Plantations, poverty and power - Critical Information Collective
Plantations, poverty and power - Critical Information Collective
Plantations, poverty and power - Critical Information Collective
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54<br />
APP’s dismal financial status was well know, Germany’s Euler Hermes decided to provide export credit<br />
insurance for APP’s expansion in China, apparently having learned nothing from the company’s massive<br />
debt default <strong>and</strong> horrendous environmental track record.<br />
Hermes defends its guarantees covering machine exports to APP with two main arguments. First it points<br />
out that other export credit agencies also supported APP’s expansion. This is the well-known “race to the<br />
bottom” argument, in which ECAs argue that if they did not support a project, another ECA would do so.<br />
The net effect would be jobs lost in the country whose ECA did not support the project <strong>and</strong> the project<br />
would go ahead anyway. 266 This may be true, but it does not mean that ECAs supporting a project can<br />
simply ignore the financial, environmental <strong>and</strong> social impacts directly caused by the company they are<br />
supporting.<br />
Second, Hermes argues that most of the Hermes guarantees were for paper production, which would not<br />
in itself require more raw material as the pulp capacity was already in place. The argument is<br />
disingenuous since Hermes knows full well that some of the raw material feeding the pulp mill comes<br />
from APP’s destruction of the forests of Sumatra, at least part of which is illegal. Hermes also knows that<br />
the pulp <strong>and</strong> paper mill has polluted the Siak River destroying fisheries <strong>and</strong> leading to serious health<br />
problems for local communities. Hermes, however, denies such arguments, citing APP’s own data to<br />
267 268<br />
prove its case.<br />
Hermes did not talk to local people affected by the pollution from Indah Kiat. Hermes rejected a<br />
measurement of AOX based on a water sample taken by German film-maker Inge Altemeier as “not<br />
comprehensible” (“nicht nachvollziehbar”). Altemeier’s sample revealed an AOX value of 7.8 mg/l (the<br />
maximum allowed under German regulations is 0.1 mg/l). Regarding the supply of raw material to Indah<br />
Kiat, Hermes argues that Arara Abadi is certified to ISO 14001 <strong>and</strong> will attempt in the future to achieve<br />
Forest Stewardship Council certification. Hermes argues that claims of illegal logging against Arara<br />
Abadi could not be proven. 269<br />
In 2007, APP managed to get FSC Chain of Custody certification for part of its pulp mill operations. The<br />
audit was carried out by SGS-Qualifor’s Salahudin Yaacob, a Malaysia-based SGS executive. He told<br />
journalists writing in the Wall Street Journal, that his role was limited to checking that APP legally<br />
owned its almost 200,000 hectares of industrial tree plantations. The chain of custody certificate allowed<br />
APP to use its pulp mixed with fully FSC-certified pulp to manufacture paper that could be labelled with<br />
the FSC “mixed sources” logo. 270 Two months later, FSC issued a statement saying that it had<br />
“dissociated from working with Indonesian based Asia Pulp <strong>and</strong> Paper (APP) in October 2007”. FSC<br />
266 “Ausfuhrgewährleistungen der Bundesrepublik Deutschl<strong>and</strong> auf PT Indah Kiat Pulp & Paper, Corp., Indonesien”,<br />
Hermes Kreditversicherungs AG, no date.<br />
267 “Ausfuhrgewährleistungen der Bundesrepublik Deutschl<strong>and</strong> auf PT Indah Kiat Pulp & Paper, Corp., Indonesien”,<br />
Hermes Kreditversicherungs AG, no date.<br />
268 In 2006, I took part in a meeting with Uwe Heinbruch who is in charge of overseeing Export Credit<br />
Guarantees/Guarantees for Direct Investments Abroad at the German Ministry for Economic Development <strong>and</strong><br />
Cooperation (BMZ). See Chris Lang (2006) “APP is destroying forests”, Pulp Inc., 18 October 2006.<br />
http://pulpinc.wordpress.com/2006/10/18/app-is-destroying-forests/<br />
269 “Ausfuhrgewährleistungen der Bundesrepublik Deutschl<strong>and</strong> auf PT Indah Kiat Pulp & Paper, Corp., Indonesien”,<br />
Hermes Kreditversicherungs AG, no date.<br />
270 Tom Wright <strong>and</strong> Jim Carlton (2007) “FSC’s ‘Green’ Label for Wood Products Gets Growing Pains”, Wall Street<br />
Journal, 30 October 2007. Available at: http://www.fsc-watch.org/archives/2007/10/30/Wall_Street_Journal