the world’s largest pulp and paper companies. The company is responsible for large-scale deforestation of Indonesia’s forests. APP has also generated a number of not-yet-settled conflicts with local communities in Indonesia.

Forthcoming research by Rully Syumanda, Friends of the Earth Indonesia/WALHI’s forest campaigner and Rivani Noor of the Community Alliance for Pulp Paper Advocacy (CAPPA) documents the company’s grim record in Sumatra.

“We in Indonesia are facing so many battles about forest destruction, including tree plantations and the oil palm industry,” said Syumanda at the start of his presentation. There are seven pulp mills, 65 paper mills and 10 pulp and paper mills in Indonesia. We are focussing on the biggest – APP’s pulp and paper mill in Riau. “We face problems because of APP’s plans to become the world’s biggest pulp and paper exporter,” said Syumanda. “The Indonesian government supports the growth of this industry.”

Foresters working in APP argue that the company is rapidly developing plantations in order to supply its pulp mills without continuing to cut down old-growth forests. “APP is the golden boy of the Forest Department,” said Syumanda, “because logging, plantations, pulp and paper dominate all.”

But this industry is not serious about developing plantations. Plantations still supply only 30 per cent of the raw material needed. Destructive logging and/or illegal logging provides much of the rest. APP is converting forest to plantations. The company has used subsidies from the rehabilitation fund, which should have been used for recovering forest areas. Vast areas of APP’s concessions overlap with community lands.

The main problem, Syumanda explained, is the over-capacity of the industry. The sheer scale of the industry means that land tenure conflicts cannot be resolved equitably. There is no protocol for solving the problems caused. But the government is not concerned about overcapacity. Instead it likes to keep the attention on illegal logging. “This has impacts,” explained Syumanda. “Several peasants and farmers have been arrested for clearing their farmland for their own needs.”

Any idea of restructuring the industry, including reducing its size, has been brushed aside by the need for fast money, at least partly to repay the company’s huge debts. APP’s debt, at almost US$14 billion, is the largest debt of any company in Southeast Asia.

Violence, human rights abuses, water and air pollution, forest fires and floods have become business as usual for the pulp and paper industry in Indonesia.

“Now we face the next challenge”, said Syumanda. The government plans to develop another five million hectares of acacia pulp wood plantations. This is in addition to the two million hectares it plans to plant to oil palm in the middle of Borneo, and perhaps another eight million hectares of oil palm around the archipelago. “It’s crazy,” Syumanda concluded.

During the 1970s, the Indonesian government declared 140 million hectares of land as state forests, “thus asserting state control over forest resources traditionally managed by tens of thousands of local communities,” added Patrick Anderson, Policy Advisor at WALHI. As with industrial logging concessions, the government gives out concessions to the pulp and paper industry regardless of who lives there and who traditionally used the forest.

One of the few rules by which the pulp and paper industry operates in Indonesia is that you build the pulp mill first – the plantations follow. “So for at least the first ten years, while the plantations are planted and growing, the mill will use natural forests as raw material,” explained Anderson.

Indonesia has about 50 million indigenous people, with about 1,000 different languages. Although in theory indigenous land rights are recognised in Indonesia, the government does not follow its laws that recognize customary rights. Now that the plywood industry is in decline due to lack of big trees, the government is doing all it can to create an export economy in the pulp and paper sector.

Rivani Noor pointed out that on Sumatra there simply isn’t enough forest left for the pulp industry to keep expanding. So APP has started pulp mills and plantation operations in China. But as with the mills in Sumatra, APP failed to secure raw material supplies before starting up its mills in China. As a result, woodchips from Sumatra’s forests will be exported to supply APP’s operations in China. APP also has a new concession in Kalimantan.

There are an additional three pulp mills proposed for Kalimantan. The South Korean Korindo Group has produced a feasibility study for a pulp and paper mill in Central Kalimantan. A group of Indian and Malaysian investors have filed a proposal with the Ministry of Forestry for a US$1.3 billion pulp and paper mill. If it goes ahead, the project would convert about 300,000 hectares of forest into plantations. Singapore-listed firm United Fibre Systems (UFS) is planning a project for South Kalimantan and is looking to secure European financial support. UFS is also in the process of taking over the existing Kiani Kertas mill in East Kalimantan, with Deutsche Bank acting as financial advisor to the company.

Not willing to limit its forest destruction to the island of Sumatra, the pulp and paper industry is busy planning its expansion into Kalimantan. If it does so, the results will be predictable and disastrous for people and forests.

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