In the recent discussion of whether sink projects should be accepted in the Clean Development Mechanism, it seems that the realities of actual projects have often been forgotten. There is, however, a long list of sinister experiences of forestry related projects by Northern companies in developing countries. As most Northern forest companies see CDM projects as just a part of commercial projects one can learn about the possible range of problems related to CDM sink projects by looking at the recent commercial plantation projects.

Both CDM sink projects and commercial plantation projects face social problems created by insufficient public involvement and the violation of customary land use rights. The experiences tell us that these problems persist even after special efforts have been taken to solve them. These problems are even more important in light of some fundamental problems of CDM sink projects, namely the lack of permanence and carbon leakage. The following two cases, plantation projects by Finnish companies in Indonesia, give a picture of some of the problems faced by possible CDM projects.

The Indonesian government has been promoting the establishment of large-scale pulp and paper industry from the 1980s. The goal has been to raise Indonesia to the top producers of pulp and paper in the world. The industry expanded rapidly during the 1990s, although recession at the end of the decade hit the industry hard, effectively halting all expansions and new projects for a couple of years. Investing in Indonesia was made attractive for foreign companies by offering subsidies, cheap labour and land for the fast-growing plantations that are supposed to feed the pulp mills.

Increasing mill capacity has been such a rapid process that plantations often have been established along or even after setting up the mills. Subsequently pulp and paper companies and the government have been under pressure to quickly find land for the plantations and ensure raw material supply for the mills. The result has often been that large areas of natural forest are being clearcut to feed the mills and areas traditionally used by local communities are taken over by the companies for the plantation with the approval of the government.

In many other cases there has been no true effort to establish plantations, as natural forests are still available as a source of fibre for a few years. Permits have been granted for 7 million hectares of commercial tree plantations (HTI) nation-wide, but only 1.6 million hectares have been planted so far (DTE2/00).

Western capital and companies are an integral part of this process. Indonesian industry would neither have the money nor the technical expertise to expand on its own. Finnish forest industry has been planning, supplying and finally operating many of the pulp and paper mill projects in Indonesia. The Finnish State has politically and financially promoted and supported Finnish industries. Examples of this co-operation between the State and companies are a large plantation project in Riau, middle Sumatra (PT Riau Andalan Pulpand Paper) and a project in West Kalimantan (PT Finnantara Intiga).

In the early 1990s an Indonesian company, APRIL (Asia Pacific Resources International Ltd.) started building a joint pulp and paper mill, PT Riau Andalan Pulp and Paper, in the village of Kerinci, Riau province. The factory was planned by the Finnish consultancy Jaakko Pöyry. Machinery for the factories came largely from Finnish companies: Valmet supplied the paper machine, Sunds two fibre-lines, Tampella three recovery boilers, Ahlström an effluent treatment-plant etc (UPM 12.9.97).

The Finnish Export Credit Agency was ready to guarantee a 200 million USD loan for APRIL, but withdrew the guarantees because of the economic depression in1999. As a result, APRIL was not able to purchase a second paper machine from Valmet, and the paper machine was left standing in a Finnish harbour waiting for a buyer. (APRIL28.8.98, Helsingin Sanomat 28.4.99)

4. Forests and Plantations

The pulp mill started running in 1995 with a capacity of 750 000 t/a, being the largest single lined pulp mill in the world. By that time APRIL had planted merely 7000 ha of acacia plantations that can be harvested from the year 2000 onwards (Paper Maker Oct 1994, UPM 6.3.98). According to APRIL it will not be able to supply its pulp mill with the plantations before 2008 even if everything goes as planned (PPI 6/98). Up to that date the pulp mill uses wood originating from natural forest clearings.

APRIL has 285 000 ha of concessions in Riau in two agreements with the government of Indonesia. Even though there are no exact data available on how much of this area consists of natural forests, it can be assumed based on the data available that approximately 200 000 ha of the concession areas consisted of natural rainforest in the time APRIL entered the area. It is unclear how much of that forest is still left. APRIL’s goal is to convert these areas to short rotation acacia monocultures. Before the plantations start to mature, clearings in these areas form the major supply of wood for the pulp mill.

Over 50 000 ha had been converted into plantations by the winter of 1998, i.e. at least 35 000 ha of rainforest had already been destroyed. By autumn 2000 nearly100 000 ha of land had been converted into acacia plantations. Approximately 170000 ha of the whole concession area are estimated to be suitable for conversion into plantations (SGS 1998, UPM 6.3.98).

Natural forests in APRIL's concessions are mostly lowland and swamp rainforests, the most species-rich ecosystems on earth (IUCN 1991). The majority of them have been previously selectively logged, i.e. largest trees have been cut for timber. Although some of the species are lost already, these logged-over forests are nevertheless important habitats for many endangered species. Part of APRIL's concessions were listed by the World Resources Institute as one of Sumatra's three remaining frontier forest areas (large, unfragmented forest areas capable of preserving ecological functions of forest if left standing intact (WRI,1997)). Because of APRIL's clear-cutting thousands of plant and animal species -including endangered tree species valued for their timber, Sumatra tiger and elephant - lose an important part of their habitat and are driven closer to extinction. They cannot survive in the remaining fragments.

The plantations being established after clearing consist of two exotic species of acacia, Acacia mangium and Acacia crassicarpa, which are planted in monocultures. In the ideal case, the trees are felled after 7 years, by which time they should have reached a height of 25m, and new seedlings are planted. The fast growth is made possible by large-scale use of fertilizers, herbicides and pesticides (SGS 1998). There are relatively few experiences with large fast-growing timber plantations in Sumatra. Especially plantations on peat land, which cover a major part of APRIL’s concessions, have suffered from poor health and their sustainability is questionable (Neilson & Fenton 1998, SGS 1998).

The effect of the pulp mill is not restricted to APRIL’s own concessions, as the forest clearings in APRIL’s concessions are not able to supply the pulp mill alone. The company procures large amounts of wood from other land clearings in Riau as well (APRIL 1997). In fact, if the company is able to build another pulp line in the Riau Andalan complex, even the fully planted concessions cannot supply the extended pulp mill capacity of 2 million t/a by their own (based on SGS 1998).

In Indonesia local communities have had very weak rights to their customary land and livelihood, although there are legal provisions for this. In the case of APRIL’s pulp mill in Riau there have been numerous conflicts where local communities have demanded their land rights in areas assigned as APRIL’s concessions. In the estate where the mill was built in 1993 three villages have been severely affected: Sering, Kerinci and Delik. Their determined protests have lead to some compensation, but the conflict of interest has not been settled.

Also in the forest concession areas there are continuous and escalating conflicts because village land is being logged and planted with acacia. There is about 60 000 ha of land where local communities have laid claims to APRIL. In reality this area may be greater because not all cases are noticed until the logging and planting operations start. The company says that the claims have been solved in an area of 30 000 ha, but according to known cases this seems unlikely. (Munoz 1999)

In many cases the villages have lost trust in the formal process and staged demonstrations to advance their demands. These have been met with oppression by the Indonesian State and by APRIL’s personnel. For example, in July 1998, a member of the staff of APRIL stabbed Mr. Rasyid of Lubuk Jambi village to death in the course of a demonstration. In October 1997 a road block of Delik villagers was violently broken up by special mobile police unit called in by APRIL and the legal advisor of the villagers, Mr.Marganti Manalu was arrested. Later he was convicted under a clause typically used for political activists, to two years in prison. (Miettinen1998)

The question in Riau is not just right to land but right to culture and livelihood. The mill forces the dramatic changes in the material and symbolic world of the communities upon them very rapidly. After having lost a central part of their culture, the forest, many of the traditional communities in Riau find it hard to sustain their material livelihood or preserve their culture.

In September 1997 Finnish UPM-Kymmene, the third largest paper company in the world, announced an alliance with APRIL with the aim of integrating the fine paper operations of the two companies. The decision of UPM-Kymmene was immediately criticised by environmental citizens' organisations throughout the world. Despite the protests, UPM-Kymmene has gone ahead with the co-operation. UPM introduced some minor improvements in the field operations in Riau, but the problems remained far from being solved.

Instead UPM brought up arguments in the public debate defending APRIL’s way of operating. They give an insight on industry’s way of thinking: According to UPM, APRIL was the legitimate user of its concessions and was doing nothing illegal. In their view, the majority of the land claims were made by "land speculators" that had moved to the area only after the company arrived. Paper is needed for education, culture and democracy and thus APRIL’s operations are a necessity. Only a small fraction of the whole area of Indonesia is needed for pulp plantations and thus conversion of forest for plantations can be justified. Plantations, unlike natural forests, bind carbon as they grow; plantations are helping to curb climate change. If it’s not us, it’s someone else. Obviously, these arguments by the company tell only a part of, if at all, the truth.

As a result of economic situation in Asia UPM decided to withdraw from Indonesia in 1999. In the process, it had arranged soft loans for APRIL and acquired 49% of APRIL’s paper mill in Changshu, South China. Later, UPM bought the rest of the factory (UPM 23.8.00). This factory is relying on pulp produced by APRIL’s pulp mill in Riau. Even after UPM bought the factory it was agreed that APRIL hold a six and half year pulp supply contract for the Changshu paper mill.

The Finnish forest company Enso entered a large-scale plantation project in West Kalimantan in the mid 90s. A joint company, PT Finnantara Intiga, owned by Enso and two Indonesian state companies, PT Gudang Garam and PT Inhutani III, was established in 1996. The companies had entered the area a few years earlier with pilot projects. In July 2000 Gudang Garam sold its stake to Stora Enso, a merger of Enso and Swedish Stora. Currently, Stora Enso owns 60% of Finnantara Intiga.

The original aim of the company was to establish approximately 100,000ha of fast-growing plantations, consisting mainly of Acacia mangium and Acacia crassicarpa tree species. Between 1996 and 1999 it established 23,000 ha of plantations. The target is to reach 50,000 ha of plantations by the end of 2003. The company holds a timber estate concession of almost 300,000 ha. (Stora Enso 9.7.00)

Enso’s target was to build a pulp mill of 500 000 t/a capacity in the area. However, planting has not gone ahead as planned, and the focus has changed merely to "the production of raw material for pulp industries in the region" (Helsingin Sanomat 29.9.96, Stora Enso 9.7.00). The possibility of obtaining more land for the plantations outside the present concession may be tempting for Stora Enso, as many mismanaged concessions have been recently cancelled in Kalimantan and free land is available.

Finnantara Intiga’s concession is situated in the area of Sanggau and Sintang, inhabited by 60 000 people in 110 villages. The area had lost most of its forest cover before Finnantara Intiga entered. The company is not converting full-grown forest to other land uses but rather uses "degraded" grass- and bush land for its acacia plantations, similar as in the case of Riau Andalan Pulp and Paper. The project is marketed as reforestation of degraded lands. Most of the land belongs to the locals, and many of the planted areas are former agricultural lands and fallows. (Otsamo 1998, Otsamo6.3.00)

Finnantara Intiga says it recognises the villagers as owners of the land in the area. Before establishing plantations the company has to get the land owners to sign a land use agreement with the company. The company negotiates with the traditional communal decision making system about the land use agreement. However, the weakening traditional system is often vulnerable to manipulation for example when under pressure from the overlapping local state government that supports the plantation scheme. This has lead to situations where families have been forced to sign land use agreements against their will. (Lounela et. al. 2000, Lounela 3.9.00)

In exchange for the land use agreement villagers are promised work in the plantations, agricultural equipment, community development programs etc. A common worry among the villagers is that only a few people are given work in the plantations whereas the need would be larger after the loss of agricultural land. Use of daily labour has been common and has left the workers in an unstable situation.(Lounela 3.9.00)

In most of the villages part of the population has agreed to rent land to Finnantara Intiga, but the areas are small and fragmented. This is the main reason for the slow establishment of plantations in the area. (Otsamo 6.3.00, Otsamo 1998)

Land procurement of the company has caused some further problems in the villages. Already before the company moved in, the livelihood and culture of the local communities was changing rapidly, as the traditional sources of livelihood could not support the present population in the present landscape. Land use agreements have divided the villages and further undermined traditional land tenure institutions. Part of the population is working in the plantations and part of the population wants to keep the land under their control. There’s often friction and even fights between those fractions. Many see the plantations occupying land for agriculture and pre-empting possibilities for other traditional livelihood sources. For example the company does not allow traditional shifting cultivation by burning land even outside the plantation area (Lounela et. al. 2000, Lounela 3.9.00, Djuweng Sep 99).

Magazines and press releases of APRIL, Down to Earth (DTE), Helsingin Sanomat, Paper Maker, Pulp and Paper International (PPI), Stora Enso, UPM-Kymmene (UPM)

APRIL 1997, meeting with the company representatives in Helsinki, 17 Dec 1997.

Djuweng, Stepanus, personal communication, September 1999.

International Union for the Conservation of Nature (IUCN) 1991: The Conservation Atlas of Tropical Forests, Asia and the Pacific. London and Basingstoke. MacMillan Press.

Lounela, Anu. Personal communication 3.9.00. Based on field work in Sanggau in 1999.

Lounela, Anu & Topatimasang, Roem 2000 (eds.):Kuka vie kalat verkosta? Paikallisyhtiöiden oikeudet luonnonvaroihinIndonesiassa. Helsinki. Visio.

Munoz, C., presentation on behalf of APRIL in a seminar on the globalisation of the forest industry, Helsinki, 3 November 1999.

Neilson & Fenton 1998: The Forest Industry Sectors of Malaysia and Indonesia - The Reality? DANA Publications. New Zealand. Cited from http://www2.wave.co.nz/~dana/malay/malaybroch.htm

Otsamo, A. (Stora Enso) 1998 in the book Tropiikin vihreäkulta. Pohjolan pojat Kaakkois-Aasian sademetsissä. Eds. Sari Kuvaja,Marko Ulvila, Thomas Wallgren. Helsinki. Like.

Otsamo, Antti (Stora Enso) 6.3.2000.Letter to Anu Lounela.

Societe General de Surveillance Forestry (SGS): PT Riau Andalan Pulp &Paper Forest Management Audit Report, published 23 April 1998.

In the last 30 years, the forestry sector in Chile has undergone profound changes characterized by, among other indicators, a massive increase of tree plantations of exotic species and a rise in foreign exchange earnings from timber exports. The opening of markets during the military regime, together with state support for tree plantations through Law 701 (1974), created the main conditions for these shifts.

Tree plantations form the basis for Chile’s timber production, which is a major source of income for the country. While in 1974 forestry income amounted to USD 103.9 million, this figure rose to more than USD 1.799 billion in 1999. Cellulose now constitutes the principal export product and the USA is the largest importer, taking 27.6 per cent per cent of exports.

Although tree plantations -- especially of Pinus radiata -- have been considered successful in economic terms, they have also caused significant social and environmental problems. Among others, one could mention the overall problem of social inequity, as only large enterprises have benefited, leaving small and medium landholders impoverished. Meanwhile, the great majority of native forests, which were historically exploited through selectively logging the best trees or trees of one species only, have been replaced by tree plantations and agriculture. Fires and grazing have also had an impact. These disturbances have led to the elimination of many endemic forest species. They have also changed the composition and structure of the original forest, setting in motion a process ofprofound degradation.

The VII region is located in the central zone of Chile. About 40 per cent of the regional population can be found in the countryside, where traditional agriculture forms the main economic activity. The inroads of the forestry and agro-industrial sectors, however, have pushed the annual rural emigration rate to 0.8 per cent. While the region is now one of Chile’s three fastest-growing, it also has one of the lowest human development indexes. In fact, it is one of the three least developed regions in the country.

Two studies of the region have quantified the destruction of native forests. One revealed that between 1978 and 1987 approximately 10,960 hectares of mainly secondary growth were destroyed. A second study, covering the period 1985-94, proved that substitution was the main cause of destruction of the region’s native forests. Approximately 17,801 hectares were eliminated by this factor during that period.

The community of Empedrado covers an area of 56,530 hectares and is located to the southwest of the regional capital. According to the 1992 census the community had 4554 inhabitants, which is less than 1 per cent of the total population of the region. About half (48.9 per cent) of the population is located in urban areas, 51.1 per cent in the countryside. If these figures are compared to the last census in 1982 one can see that the gradual loss in rural population has been more than 65 per cent, which indicates a decrease of rural population of 2 per cent annually between 1982 and 1992.

According to an interpretative poverty study undertaken by SEPLAC (1998) 80 per cent of the population finds itself in conditions of poverty. Some 62 per cent of the poor reside in rural areas. Empedrado is one of the three poorest communities in the entire country.

The great majority of the communal territory is devoted to forestry. Tree plantations, especially Pinus radiata and Eucalyptus, cover 37,586 hectares, native forests 3,716 hectares, mixed forests 1,357 hectares leaving 4,325 hectares still available for planting. Despite large expanses of commercial plantations, however, it is still possible to find small populations and communities of native species. Many of them are at risk of extinction, being distributed in less accessible locations like cliffs.

According to MENA (1996) and SEPLAC (1998), the majority of the territory is the property of large absentee forestry enterprises, including CELCO, Bosques de Chile and Aserraderos Pacifico. The rest of the territory is divided into agricultural and forest plots of which the average size is less than 15 hectares. As more and more farming properties were sold to tree-planters from 1974 on, plot size has decreased by some 30 per cent.

The overall balance of land use between 1961 and 1991 shows that in these 30 years the area of tree plantations increased by 21,652 hectares, while cultivated areas and natural grasslands declined by 13,529 hectares (MENA, 1996). More than 50 per cent of the territory covered by trees belongs to one enterprise, Forestal CELCO S.A.. Moreover, according to Lara et al. (1987) native forest cover in the period between 1978 and 1987 decreased by 1,920 hectares due to the encroachment of plantations, which makes it the second most affected community in the region as far as this factor of destruction is concerned.

Forestry forms the main economic activity in the community. However, the seasonality of the labor generated by forestry -- unemployment is high between May and September -- affects family life(SEPLAC, 1998).

Extensive forestry generates various social problems. They include a high number of female-headed households. Family members working in the forestry sector are often absent from the household for extended periods. In addition, the forestry camps leave a large number of single mothers in local communities, due to the vicinity of forestry camps. The illiteracy rate, meanwhile, is over 20 per cent, partly due to the fact thatlocal children often leave school to work in the forests in the collection of mushrooms or fuelwood. Soil degradation over 28,287 hectares of the region’s land, decreases in productivity, and a lack of opportunities for the rural population add to pressures leading to rural-urban migration and a poverty rate of 80 per cent amongst the total population.

A 308 per cent expansion in tree plantations, especially of Pinus radiata, and an associated 54 per cent decrease in cropland and prairies, has contributed to decline in the farming community in Empedrado and increased rural-urban migration.

The fact that Empedrado has been "favored" by Law 701, which has exclusively stimulated the establishment of tree plantations of exotic species, has reduced income from traditional agricultural practices over the past 15 years. At the same time, native forests in the area have shrunk to isolated patches and have been gravely altered in their structure. The low economic value of such patches and the pressure they are under to help sustain local livelihoods is leading to yet more degradation, particularly since programs to support and help small and medium-sized forest owners to manage their forest in an integrated and sustainable manner do not exist. Farmers who do not migrate are also under pressure to damage the productive capacity of the land remaining open for farming. Many farmers are unable to expand their cultivated lands, since they are surrounded by tree plantations. Moreover, there are hardly any support programs for small landowners through which they could find alternative employment. Other effects of the plantation boom have included urban and rural poverty, damage to the secondary road infrastructure, low education levels, illiteracy, unemployment, alcoholism, loss of cultural identity,and scarcity of municipal resources (the large forestry enterprises do not contribute to the municipality’s budget). Small wonder that inhabitants of the forest and small farmers see the model of forestry development that is currently being imposed -- one that emphasizes physical factors without taking sufficient account of long-term social or environmental costs -- as a threat to their survival.