Plantations, poverty and power - Critical Information Collective

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49 Indah Kiat, Asia Pulp and Paper, Indonesia: Deforestation, debt and destruction of livelihoods In the late 1980s, the province of Riau in central Sumatra was 80 per cent covered in forest. Today, only 30 per cent is left. “The main driver of deforestation and peat-bog draining here is the voracious appetite for timber, and the big players are two giant pulp mill owners”, reports Fred Pearce in New Scientist magazine. “One company is Asia Pacific Resources International (APRIL), part of RGM International, an empire owned by Singapore-based magnate Sukanto Tanoto. APRIL’s rival is the Sinar Mas Group dynasty founded by Eka Tjipta Widjaja, which owns Asia Paper and Pulp (APP).” 232 APP boasts on its website that it is the largest pulp and paper producer in Asia outside Japan. 233 APP’s products include printing and writing papers, coated and uncoated sheets, photocopy paper, stationery, carbonless paper and tissue paper products. 234 Although APP doesn’t say this on its website, the company is also one of the most controversial and destructive pulp and paper companies on the planet. Construction of APP’s Indah Kiat pulp mill started in 1994. At the time, it was the largest single-line pulp mill in the world. In the previously small village of Kerinci, four thousand Indonesians worked day and night to build the mill. The pulp mill was designed by the Finnish consulting firm Jaakko Pöyry. A soda boiler was supplied by Finland’s Tampella. More machinery came from Finland’s Kone, Valmet, Ahlstrom, Sunds Rauma and Outukumpu, Sweden’s Sunds Defibrator, Noss and Asea Brown Boveri Flakt; Japan’s Mitsubishi Heavy Industries and Nippon Sanso; Canada’s Chemetics and Bailey; the USA’s Cranston and Solarturbines; Germany’s Siemens and Voith; Britain’s ICI; Taiwan’s Teco; and India’s Ion Exchange. 235 Today, APP’s Indah Kiat pulp mill has a capacity of 2 million tonnes a year. Indah Kiat also has a 1.5 million tonnes a year paper mill. Since starting operations in Sumatra in the 1980s, WWF estimates that APP has pulped about one million hectares of natural forest in Riau province. 236 APP is ultimately owned by the Widjaja family, one of Indonesia’s largest business families, through a complex series of shareholdings. 237 The man who established the Sinar Mas Group, Eka Tjipta Widjaja, was the fifth richest business person in Indonesia in 2007, according to Forbes magazine. 238 Apart from pulp and paper the Sinar Mas Group is involved in agribusiness (including palm oil – another massively destructive plantation crop), property and finance. In 1990, Eka Tjipta Widjaja was reported as saying, 232 Fred Pearce (2007) “Bog barons: Indonesia’s carbon catastrophe”, New Scientist, 1 December 2007. http://www.newscientist.com/channel/opinion/mg19626321.600-bog-barons-indonesias-carbon-catastrophe.html 233 APP website http://www.asiapulppaper.com/ 234 Romain Pirard and Rofikoh Rokhim (2006) “Asia Pulp & Paper Indonesia: The business rationale that led to forest degradation and financial collapse ”, CIFOR, Working Paper No. 33. http://www.robinwood.de/german/trowa/sumatra/appcifor2006.pdf 235 Ricardo Carrere and Larry Lohmann (1996) Pulping the South: Industrial Tree Plantations in the World Paper Economy, Zed Books, page 211. 236 “Asia Pulp & Paper (APP) Hiding Destruction Behind False Advertisements: APP continues to ignore calls for conservation beyond ‘legal compliance’, and even fails on the latter”, WWF Monitoring Brief October 2006. http://www.wwf.or.id/index.phpfuseaction=newsroom.detail&id=NWS1161151678&language=e 237 Romain Pirard and Rofikoh Rokhim (2006) “Asia Pulp & Paper Indonesia: The business rationale that led to forest degradation and financial collapse ”, CIFOR, Working Paper No. 33, page 2. http://www.robinwood.de/german/trowa/sumatra/appcifor2006.pdf 238 “#5 Eka Tjipta Widjaja & family”, Forbes, 13 December 2007. http://www.forbes.com/lists/2007/80/07indonesia_Eka-Tjipta-Widjaja-family_EGES.html
50 “Once I decide to do something, I will pursue it at any cost.” 239 This could be APP’s motto. Transfer pricing in Sinar Mas’s corporate maze The Sinar Mas conglomerate includes hundreds of companies. The ultimate owners are in a position to run the various companies for their own interests and to capture profits for themselves. The losers in this arrangement are shareholders (when the price falls), creditors (when loans are not repaid) 240 and local people who are left to find new livelihoods after their environment is destroyed to make way for Sinar Mas’s monocultures. The vast number of companies and the almost complete lack of transparency allows Sinar Mas to control of sales prices between companies in the group. Transactions between companies controlled by the Widjaja family include “wood supply, energy supply, chemicals supply, the marketing of pulp and paper products both to domestic and international markets, insurance, the construction of infrastructure, finance, etc.” 241 For example, APP’s Indah Kiat pulp mill has an agreement with the Arara Abadi plantation company. Both companies are part of the Widjaja family conglomerate. Under the agreement Indah Kiat finances the plantation company. Payments from Indah Kiat to Arara Abadi appear in financial reports as “non current advances to related parties”. 242 The agreement allows Arara Abadi to operate at very low costs (even lower if the loans from Indah Kiat are not repaid). The transactions between the companies are not transparent and profits generated by Arara Abadi are impossible to calculate accurately. 243 In 2006, the Center for International Forestry Research (CIFOR) published a report looking at APP. They chose APP because the company highlights many of the problems in the pulp and paper sector in Indonesia: rapid expansion; massive deforestation; and huge debts. 244 The CIFOR report includes a matrix illustrating the links and transactions between the various companies controlled by the Widjaja family. The report points out that “The impressive list of these transactions tends to show that the ultimate owners made use of transfer pricing to move profits, as they have total power of decision.” 245 Transfer pricing is a mechanism whereby the price of a transaction between related companies is based on where 239 Ed Matthew and Jan Willem van Gelder (2001) “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. http://www.foe.co.uk/resource/reports/paper_tiger_hidden_dragons.pdf 240 Romain Pirard and Rofikoh Rokhim (2006) “Asia Pulp & Paper Indonesia: The business rationale that led to forest degradation and financial collapse ”, CIFOR, Working Paper No. 33, page 3. http://www.robinwood.de/german/trowa/sumatra/appcifor2006.pdf 241 Romain Pirard and Rofikoh Rokhim (2006) “Asia Pulp & Paper Indonesia: The business rationale that led to forest degradation and financial collapse ”, CIFOR, Working Paper No. 33, page 4. http://www.robinwood.de/german/trowa/sumatra/appcifor2006.pdf 242 Romain Pirard and Rofikoh Rokhim (2006) “Asia Pulp & Paper Indonesia: The business rationale that led to forest degradation and financial collapse ”, CIFOR, Working Paper No. 33, page 4. http://www.robinwood.de/german/trowa/sumatra/appcifor2006.pdf 243 Romain Pirard and Rofikoh Rokhim (2006) “Asia Pulp & Paper Indonesia: The business rationale that led to forest degradation and financial collapse ”, CIFOR, Working Paper No. 33, page 4. http://www.robinwood.de/german/trowa/sumatra/appcifor2006.pdf 244 Romain Pirard and Rofikoh Rokhim (2006) “Asia Pulp & Paper Indonesia: The business rationale that led to forest degradation and financial collapse ”, CIFOR, Working Paper No. 33, page 1. http://www.robinwood.de/german/trowa/sumatra/appcifor2006.pdf 245 Romain Pirard and Rofikoh Rokhim (2006) “Asia Pulp & Paper Indonesia: The business rationale that led to forest degradation and financial collapse ”, CIFOR, Working Paper No. 33, pages 11-12. http://www.robinwood.de/german/trowa/sumatra/appcifor2006.pdf
Page 2 and 3: 1 Plantations, poverty and power: E
Page 4 and 5: 3 CONTENTS Introduction 1. Plantati
Page 6 and 7: 5 New investors have emerged recent
Page 8 and 9: 7 1. Plantations do not plant thems
Page 10 and 11: 9 plantations established on grassl
Page 12 and 13: 11 Nations Food and Agriculture Org
Page 14 and 15: 13 Another reason for the move to t
Page 16 and 17: 15 In his book, “Khor Jor Kor, Fo
Page 18 and 19: 17 Between 1991 and 2006, the numbe
Page 20 and 21: 19 are asking for”, notes WWF. 60
Page 22 and 23: 21 consume fewer goods. Less advert
Page 24 and 25: 23 credit crunch, unstable oil pric
Page 26 and 27: 25 Investment in plantations in the
Page 28 and 29: 27 possible price. Subsidies, linke
Page 30 and 31: 29 2. The anatomy of five pulp proj
Page 32 and 33: 31 However, while the Bank confirme
Page 34 and 35: 33 make way for its tree plantation
Page 36 and 37: 35 In April 2004, about 2,000 famil
Page 38 and 39: 37 Sappi, Swaziland: 50 years of in
Page 40 and 41: 39 after an assessment by the Soil
Page 42 and 43: 41 impact of the plantations on wat
Page 44 and 45: 43 Advance Agro, Thailand: Deforest
Page 46 and 47: 45 confiscation and liquidation of
Page 48 and 49: 47 management was facing a bankrupt
Page 52 and 53: 51 company owners want profits to b
Page 54 and 55: 53 • US$4.5 billion owed by APP i
Page 56 and 57: 55 explained that “association wi
Page 58 and 59: 57 Indah Kiat faces a series of lan
Page 60 and 61: 59 logging. While the investigation
Page 62 and 63: 61 experimental areas and not from
Page 64 and 65: 63 Staples and Office Depot in the
Page 66 and 67: 65 “the exhaustive studies have c
Page 68 and 69: 67 CEDHA has also filed complaints
Page 70 and 71: 69 of converting grasslands to indu
Page 72 and 73: 71 3. Pulp Inc. Profiles of seven p
Page 74 and 75: 73 Thailand, a power plant for a Ne
Page 76 and 77: 75 Management’s experts the possi
Page 78 and 79: 77 A year after Aracruz’s third p
Page 80 and 81: 79 In January 2003, Pöyry announce
Page 82 and 83: 81 Bank in the early 1990s. Groome
Page 84 and 85: 83 Pöyry’s role in the Baikal Pu
Page 86 and 87: 85 Under carbon financing, Pöyry o
Page 88 and 89: 87 Pöyry is working on second gene
Page 90 and 91: 89 The Confederation of European Pa
Page 92 and 93: 91 CEPI Eurokraft states that “it
Page 94 and 95: 93 sectors need to reduce by 21% co
Page 96 and 97: 95 The ADB’s report notes that th
Page 98 and 99: 97 Nepal In Nepal, the target area
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99 loan for the second plantations
Page 102 and 103:
101 International Finance Corporati
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103 •In December 2000, IFC approv
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105 firm’s activities. After his
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107 safeguards are in practice.
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109 Bank projects are approved by a
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111 •€80 million to Portucel to
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113 The Food and Agriculture Organi
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115 Nevertheless, Poore and Fries n
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117 failure to define industrial tr
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119 FAO’s guidelines recommend th
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121 Rosengren did not reply to my e
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123 Forest Stewardship Council: Mis
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125 body that rubber stamps operati
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127 Criterion 1.6, for example, sta
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129 fast wood plantations have take
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131 Principle 10.8 should prevent t
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133 By April 2004, FSC had, at last
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135 plantations, because it creates
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137 integrated set of common Princi
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139 for clearing areas of Atlantic
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141 Colombia were certified by SGS.
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143 The dissociation became necessa
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145 4. Future planned pulp mills As
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147 Planned pulp projects: 698 Comp
Page 150 and 151:
149 UPM and Sveza Group Vologda Rus
Page 152:
151 paper industry along ecological
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