• China: Restructuring the paper sector to suit a globalised industry
• The Pulp and Paper Industry in Indonesia: A Growing Disaster
• Thailand: A pulp mill with a long history
• Vietnam: A divided community around the Tan Mai Paper Mill

THE LOCAL IMPACTS OF PULP MILLS

- China: Restructuring the paper sector to suit a globalised industry

Since 1996, in an attempt to control pollution, China's State Environmental Protection Administration has closed thousands of pulp and paper mills. "A significant portion of urban as well as rural water pollution problems came from industry and, in particular, the pulp and paper industry," commented the World Bank in a 2000 report about China's pulp and paper industry.

China has closed down 7,000 small mills according to Petteri Pihlajamaki of Finnish forestry consulting firm Jaakko Pöyry. "The Chinese pulp and paper industry caused more pollution than the pulp and paper industry of the rest of the world combined," he told Tove Selin, Coordinator of the Finnish NGO campaign to reform Export Credit Agencies.

Before 2000, only ten per cent of China's pulp was produced from wood. Most of the closed-down mills used non-wood raw material like residues from rice and wheat crops. The World Bank described these mills as "outdated, inefficient, and too small, and they rely heavily on locally grown feedstocks, in particular rice straw."

The old mills were no doubt highly polluting, but closing mills down was not the only possible solution. In many provinces, selling wheat straw to local paper mills was an important source of income for farmers. Pollution from non-wood fibre mills can be reduced by improving chemical recovery, by reducing the amount of silica going into the waste water and by using alternative pulping techniques.

While the government is closing down pulp and paper mills, China is the world's fastest growing pulp and paper market. Although per capita paper consumption is less than ten per cent of the amount consumed in the US, China accounts for 14 per cent of global paper consumption. Jaakko Pöyry estimates that consumption will increase at 4.4 per cent a year between 2000 and 2015.

To meet the increasing demand, China increased imports of pulp by more than four times between 1997 and 2003. China is now the world's second largest importer of forest products (after the US). Sixty per cent of these imports are pulp and paper products.
The restructuring of China's pulp and paper industry from small-scale mills using local raw materials to massive, modern mills using wood-based pulp has created a bonanza for the consulting firms, machinery suppliers and paper companies that make up the global pulp and paper industry.

During the 1990s, China's paper industry received around US$1 billion from international financial institutions, foreign governments and foreign direct investment. "China is still the Promised Land as far as pulp and paper equipment suppliers are concerned," wrote Pulp and Paper International's editor Graeme Rodden in December 2003.

Finnish-Swedish paper giant Stora Enso announced earlier this year that it would increase the capacity of its Suzhou mill from 160,000 to 240,000 tons a year. Stora Enso has eucalyptus plantations in Guangxi province in south China.

Finland's UPM Kymmene's Changshu mill started operations in 1999 and today produces 350,000 tons of paper a year. By 2005, capacity will be increased to 800,000 tons a year, with pulp imported from Indonesia.

Indonesia's massively indebted Asia Pulp and Paper has plans to build a 600,000 tons pulp and paper mill in Qinzhou, Guangxi province. Raw material is proposed to come from the company's eucalyptus plantations in south China. APP aims to establish 600,000 hectares of plantations in China.

Japan's largest paper company, Oji Paper, plans to establish a total of 200,000 hectares of fast-growing tree plantations in China.

Chinese companies are also getting in the act. Yueyang Forest and Paper has 65,000 hectares of plantations and hopes to plant 100,000 hectares with poplar, alder and pine by the end of 2005. The plantations are to feed Yueyang's 550,000 tonnes a year pulp and paper mill.

The World Bank dismisses China's small-scale paper mills as inefficient, but is unlikely that the boom in fast-growing tree plantations in China would have been possible without subsidies.

The Chinese government has set aside US$13 billion for plantation development between 2002 and 2020. The aim is to plant almost 6 million hectares for the pulp and paper industry between 2001 and 2015.

Meanwhile, China is the largest recipient of World Bank loans to the forestry sector. Since 1980, China has borrowed more than US$600 million from the World Bank to establish plantations to feed the pulp and paper industry. In 2002, the World Bank approved a US$93 million loan for a "sustainable forestry development project" in China, aimed at forest protection and "ensur[ing] a supply of wood to meet China's growing demand".

China's small-scale polluting pulp and paper industry, which employed large numbers of people and supported millions of farmers, is being replaced by a modern polluting industry, which employs few people and which relies on vast areas of monoculture plantations to supply its raw materials.

By: Chris Lang, e-mail: chrislang@t-online.de

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- The Pulp and Paper Industry in Indonesia: A Growing Disaster

In the early 1980s the Indonesian government launched an ambitious forestry plan entitled "Industrial Timber Plantation (HTI) and Pulp Industry Development." In the early stages of its development, pulpwood plantations were claimed to rehabilitate degraded land and to reduce the pressure on natural forests. This misleading propaganda was indeed intended to disguise an ambitious plan of the Indonesian government for the country to become a world major pulp and paper producer.

To achieve this plan, the government did not only issue a large number of regulations that enabled concessionaires to log natural forests, but it also disbursed millions of dollars in interest-free loans as an incentive to encourage corporations to get involved in the business, with the additional benefit of extracting timber from the concessions as well as receiving many other political and economic privileges.

The expansion of the project was running smoothly. Up to 2001 more than 8 million hectares of land had been given to some 175 companies to be converted into HTIs. Some 5 million hectares of the total were allocated for fast growing monoculture tree plantations (Acacia mangium and Eucalyptus). Pulp production sharply rose from 980,000 tons in 1987 to 8 million tons in late 2000. This changed Indonesia’s status from net pulp importer into net pulp exporter.

However, as plantations expanded, the process was gradually generating a disaster chain to the environment and to the economic, social and political lives of the Indonesian people.

There is no relevant data to support the argument that the pulp industry is efficient and productive. On the contrary, the official data showed that only 1.85 million hectares (23.5% of the total designated area) had been planted with trees to feed the pulp mills. The figure might be even lower in the field, as plantations were often established on land unsuitable for HTIs such as the peat swamps or swamps (for example, the Asia Pulp and Paper Company in Jambi had a 1:3 qualitative-quantitative ratio, meaning that for every 3 trees planted on the swamps only 1 survived). Free timber in the concessions was obviously the main reason for corporations' involvement in the business: once the forest was cleared and the timber removed, the concession was abandoned without having planted the trees that were supposed to be planted.

HTI concessionaires themselves did not maintain their plantations well. In 2002 the government revoked the license of some HTIs for various reasons such as unpaid debts, mismanagement and misuse of the Reforestation Fund, thus showing that the HTIs did not perform well.

Ironically, no care was given to the logged-over sites, degrading millions of hectares of land, once primary forests or sources of livelihood for local communities, and turning it them into “no people’s land” (abandoned land). This in turn degraded the balancing function of the land and when the structural environmental degradation built up, the results were floods, forest fires and landslides.

To make matters worse, it was clear that the seven pulp industries based in Sumatra and Kalimantan were using raw material from natural forests. The 2003 data of the Ministry of Forestry showed that on average each of the industries had a raw material deficit of 700,000 – 2,000,000 cubic meter per year, with plantations only supplying 20-25% of the total demand, and with half of the wood from natural resources being extracted illegally.

The above figure might have been much higher if we had taken the ministry’s previous data. The 2001 Forest Management Statistic showed that while demand reached 25 million cubic meters of wood per year, the total production of related plantations, was only 3.8 million cubic meters per year, meaning that 85% of pulpwood was extracted from forests and not from plantations.

It is obvious that pulp industries will continue to rely on natural forests to fulfill the demand of raw material. In March 2004, a national newspaper reported statements from Asia Pulp and Paper (APP) and Asia Pacific Resources International Holding Ltd (APRIL) that they would stop receiving raw material from natural forests in 2007 and 2008. However, we doubt that this will be so, because their HTI’s production was far below their industrial capacity, as revealed by research carried out by Indonesia’s NGO network.

The authoritarian system implemented by the government in the forestry sector produces a closed licensing system, which has fuelled corruption, collusion and nepotism. More technically, the land allocation processes have suppressed indigenous/local community’s sovereignty, resulting in prolonged social conflicts between the concessionaires and local communities.

According to data from the Ministry of Forestry, during 1990-1996 more than 5,700 conflicts over HTI’s establishment occurred throughout Indonesia. The conflicts were mostly of struggle for land ownership between indigenous peoples and other local communities with the concessionaires.

In Porsea, North Sumatera, conflicts between the local community and PT Inti Indorayon Utama (IIU) escalated into the use of violence by the government-supported company. Hundreds of people were attacked, with the result of some suffering permanent disability, scores going to jail and several dying. The company also completely destroyed the harmony between the environment and the local community. Areas around the factory were contaminated by stinky chlorine odor, making it difficult to breathe. The community’s rice land was polluted by the factory chemical waste.

After long years of struggle, the mill was eventually closed down. However, the corrupt legal system and the political complexities led to the re-opening of the business run by tycoon Radja Garuda Mas. The re-opening of the company under a new approach, a new name (PT Toba Pulp Lestari) and a new orientation (no longer producing rayon, but producing only pulp) by President Megawati clearly showed that she turned a blind eye to the military violence against the local community.

Other companies have used different though equally oppressive methods. For instance, APP created a kind of local militia (called PAM Swakarsa) to quell local community’s protests and so did Indah Kiat Pulp & Paper and Riau Andalan Pulp & Paper. In Jambi, PT Lontar Papyrus and PT Wira Karya Sakti cleverly managed to use their influence to have the local administration accommodate their interests in local regulations; for example, they managed to convert the designated rice land into HTI in the vicinity of Parit Pudin.

It can be concluded that the pyramid of social conflicts generated by the establishment of pulp mills and HTIs is the result of the structural and systematic policies carried out by the government in collusion with the companies, and of the paradigm of natural resource and conflict management that place the environment and communities as mere objects.

Excessive expectations from a prosperous pulp industry has made the government violate its own regulations. The government supports HTI concessionaires not only through an unclear and business-favorable licensing system but also through interest-free loans as an economic incentive for such business. Moreover, it keeps issuing policies favouring the companies.

In late 2003, through the Ministry of Forestry, the government arranged some ministerial regulations concerning the HTI sector and four ministerial decrees were issued. Ironically, all of them refer to HTIs' privileges and continue to ignore the problems. The decrees stipulate that any HTI can be established without having to conduct feasibility studies. The decrees thus elude the issue of HTI's bad performance and open the way to industrial pragmatism and to environmental and socio-economic problems. The decrees also stipulate that both established HTIs and non-performing ones are allowed to alter their investment structure through divestment, which clearly puts public funds (channeled through government loans) at risk. Any HTI’s assets or shares sold to the private sector will no longer belong to the public.

Problems surrounding the pulp industry and HTIs have eventually led to natural occurrences that communities have had to endure: i.e. the natural disasters that are increasing in frequency, scope and intensity. Bad HTIs leave degraded land or badly-maintained plantations. This might alter the weather, i.e. increasing the local temperature. In early 2003, an extensive fire occurred in Jambi. Almost 500 hectares of the HTI managed by PT Dyera Hutan Lestari (PT DHL) were burning for 3 weeks due to bad management, to the conversion of peat swamps to plantations that destroyed the sedimentation structure of water and mud, and to a bad canal system. In another part of Jambi, in the vicinity of Mendahara Ulu the area was flooded because the mangrove forests in the upper course had been destroyed by an HTI.

The beginning of 2003 saw a big flood lasting for almost a whole month in Riau. The flood destroyed everything along its course and caused a loss of up to 764 billion rupiahs, equivalent to 64% of the 2002 regional budget. A report from the Indonesian NGO WALHI revealed that the large amount of converted land in the upper course had caused the loss of carrying capacity of the soil, resulting in erosion, sedimentation and flooding.

Still in Riau, mid 2003 saw another big flood followed by a forest fire that destroyed more than 245,000 hectares of forest in less than 23 days. Thirty two of the 54 companies clearing forests with fire were HTIs.

Floods, landslides, forest fires and smog are not the culmination process of nature, but the products of exploitative management regulated by economic interest-seeking policies that ignore sustainable resource management. The disasters therefore prove to be structural ones, generated by super-structured policies and corrupt governmental officials. It is therefore crucial to understand the roles of actors and policies outside the forestry sector -which directly and indirectly relate to forestry issues- in viewing the pulp and HTI sector.

By: Rivani Noor, Rully Syuamanda, Rudy Lumuru & Longgena Ginting (Presented at the Forest Movement Europe-Taiga Rescue Network Paper Strategy Meeting, Helsinki-Finland 22-25 April 2004)

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- Thailand: A pulp mill with a long history

Established in 1989, Advance Agro Public Company Limited is located in Prachinburi province. Its main business is producing and selling pulp and printing and writing paper. The company’s production capacity of bleached kraft pulp is 175,000 tons per year. It also produces bleached short-fibre pulp for two mills operated under Advance Agro Pulp, with a combined capacity of 427,000 tons as well as printing and writing paper, with an annual capacity of 250,000 tons. Along with its subsidiaries (High Tech Paper and Advance Paper), Advance Agro has an annual production capacity of 500,000 tons. About 70% of its product is exported to China, the US, Hong Kong and Japan.

Advance Agro (PLC) is a subsidiary of the Kaset Rung Ruang (Soon Hua Seng--SHS) Group. More than 10 years ago, police arrested employees of the SHS subsidiary Suan Kitti for clearing forest to make way for eucalyptus plantations. The controversy turned into such a heated public issue that the then Council of Ministers had to prohibit large-scale commercial tree plantations by the private sector in national reserve forests.

The mill was originally to be the “Suan Kitti Pulp Mill”, but in order to distance itself from public criticism associated with Suan Kitti, SHS swiftly renamed the mill Advance Agro and hired the Finnish-owned Presko public relations firm for advice on minimising any further environmental criticism. CIDA, the Canadian aid agency, subsequently funded the Canadian consultants H.A. Simmons to work for SHS, and the UK Commonwealth Development Corporation (CDC) provided loans and debt finance for the mill.

The company's main shareholders are the Soon Hua Seng Group (56%), StoraEnso, Europe's largest pulp and paper producer (19%), New Oji Paper, Japan's largest paper producer (5.5%) and CDC (1%).

At present the mill obtains its raw material supplies from 32,000 hectares of eucalyptus plantations and additional 57,000 hectares of eucalyptus grown by 6,000 farmers under contract to Agro Lines.

Advance Agro markets its "Double A" brand paper as environmentally friendly. The company's advertising explains that the raw material comes from plantations and thus relieves pressure on remaining forest areas. But in reality, Advance Agro's plantations have displaced communities and are the final stage of deforestation in east Thailand.

Laem Khao Chan village is about 100 years old and is close to one of Advance Agro's mills. In the past, villagers grew rice, cassava and pumpkin. When SHS started to look for land to plant eucalyptus many villagers sold the land they had used for cassava planting to the company. But villagers found that the eucalyptus plantations started to affect their rice fields as well.

Suwan Kaewchan, a member of the Laem Khao Chan Tambon Administration Organization in Laem Khao Chan village, explained: "When the company came and started planting eucalyptus near the rice fields, the water began to dry up and people found they couldn't grow rice. One by one they began to sell their land and leave. They went to work as hired labour in other areas or with the company."

Villagers who kept their land but planted eucalyptus under contract to the company faced another problem, as Kasem Pet-natee of the Khwae Rabom-Siyad Development Project pointed out: "After the first harvest, the soil is so degraded that villagers have to spend money to improve the soil. Removing the trees is difficult. Villagers have to hire expensive machinery to remove the stumps and roots of the trees. Agricultural communities are falling into debt to banks and moneylenders. When villagers cannot pay, the banks take their land."

Wastewater from Advance Agro's mill is poured onto the eucalyptus plantations. The filthy water lies in channels between the rows of the eucalyptus trees. Villagers point out that although the water is treated at the pulp mill, this does not mean that the water is clean. Recently water released from the mill killed villagers’ rice crops. Dust from the mill also spread to the villagers’ houses and brought a rash to their skin.

Several transnational corporations have benefited from contracts on Advance Agro's mills. Jaakko Poyry, the world's largest forestry and engineering consulting company of Finland, won a contract (of not more than 3 years and signed on 15 December 1993) from Advance Agro for engineering design, project and construction management for the mill. The corporation was paid US$15,250 each week, excluding an hourly fee of US$60 for carrying out additional orders. Another contract (signed on 5 September 1995) was made with Finland’s Ahlstrom Corporation for a 10-year provision of technical services. The first-year payment was US$350,000 and 3% of Advance Agro’s net revenue had to be paid annually to Ahlstrom for the outstanding payment.

When StoraEnso bought up shares in Advance Agro in 1998, several cooperation contracts between the two companies were signed. For example, Advance Agro had to pay StoraEnso annually US$100,000 in return for pulp and paper research and development cooperation. To obtain technical assistance from StoraEnso, Advance Agro would have to pay salaries, other benefits and technical assistance costs to StoraEnso for 12 months. StoraEnso would secure at least 12,000 tons of European long-fibre pulp a year as well as be paid in commission as Advance Agro’s overseas sales representative and distributor (except in Thailand and Japan) for seven years. It was expected that the long-fibre pulp to be secured by StoraEnso would come from its mills in Europe.

Source: Extracted from "Commercial Tree Plantations in Thailand: Flawed Science, Dubious Politics and Vested Interests", by Pornpana Kuaycharoen and Noel Rajesh

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- Vietnam: A divided community around the Tan Mai Paper Mill

Just meters beyond the outer wall of Tan Mai Paper mill, a thriving industry exists in the shade of coconut trees. In ponds where rice fields used to lie, local villagers stand chest deep in wastewater from the factory. Young men strain to lift nets out of the ponds, filled to the brim with the catch of the day: paper fiber emitted in the mill's wastewater.

As one part of this community literally lives off wastewater, selling recovered fiber to low-grade paper makers in nearby Ho Chi Minh City, other people pay the price of damaged crops, polluted drinking water, and dead fish. Tan Mai is an example of a divided community that both depends on the factory's pollution for income and is injured by its activities. Some community members work in the factory. Others complain of losing entire years crops with no compensation.

Although Tan Mai had been causing pollution since the 1960's, it was not until the factory increased its production in 1992 that community members organized as a group to demand recourse for dead fish and damaged crops. Between 1992 and 1996, community members wrote letters to the Department of Science, Technology and Environment (DOSTE), the media, and to the factory management. The DOSTE investigated the claims of the community, but never showed the results to community members, and never awarded compensation for lost crops or fish. Few people argue that Tan Mai does not have serious environmental impacts. The factory managers acknowledge that they need a new waste treatment system. Even the people who make their living off recovering fiber express their concern about the impacts of the factory's pollution. Local farmers cannot eat the rice they produce, instead using it only to feed to their pigs. Community members complain of nausea from air pollution, undrinkable well-water, nose, eye, and skin problems, and lower yields from their fruit trees.

However, the community around Tan Mai is both physically and emotionally divided. One group of families lives next to the factory's back wall, collecting the paper fibers, another group grows rice in fields nearby, a third group lives in company-built apartments on the urban side of the factory, and a fourth lives in fish-raising houseboats on the river into which Tan Mai discharges its wastewater. The Phuong (or ward) has a young and dynamic chairman, who is quite open about the environmental impacts of the factory on the community, and equally open about his frustration with not being able to change the situation. Through this local official, the community has submitted formal complaints to the factory and to provincial authorities. But as he explains, "The people in this area have children working in the factory. They can use electricity and water from the factory. So of course there are losses and benefits from the factory, so they don't want to complain much" (personal interview - June 6, 1997).

Tan Mai is owned and managed by central state authorities, and is at the same time under the regulation of the National Environment Agency. Either through corruption or a concerted policy, the state has worked to block criticisms and demands for environmental improvements at factories such as Tan Mai. For instance, after complaints from the community, the DOSTE took measurements of water pollution at Tan Mai. However, these measurements were taken in a way that covered up the real pollution levels (for example, some samples were actually taken upstream from the factory, where the water was relatively clean). The DOSTE then issued a formal memo stating that the factory was in compliance with environmental standards. Everyone involved in this case recognizes that Tan Mai is nowhere near compliance with environmental standards, yet this document is now accepted as proof of Tan Mai's performance. Once Tan Mai received the DOSTE memo, neither the community nor local government authorities were able to fine or seek compensation from the factory.

Community members have thus resigned themselves to the factory's continued pollution, seemingly giving up on further complaints. Community members gave different reasons for no longer writing complaint letters, including: "they have no effect," "they only result in DOSTE coming out, measuring, and then disappearing" and "they get you noticed by the authorities." This discouragement is not uncommon. Other communities I studied also feared that complaints would be ignored or cause more trouble than they were worth. Nonetheless, other communities persevered and were sometimes successful.

The community around Tan Mai however, has been unable to overcome internal divisions and resistances. The community is in fact endowed with a reasonable level of capacities, including a mix of educated young members and industrial workers. The community even has some connections to local government representatives. Nonetheless, they have not been able to forge broader state or media linkages, and their internal divisions have weakened their ability to pressure environmental agencies to take action against a centrally managed, Ministry of Industry factory.

Tan Mai is for a number of reasons an extremely well insulated company. The government has targeted the paper industry for expansion and is aggressively promoting the three largest pulp and paper mills in the country (including Tan Mai). Promotion and protection of Tan Mai thus wins out over other interests (including tax collection), and blocks local regulation of pollution. The firm in this case has such strong linkages with the state that virtually no amount of local pressure can motivate stricter regulation. Recognizing this, community members have given up even submitting formal complaint letters.

By: Dara O'Rourke, Watershed 9 (3) March-June 2004. Extracted from "Community-Driven Regulation: Balancing Development and the Environment in Vietnam", The MIT Press, 2004.