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Indonesian
pulp
producers
may have
obtained as
much as
40 per cent
of the
wood they
consumed
between
1994 and
1999 from
illegal
sources

Case Study: Indonesia

52International Herald Tribune 25/1/00 - Indonesia's forests are Vanishing Faster than Ever - Thomas Walton & Derek Holmes
53UK Tropical Forest Management Programme, 8 December 1999. Round wood Supply and Demand in the Forest Sector in Indonesia.
54Barr, C., 2001. Political Economy of Fiber and Finance in Indonesia's Pulp and Paper Industries - Banking on Sustainability: Structural Adjustment and Forestry Reform in Post-Suharto Indonesia. CIFOR and WWF's Macroeconomics Program Office, Washington DC.
Indonesia's forest ecosystems and species are disappearing fast. A World Bank study estimates that the deforestation rate in Indonesia is higher than it has ever been at 2 million ha/year, representing an annual loss of forest equivalent in area to the size of Belgium52.

Illegal logging in Indonesia is rife. A study by the UK Government funded Indonesia-UK Tropical Forest Management Programme concluded that 73 per cent of all logging in Indonesia is coming from undocumented, and presumably illegal, sources53.

Indonesian pulp producers may have obtained as much as 40 per cent of the wood they consumed between 1994 and 1999 from illegal sources. Of the 120 million m3 of wood estimated to have been consumed by the Indonesian pulp industry between 1988 and 2000, only 10% was harvested from plantations. The rest has almost entirely been sourced by clear cutting natural forest, resulting in the destruction of over 900,000 hectares of highly bio diverse rainforest. The Indonesian pulp and paper industry is running out of wood and facing a plantation based raw material short-fall for at least the next six years and possibly far longer54 .

55www.maanystavat.fi/april/why/april.htm
56SGS, 1998. APRIL Audit Progress Report.
www.upm-kymmene.com/upm/
download/aprilforestry.pdf
57www.maanystavat.fi/april/why/april.htm

APRIL

APRIL (Asia Pacific Resources International Holdings Ltd) APRIL is a Singapore held company, part of the Indonesian Raja Garuda Mas Group owned by the business magnate Sukanto Tanoto. APRIL's main pulp subsidiary is Riau Andalan Pulp and Paper (RAPP), located in Riau Province on the Indonesian island of Sumatra55.

A study by the independent auditors SGS, commissioned by APRIL in 1998, found that over 40,000 hectares of APRIL's concession area has been claimed by local communities56. The area where the RAPP factory has been built is land claimed by the indigenous people of Delik, Sering and Kerinci villages. APRIL was until recently the manager of the Indorayon pulp and rayon plant, now known as Toba Pulp Lestari, in North Sumatra. Violent clashes between community members and security forces led President Habibie to announce the temporary closure of the mill in March 199957.

58http://www.focusonfinance.org/App.htm
see also: Matthew , E. & Willem van Gelder, J., 2002. Paper Tiger, Hidden Dragons: The responsibility of international financial institutions for Indonesian forest destruction, social conflict and the financial crisis of Asia Pulp & Paper. Friends of the Earth, Profundo, London. 68p.
www.foe.co.uk/resource/reports
/paper_tiger_hidden_dragons.pdf 59Barr, C., 2000. Profits on Paper: the Political - Economy of Fiber, Finance, and Debt in Indonesia's Pulp and Paper Industries. CIFOR and WWF-International's Macroeconomics Program Office, Washington, D.C.
60APP, 2001. Presentation to ITTO/WWF

APP (Asia Pulp and Paper)

In the wake of the Asian financial crisis in 1997/8, one Indonesian company, APP appeared to emerge from the economic chaos relatively unscathed. Part of the Sinar Mas Group, APP has become the biggest pulp and paper producer in non-Japan Asia. Before and after the financial crisis, international financial institutions, including leading banks, investment groups and export credit agencies have queued up to finance and guarantee the rapid expansion of their operations. Three years later, APP was one of the largest corporate debtors in Asia, on the verge of bankruptcy and has been accused of rainforest destruction, pollution and conflict with local communities58.

APP owns logging concessions of at least 1.5 million hectares in total in Indonesia. The Indah Kiat company is the engine that drives APP, accounting for 77% of its pulp production and 40% of Indonesia's overall pulp output59. In 1999, its mills ran at full capacity, consuming 6.8 million m3 of wood - equivalent to one quarter of Indonesia's legal wood supply. APP report that they use 22,000 MT of wood/day, hauled on 1,000 trucks60.