Plantations, poverty and power - Critical Information Collective

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55 explained that “association with APP would threaten the good will and faith invested in the name Forest Stewardship Council and the years of support and participation by companies that are truly committed to the pursuit of responsible forest management globally”. 271 Setting aside, for the moment, the fact that FSC has certified several industrial tree plantation companies which are clearly not “committed to the pursuit of responsible forest management”, FSC’s statement makes nonsense of Hermes’ arguments justifying its decision to support APP. Unfortunately, the damage is already done. APP China’s debt of about US$2.8 billion was restructured in November 2003. The debt-for-shares deal left Chinese state-owned banks as co-owners of APP China, but the largest shareholding is the Widjaja family, which had been buying up APP China bonds at a discount before the restructuring. APP owns only 0.1% of APP China meaning that APP China’s operations are out of reach of APP’s creditors. But APP China, APP and Sinar Mas are all still firmly under the control of the Widjaja family. 272 APP China is expanding rapidly. The company’s projects in China include Gold East Paper Co. Ltd in Jiangsu, on the Yangtze River. By 2005, APP had invested US$1,823 million in its three paper machines at Gold East Paper. 273 Another APP China project is Hainan Jinhai Pulp and Paper, the world’s largest single line pulp production facility. Pulp production started in November 2004. The mill produces 3,200 metric tonnes per day. Raw material comes from APP’s eucalyptus and acacia plantations, but the company is also buying wood chips, because the plantations are not sufficient to supply the mill. About 23 per cent of the mill’s wood is bought. 80 per cent of the pulp is sold to other APP mills, with the rest sold on the market. 274 Yet another APP China project is Ningbo Asia Pulp and Paper, which produces paperboard. The mill runs on a mixture of recycled paper and virgin pulp. 275 What was the money for One of the extraordinary aspects of the APP story is that the company managed to run up debts of US$13.9 billion. After all, the company only runs a handful of pulp and paper mills and related forestry operations. Until 2001, it made large profits – CIFOR’s researchers estimate profits of US$1.5 billion for the four main APP companies between 1993 and 1999. Yet by April 2001 according to APP, APP’s flagship pulp mill, Indah Kiat, had run up a debt of US$2.7 billion. 276 Why did the banks never ask what all that money was actually for Indah Kiat managed to arrange loans 271 “Forest Stewardship Council dissociates with Asia Pulp and Paper December 2007”, Forest Stewardship Council statement, December 2007. Available at: http://www.fsc-watch.org/archives/2008/01/10/FSC_dumps_Asia_Pulp_ 272 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 2. 273 “Bigger by the second”, RISI, 1 December 2005. http://www.risiinfo.com/contentgateway/pulpandpaper/magazine/dbareaarchiveppmag2005001202.html 274 “Bigger by the second”, RISI, 1 December 2005. http://www.risiinfo.com/contentgateway/pulpandpaper/magazine/dbareaarchiveppmag2005001202.html 275 “Bigger by the second”, RISI, 1 December 2005. http://www.risiinfo.com/contentgateway/pulpandpaper/magazine/dbareaarchiveppmag2005001202.html 276 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 - England, Wales & Northern Ireland, May 2001, pages 18-19.
56 to refinance loans that it had failed to repay. When it failed to repay the new loan the company arranged yet another loan. 277 The Widjaja family has managed to pocket the profits, delay paying its debts, avoided repossession of its assets, avoided any meaningful restructuring of its corporate empire and, so far at least, Widjaja family members have avoided going to jail. CIFOR’s researchers point out that APP’s financial collapse had little to do with the Asian economic crisis, which happened four years before APP defaulted on its debts. When the exchange rate of the rupiah collapsed against the dollar, this was to some extent to APP’s advantage – production costs were in rupiah and export oriented sales were mainly in dollars. CIFOR’s report explains that the losses were related “to the global oversupply of pulp and paper products on the international market, an increase in production costs (for unclear reasons), losses due to foreign exchange rates (registered in the financial reports but not always realized), and other unspecified reasons (the financial reports specify ‘other costs’ without being any more precise).” 278 Environmental destruction and violence The worst aspect of APP’s operations, however, is not the fact that the company has managed to obtain large amounts of money which it will not, and probably cannot, repay. The company has devastated the environment and livelihoods of thousands of people in Sumatra. When Nordea provided a loan to Arara Abadi, APP’s plantation company, the bank provided no environmental or social demands on the company as part of the deal. 279 It would be unfair, however, to single out Nordea. The bank is just one of APP’s many financiers that failed to carry out adequate due diligence before giving loans to APP. Having handed over the cash, none of the banks has made serious attempts to limit the social and environmental damage carried out by APP or its subsidiaries. Large areas of Indah Kiat’s concessions in Riau are on the land of the indigenous Sakai people, who were evicted to make way for the pulpwood operations. 280 In 2001, villagers won the land rights to 70,000 hectares of APP’s concession. APP lost one quarter of its concession area. A report produced in 2001 by consulting firm AMEC notes that “The existing level of claim disputes can have a large impact on sustainable wood supply plans. If the number of successful claims escalates, it will have a further severe impact”. 281 277 For a dizzying overview of the loans that Indah Kiat managed to secure, see 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 - England, Wales & Northern Ireland, May 2001, pages 29-31. 278 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 11. http://www.robinwood.de/german/trowa/sumatra/appcifor2006.pdf 279 Mats Valentin and Kristina Bjurling (2004) “Swedish involvement in the Indonesian paper and pulp industry”, SwedWatch, October 2004, page 12. 280 Ricardo Carrere and Larry Lohman (1996) Pulping the South Industrial Tree Plantations and the World Paper Economy, Zed Books, page 222. 281 Christopher Barr (2004) “Risk Analysis and Impact Assessment for Pulp and Plantation Investments: The Case of Indonesia”, presentation at International Forum on Finance and Investment in China’s Forestry Sector, Center for International Forestry Research (CIFOR), Beijing, 22-23 September 2004.
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 52 and 53: 51 company owners want profits to b
Page 54 and 55: 53 • US$4.5 billion owed by APP i
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
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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
Page 122 and 123:
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
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
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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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