Plantations, poverty and power - Critical Information Collective

More documents

Recommendations

Info

51 company owners want profits to be realised. For example, a plantation company might sell wood fibre to a related pulp mill at a highly inflated cost, in order to transfer profits from the pulp mill (which may have, say, run up enormous debts which creditors are trying to reclaim by seizing the company’s profits) to the plantation company, which formally at least is a separate company. If the pulp mill meanwhile pours money in the form of interest-free loans into the plantation company this will also help hide the profits. CIFOR’s researchers, Romain Pirard and Rofikoh Rokhim, note that the prices of wood supply to APP’s pulp mills increased in a “spectacular way” from 2001 onwards. APP explains that this is because the company is increasingly using plantation wood, which is more expensive than clearcutting natural forests. Pirard and Rokhim point out that the mills have transferred tens of millions of dollars to the wood suppliers in recent years and that a more convincing reason for the wood price hike is the fact that during the 1990s APP attracted investors by advertising the company’s access to very cheap raw materials from native forests. After 2001, the agreements were changed: presumably so that the profits were transferred from the pulp mills to the wood supplier companies. Although the wood supplier companies are also controlled by the Widjaja family, they do not owe vast amounts of money to international investors. 246 The banks lending to the Widjaja family companies in the 1990s made little effort to investigate the nature of the companies they were investing in. “When we approved the credit for millions of US dollars, we just signed and never asked in detail about the risks of the business”, a former director of corporate finance of a major financial institute told CIFOR’s researchers in an off-the-record interview in 2004. 247 The banks allowed APP to run up colossal debts, totalling an estimated US$13.9 billion. Even after the Asian economic crisis, investors remained optimistic. “Asia Pulp & Paper: Here Comes the Cash Flow!” exclaimed Morgan Stanley in November 1999. 248 When it became clear that APP was having difficulty repaying its debts, investors continued to pour money into Widjaja family companies, including in the pulp and paper sector, in the hope that some of the new debt would be used to repay existing debts. 249 Part of APP’s expansion was financed by Bank Internasional Indonesia, which is also part of the Sinar Mas Group. In 1999, the bank ran into difficulties because of its non-performing loans. The amount of loans that the bank gave to related parties was higher than allowed under Indonesian law. The case was never brought to court and the Indonesian Bank Restructuring Agency (IBRA) took over the bank’s nonperforming loans on behalf of the Government of Indonesia. IBRA ended up with US$1.3 billion of APP’s debts. 250 Ultimately, Indonesia’s taxpayers have ended up bailing out APP. In November 2001, the 246 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 9. http://www.robinwood.de/german/trowa/sumatra/appcifor2006.pdf 247 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 248 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 5. http://www.robinwood.de/german/trowa/sumatra/appcifor2006.pdf 249 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 5. http://www.robinwood.de/german/trowa/sumatra/appcifor2006.pdf 250 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 5.
52 Widjaja family agreed with IBRA to give personal guarantees against APP and Sinar Mas debts. The following year, the IMF stepped in and, acting on behalf of international creditors, pressured IBRA to work on a restructuring involving all creditors at the same level. In the process, Widjaja’s personal guarantees of repaying IBRA debts disappeared. 251 None of this financial, social and environmental mess would have been possible without the financial support of a range of financiers, predominantly from the North. 252 Banks involved include Goldman Sachs, J.P. Morgan Chase & Co., Franklin Templeton, Morgan Stanley Dean Witter, Capital Group, Merrill Lynch, Bank of America (USA), UBS, Credit Suisse First Boston (Switzerland), ABN AMRO Bank (Netherlands), Deutsche Bank, Dresdner Bank, Norddeutschelandesbank, Commerzbank, Bayerische Vereinsbank (Germany), DBS Bank (Singapore), Bank Internasional Indonesia (Indonesia), Barclays Bank, NatWest (UK), and Bank of China (China). 253 APP’s expansion during the 1990s was also supported by export credit agencies. The export credit agencies of Germany, Austria, Canada, Spain, Sweden, Italy, Japan, the US, France, Denmark and Finland guaranteed export credits to suppliers of pulp and paper machinery from their own countries. 254 The Swedish Export Credit Guarantee Board (EKN), for example, supported equipment exports from the following Swedish companies to Indah Kiat: ABB, Hägglunds Drives, Kvaerner Pulping, Noss and Sunds Defibrator (now owned by Metso Paper). 255 EulerHermes, Germany’s export credit guarantee agency, guaranteed several loans to APP from ABN Amro. 256 APP’s four Indonesian subsidiaries (Indah Kiat Pulp & Paper, Pabrik Kertas Tjiwi Kimia, Pindo Deli Pulp & Paper Mills, Lontar Papyrus Pulp & Paper Industry) ran up a total debt of about US$1 billion to the various ECAs. 257 In March 2001, APP appointed Credit Suisse First Boston (Switzerland) to coordinate a restructuring of its debt. 258 A week later, APP defaulted on its loan repayments. APP’s debt was divided into three parts with separate restructuring deals: • US$6.7 billion owed by four APP subsidiaries; • US$2.8 billion owed by APP China; and http://www.robinwood.de/german/trowa/sumatra/appcifor2006.pdf 251 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 6. http://www.robinwood.de/german/trowa/sumatra/appcifor2006.pdf 252 Jan Willem van Gelder (2001) “German banks and palm oil and pulp & paper in Indonesia. A research paper prepared for WWF International”, Profundo, December 2001, page 100. 253 Ed Matthew (2001) “Asia Pulp & Paper”, Friends of the Earth Briefing, 22 June 2001. Jan Willem van Gelder (2001) “German banks and palm oil and pulp & paper in Indonesia. A research paper prepared for WWF International”, Profundo, December 2001, page 100. 254 Jan Willem van Gelder (2005) “The financing of the Riau pulp producers Indah Kiat and RAPP, A research paper prepared for Jikalahari (Indonesia)”, Profundo, October 2005, page 4. 255 Mats Valentin and Kristina Bjurling (2004) “Swedish involvement in the Indonesian paper and pulp industry”, SwedWatch, October 2004, page 10. 256 Jan Willem van Gelder (2001) “German banks and palm oil and pulp & paper in Indonesia. A research paper prepared for WWF International”, Profundo, December 2001, page 100. 257 Jan Willem van Gelder (2005) “The financing of the Riau pulp producers Indah Kiat and RAPP, A research paper prepared for Jikalahari (Indonesia)”, Profundo, October 2005, page 4. 258 Jan Willem van Gelder (2005) “The financing of the Riau pulp producers Indah Kiat and RAPP, A research paper prepared for Jikalahari (Indonesia)”, Profundo, October 2005, page 4.
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 50 and 51: 49 Indah Kiat, Asia Pulp and Paper,
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
Page 100 and 101: 99 loan for the second plantations
Page 102 and 103:
101 International Finance Corporati
Page 104 and 105:
103 •In December 2000, IFC approv
Page 106 and 107:
105 firm’s activities. After his
Page 108 and 109:
107 safeguards are in practice.
Page 110 and 111:
109 Bank projects are approved by a
Page 112 and 113:
111 •€80 million to Portucel to
Page 114 and 115:
113 The Food and Agriculture Organi
Page 116 and 117:
115 Nevertheless, Poore and Fries n
Page 118 and 119:
117 failure to define industrial tr
Page 120 and 121:
119 FAO’s guidelines recommend th
Page 122 and 123:
121 Rosengren did not reply to my e
Page 124 and 125:
123 Forest Stewardship Council: Mis
Page 126 and 127:
125 body that rubber stamps operati
Page 128 and 129:
127 Criterion 1.6, for example, sta
Page 130 and 131:
129 fast wood plantations have take
Page 132 and 133:
131 Principle 10.8 should prevent t
Page 134 and 135:
133 By April 2004, FSC had, at last
Page 136 and 137:
135 plantations, because it creates
Page 138 and 139:
137 integrated set of common Princi
Page 140 and 141:
139 for clearing areas of Atlantic
Page 142 and 143:
141 Colombia were certified by SGS.
Page 144 and 145:
143 The dissociation became necessa
Page 146 and 147:
145 4. Future planned pulp mills As
Page 148 and 149:
147 Planned pulp projects: 698 Comp
Page 150 and 151:
149 UPM and Sveza Group Vologda Rus
Page 152:
151 paper industry along ecological
show all

Plantations, poverty and power - Critical Information Collective

Create successful ePaper yourself

Delete template?

Save as template?