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The Pulp Invasion:
The international pulp and paper industry in the Mekong Region
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THAILAND Contents:
The Thai government has actively supported the development of the industry, through subsidies, pro-cash crop and plantation policies, tax relief and favourable import duties on machinery imports. The second section looks at some of the government support, and includes a brief introduction to some of the background political situation in the country during the early 1990s. The third section looks at some of the international support to the industry in Thailand, largely through multilateral and bilateral "aid". The fourth section looks at some of the Thai companies involved in the pulp and paper sector. While they have made profits, they have also run up enormous debts. This, accompanied by the economic crisis in 1997, has opened the door for international companies to buy up shares in Thai companies. Some of these companies are also profiled in this section, along with international consultants who provide advice and legitimacy for the industry. Associated with the expansion of the pulp and paper industry, the area of fast-growing tree plantations has also expanded, often with disastrous impacts for many local communities. The fifth section describes some of the problems faced by communities and the protests against the industry in Thailand. Whilst faced with continuing threats of expansion, for example of Phoenix and Advance Agro's operations, villagers continue to protest, and continue to fight for their rights to decide how they will manage their environment. 1. OVERVIEW OF THE SITUATION TODAY When the first pulp mill was built in Thailand in 1923, it had a production capacity of one ton a day. Since then, pulp and paper production has massively expanded and today Thailand has 44 paper and board mills with a total capacity of more than 3.8 million tons a year (PPI 1999) (Chatrudee 2000). Eucalyptus trees provide the most important domestic source of raw material for the pulp industry. The Royal Forest Department planted the first eucalyptus tree in Thailand in 1946, in Phrae province (Pearmsak and Mochida 1999: 36). At first the spread of plantations was slow, and by 1976 only about 12,000 hectares of industrial plantations existed. A recent FAO publication estimates that by 1995 more than 300,000 hectares of industrial plantations had been established in Thailand (Brown 2000: 135). The FAO's figures (and any other figures of plantation cover in Thailand) are estimates – no national inventory of plantations has ever been carried out (FAO www 1). The Royal Forestry Department has never produced any studies on the impacts of eucalyptus plantations of larger than 160 hectares (Tunya 2000). Consumption of paper products is dominated by kraft paper, which in 1998 accounted for 47 per cent of consumption. Newsprint accounted for 19 per cent and printing and writing paper 14 per cent. Household and sanitary paper consumption stood at 3 per cent of paper and board consumption (pponline 1999). The biggest kraft paper producer is Siam Cement Group, with a total annual capacity of 805,000 tons. Second is Panjapol Group with a capacity of 505,000 tons, and Thai Cane Paper is third, with 280,000 tons. The biggest producer of printing and writing paper is Advance Agro, with a capacity of 264,000 tons followed by Thai Cane Paper with 264,000 tons and Central Paper with 68,000 tons (Chatrudee 2000). The following are the major companies involved in the pulp and paper industry in Thailand:
(Source: Siam Tree Development Company, in Tunya 2000) Several factors have played a role in promoting the eucalyptus boom in Thailand. Developments in shipping, and the changing world pulp and paper economy meant that trees grown in the South could be used to supply a world pulp market. (See Carrere and Lohmann 1996: 41-59.) The oil crisis of the early 1970s, which led to a rise in the cost of importing pulp to Thailand, was another factor in the development of Thailand's pulp industry. The production of pulp, as opposed to importing it, at least from the financial point of view, suddenly became a much more attractive proposition. The first mill to produce pulp for the domestic market was the Phoenix pulp and paper mill in Khon Kaen, which came on line in 1982. In order to allow sales of pulp from Phoenix to compete with cheap imports from Brazil and Portugal, in 1982 the Thai government increased import tax on pulp from one per cent to 10 per cent, and forced importers to pay a 15 per cent commercial tax as well a series of other import duties (Pearmsak and Mochida 1999: 68). Despite these import taxes, and even though domestic production capacity largely met demand for paper in 1992, Thailand imported 73,000 tonnes of paper and pulp simply because it was cheaper (The Nation 15 September 1993). Pulp from Indonesia threatens to flood the Thai market. In 1996, Indonesia produced 7.4 million tons of pulp, but local demand was only 2.6 million tons. Indonesia has lower labour costs than Thailand, so Indonesian companies can sell their paper for less than Thai manufacturers (Yuthana 1997). In 1997, Thailand imported 349,000 tons of short- and long-fibre pulp mainly from the US, Canada, Chile, Brazil, New Zealand, Sweden, Indonesia and the Czech Republic. As most of Thailand's pulp production uses eucalyptus wood, producing short-fibre pulp, a large proportion of the imports consist of long-fibre pulp. Imports of waste-paper were almost double imports of short- and long-fibre pulp, at 622,000 tons – from the US, Singapore, Germany, Netherlands, New Zealand and Hong Kong. 66 per cent of this was old corrugated containers (FAO 1998). The Asian economic crisis of 1997 had a serious impact on the pulp and paper industry in Thailand. One result generally was an increase in foreign ownership companies. After the crisis, more foreign investment poured into Thailand than ever before. In the eleven years of economic boom from 1986 to mid-1997, Thailand received a total of US$19.1 million private foreign direct investment (FDI). In the two years after the crisis, 45 large companies listed on the Stock Exchange of Thailand offered their share to foreign buyers. As a result, US$14.9 million of FDI flowed into the country between July 1997 and the end of 1999. Almost all the foreign investors were interested in buying up cheap assets (Pasuk and Baker 2000: 218). Northern companies are moving into the Thai pulp and paper industry by buying into Thai firms. Stora Enso, for example, has a 19.9 per cent share of Advance Agro (Sonnenfeld 1999: 31). New Oji bought up 5.5 per cent of Advance Agro. Norske Skog took over Shin Ho newsprint plant in Thailand. Another effect of the economic crisis was a reduction in domestic consumption of paper and board. Consumption fell from 2,042,000 tons in 1997, to 1,604,000 tons in 1998. Domestic pulp consumption also fell from 802,000 tons in 1997, to 644,000 tons in 1998 (FAO 1998). Imports of pulp and paper in 1998 decreased to 43 per cent of 1997 levels (pponline 1999). At the same time, production capacity increased. Exports increased, partly because of the surplus created by reduced domestic demand, but also because companies were desperate to earn hard currency in order to repay foreign loans after the collapse of the value of the baht. In 1997 exports of pulp and paper stood at 525,000 tons. By 1998 this figure had almost doubled, at 971,000 tons (Paperloop 2000). According to the Thai Pulp and Paper Association, domestic demand stood at 1.9 million tons in 1999, with production capacity of 3.8 million tons. Somboon Chuchawal, the association's chairman concluded that no new investment in the industry was likely in the next decade (Chatrudee 2000). Advance Agro and Phoenix currently have ambitious plans to increase capacity, driven by their needs to repay debt, and by the demand for cheap pulp internationally. 2. THAI GOVERNMENT SUPPORT TO TO THE PULP AND PAPER INDUSTRY Since the 1960s, the government of Thailand (with prodding and support from the World Bank, see below) has promoted cash crops such as corn, cassava, sugar cane and kenaf for export. One of the results has been that farmers expanded their fields into logged-over forest lands (Casson 1997: 11) (Lohmann 1991: 3). In many ways, fast-growing tree plantations are simply another cash crop. In 1961, Thailand's first National Economic and Social Development Plan (NESDP) specified that 50 per cent of land should be reserved for forest (Apichai et al 1990: 11). The first Plan set a target of 2,000 hectares a year for plantations. The target area increased with subsequent Plans, from 38,000 hectares in the third Plan (1972-1976) to 400,000 in the fourth Plan (1977-1981) (TDRI and TEI 1993: 4-53). With the fifth NESDP (1982-1986) the government introduced a private sector role in establishing plantations. A target of 48,000 hectares annually was to be planted. The government provided a series of subsidies, including cheap rent for forest land and tax exemption (Pearmsak and Mochida 1999: 26). In response, twelve companies applied to the Board of Investment for promotion privileges on a proposed total area of 20,000 hectares of plantations. Half of the companies withdrew their applications because of a lack of available land, and the remainder planted up around 8,300 hectares (TDRI and TEI 1993: 4-64). Under the forestry policy of 1985, the area of "forest" in Thailand was to be increased to 40 per cent of the country's total land area, and this target figure was also included in the sixth NESDP (1987-1991) (Pearmsak and Mochida 1999: 48). The 40 per cent target figure has endured, despite the fact that people live on much of the land required, despite villagers' protests and ever-increasing information about the impacts of fast-growing tree plantations. Government officials frequently quote the target figure as a justification for more plantations. For example, Chittiwat Silapat of the FIO said, "There's no way to force farmers to go out of that area, no way to force them to plant forest. But this [i.e. 40 per cent forest cover] is a must, we must have a forest cover area" (Chittiwat 2000a). During the late 1980s, the government unofficially allowed companies to clear forest and declare it "degraded", and therefore suitable for "reforestation" with eucalyptus plantations. In January 1990, 156 employees of Suan Kitti, a subsidiary of Suan Hua Seng one of Thailand's foremost plantation companies (see section on Suan Hua Seng below), were arrested for illegally logging a forest area in eastern Thailand (Carrere and Lohmann 1996: 237). The government of Chatichai Choonhaven was at the time racked by scandals and corruption. Several influential figures in the Chatichai administration were also on Suan Kitti's board (Pye 1997: 4). As a result of the public outcry, in May 1990 the Chatichai administration banned all commercial plantation projects in National Reserve Forests (Carrere and Lohmann 1996: 237). However, a military coup the following February breathed new life into the plantation industry -- particularly though a project known by its Thai initials as Khor Jor Kor (the Land Distribution Programme for the Poor Living in Degraded Forest Areas). Despite the harmless sounding title, the project was carried out by the military's Internal Security Operations Command, and aimed to resettle five million villagers (Carrere and Lohmann 1996: 237) supposedly encroaching in reserve forest areas. The project targetted 2,500 villages in 352 reserve forests over an area of 2.24 million hectares in northeast Thailand. Thai and foreign companies would then be able to lease the land for eucalyptus plantations (PER 1996) (Lohmann 1991: 4). During 1991 and 1992, the Army and the RFD forcibly evicted hundreds of villagers from their homes. Thousands of villagers including those already evicted called on the government to cancel the project (PER 1996). A broad-based public protest against the military coup culminated in the biggest demonstration in Thai history in May 1992, with over 500,000 people taking part in a night and day vigil at Sanam Luang and the Democracy Monument in Bangkok. The government's initial response was to order troops to fire into the crowds of unarmed demonstrators. Thousands were wounded and over one hundred people were killed. The protests continued, despite the violent repression and eventually the military dictatorship led by General Suchina Kraprayoon was forced to back down (Pye 1997: 5). In June and July 1992, thousands of affected villagers protested in Nakhon Ratchasima province. On 24th June, about 300 farmers set off from Khorat on a march to Bangkok, demanding the total scrapping of the Khor Jor Kor programme. More people joined the march until by the end of June, 3000 protesters blocked Highway 2, the main road to the northeast. Eventually, after refusing to negotiate with less important representatives, the protesters met Deputy Interior Minister Anek Sithiprasasana. The seven-hour long meeting resulted in a victory for the farmers, and the Anand-government cancelled the project and allowed the resettled farmers to return to their homes (PER 1996) (Pye 1997). With the end of the Khor Jor Kor project, the government of then-Prime Minister Anand Panyarachun passed a Cabinet Resolution dated 8 September 1992, which limited the area of national forest reserve that could be planted with eucalyptus to 8 hectares (50 rai). In addition, only farmers who had lived on the land for five years or more could plant trees in national forest reserve land (Krungthep Thurakij 21,22,26 September 1999). In September 1993, the Council of Economic ministers of the Chuan Leekpai government decided to lift the ban on commercial reforestation that had been imposed by the previous administration (Bello et al 1998: 198) (Carrere and Lohmann 1996: 238). Since then a series of governments has promoted plantations and approved new pulp mills and expansions of existing mills. New mills have to be approved by the Board of Investment (BoI). Initially established under the aegis of the World Bank, the BoI has played a crucial role in promoting the development of a pulp and paper industry in Thailand. The BoI's approval of Advance Agro's pulp and paper mill indicates the type and value of subsidies the government provides to the industry. With the approval, Advance Agro was awarded:
Coincidentally, Staphorn Kavitanon became a member of the board of Advance Agro in 1996. Staphorn is Secretary General of the Board of Investment (AA www 3). The two government institutions most directly involved with establishing plantations are the Royal Forest Department and the Forest Industry Organisation. Both institutions are profiled below. - ROYAL FOREST DEPARTMENT (RFD) Formed in 1896, the Royal Forest Department is a product of British imperialism. In 1895, Herbert Slade, the Deputy Conservator of Forests in Burma, conducted a six month-long inspection of Siam's forests. He advised the King to nationalise the forest and set up a forestry service to attempt to limit the rate of logging by timber companies. (At the time, the teak trade in northern Thailand was dominated by six companies, three of them British, one French, one Danish and one Chinese.) Herbert Slade became the first Director-General of the RFD. Until 1923, the succeeding Director-Generals were all British, and the Department was dominated by British forestry officers. In 1899, King Rama V (King Chulalongkorn) of Siam formally claimed ownership of all forest land in the country. In 1932, with the end of absolute monarchy in Thailand, forest lands became the property of the state, with logging concessions leased to corporations. Timber production reached a peak of 4.5 million cubic metres in 1968, after which it declined and in the mid-1980s Thailand became a net importer of timber. The impact of logging on the forests was disastrous – the area of forest declined from 274,000 square kilometres in 1961 to 143,000 square kilometres in 1989. During the 1980s, villagers protested against the logging companies, blocking roads, obstructing logging operations and occupying logging camps. Villagers set up their own forest protection patrols and planted trees in logged-over forest. As a result of the protest movement, and floods in 1988, which were blamed on logging and which killed more than 300 people, the government declared a nationwide ban on inland logging concessions in January 1989 (logging concessions in mangrove forests remained). With the logging ban, the RFD shifted its focus from logging to "conservation" and "reforestation". During the 1980s, the RFD set up a separate office specifically to promote commercial tree farms, with a public relations budget of US$24 million (Carrere and Lohmann 1996: 233). Post-logging ban, the RFD, the military and private companies have promoted plans to establish four million hectares of fast-growing tree plantations to feed the pulp and paper industry. Meanwhile, many of Thailand's logging companies simply moved their operations to neighbouring countries: Burma, Cambodia and Laos (Lang and Pye 2000: 30-31). In 1992, a Reforestation Office was established within the RFD. Two years later the Office accounted for 40 per cent of the RFD's budget. The Reforestation Office announced three major programmes in 1993 aimed at promoting reforestation:
The King's Project was a dismal failure. After a year, the RFD admitted only 30 per cent of 297 million saplings produced for the campaign had actually been planted. Government officials resorted to cutting down "degraded forest" to meet planting targets. For example, in Udon Thani province, a cemetery forest was cleared and after the district head appeared at a public event to launch the project, villagers spent five days planting eucalyptus saplings. The then-Director General of the RFD, Pong Leng-ee was removed when it emerged that less than twenty per cent of the budget for the King's Project had actually gone on producing seedlings (Pye forthcoming). In April 2001, the private reforestation was put on hold. The Budget Bureau scrapped the budget for the year on the grounds that the RFD already had approximately US$800,000 left over from previous years. By 1999, of the 1,300,000 hectares target, only around 500,000 hectares had been planted with trees. A source told the Bangkok Post in April 2001, "the number has vastly decreased as many participants abandoned the project in the interval" (Ploenpote 2001a). The RFD is plagued with corruption and illegal logging scandals. In 1996, Yanyong Thanompichai, then-Director-General of the RFD, was removed from his post following an illegal logging scandal in Surat Thani province. Two years later, another RFD Director-General Sathit Sawintara, was removed following the exposure of systematic illegal logging, involving high-level forestry officials, in the Salween National Park (Pye forthcoming). Today's Director-General of the RFD is Plodprasop Suraswadi. Plodprasop seems happy to continue the RFD's role as an unregulated and unaccountable armed force. In January 2000, he appeared on the cover of the RFD's in house magazine "Vanasarn" in military-looking uniform armed with a knife and a uniform. Such gestures are reflected in some of RFD's recent activities. In May 1999, approximately 500 police and 1,500 forestry officials broke up a peaceful demonstration of farmers in Chiang Mai. In the same month, Karen people living in Thung Yai Naresuan Wildlife Sanctuary accused Plodprasop of threatening three Karen hermits with an assault rifle, and ordering their meditation huts to be burned down. Plodprasop denied any knowledge of the incident, but the previous month a group of "paramilitary rangers" demolished Karen homes, destroyed cooking utensils and farming tools in Thung Yai Naresuan (Uamdao 1999a). In August 2000, the racism and violence of the RFD's "nature conservation" was transparent as RFD officials and police watched as a group of lowland Thais cut down the orchards and burned houses of Hmong people in Pa Klang, Nan province. (See Watershed 2000a.) - FOREST INDUSTRY ORGANISATION (FIO) FIO was established on 1 January 1947 as a state-owned forestry enterprise. Until the January 1989 ban on timber concessions in Thailand, FIO's main activity was logging. Today, FIO sells illegally felled logs that have been confiscated by the police, operates sawmills and furniture factories, and has established plantations covering approximately 144,000 hectares (Chittiwat 2000a). The plantations are mainly teak in the North, rubber in the South and eucalyptus camaldulensis in the northeast and east of Thailand (Chittiwat 2000a). Before the 1989 logging ban, logging concessions had accounted for more than 80 per cent of FIO's income (Suphaphan 1994). With the logging ban, "everything collapsed overnight" according to Chittiwat Silapat, of FIO's Office of Budget and Planning. FIO survived by selling timber stockpiled in its yards, and by running up debts. "If we were a private company, I think we would be bankrupt" said Chittiwat (Chittiwat 2000a). In the early 1990s, FIO planned a US$168 million joint venture pulp mill in Si Sa Ket in northeast Thailand. A majority share in the project was to have been held by the Siam Cement Group and Advance Agro with a 10 per cent share held by the Industrial Finance Corporation of Thailand. The project was shelved due to local opposition (Carrere and Lohmann 1996: 232). Villagers wrote letters to the FIO, the Science Ministry, the Office of the Prime Minister's Secretariat and to the province's nine MPs, asking for the plan to be reconsidered (Walakkamon 1995). In April 1994, about 200 villagers from Kanthararom district in Si Sa Ket province rallied in front of the provincial hall in protest at the FIO's proposed pulp mill (Bangkok Post 19 April 1994). Chittiwat's views on the project typify FIO's technocratic approach to forestry: "Once the pulp mill had been established it would have benefitted the local people and they could have had more jobs, and at the same time can create more forest cover. Even if it was eucalyptus" (Chittiwat 2000a). According to Paper Asia magazine, Jaakko Poyry offered to conduct a preliminary study free-of-charge on the condition that if FIO and the government approve the project, they would have to hire Jaakko Poyry for all further studies on the project. FIO turned Poyry down and asked Poyry to propose prices for the report (Chang 1991: 16). Over the next few years the organisation's teak plantations will reach maturity, allowing FIO to cash in on logging its plantations (Chittiwat 2000a). FIO has also turned to international aid projects (see section on International "Aid", below) in order to help it survive. SCC Natura has benefited from a series of Swedish-funded contracts to help "finding a new life for FIO". (See section on SCC Natura, below.) Recently, the Chinese government has offered FIO the possibility of establishing a pulp mill. Three years of talks between Advance Agro and the Chinese government to establish a US$1 billion plantation and pulp project have come to nothing, and the Chinese government is eying FIO's plantations as a source of raw material for the project. The pulp would be exported to China. (See section on Advance Agro, below.) - CARBON FORESTRY International discussions, supposedly aimed at addressing the problems of global climate change, have presented plantation proponents with their latest, and perhaps most inequitable, form of support for the plantation industry. In a blatantly imperialist move, some Northern governments, energy companies and forestry consultants are attempting to evade the need to reduce emissions of greenhouse gases in the North, by claiming that planting trees in the South can absorb greenhouse gases. In 1991, the Asian Development Bank funded a project in Thailand titled, "Preparation of a National Strategy on Global Climate Change". The project was initially focussed on the 1992 UNCED meeting in Rio, but the project was redesigned after Rio "in order to help Thailand meet its international obligations as a signatory to the Framework Convention on Climate Change". Among the project's recommendations is the implementation of "Reforestation programs, leading both to a mitigation of GHG [greenhouse gas] emissions and to the maintenance of biodiversity" (TDRI and TEI 1993: II). In 1995, the Thai government agreed to accept foreign aid for forestry and energy efficiency projects aimed at preventing global warming. However, the government refused to allow "carbon credit" in return for such investment (The Nation 29 January 1995). The RFD and the FIO have welcomed the chance of cashing in on carbon forestry. Sonjai Javanond, an official at the RFD, told the Japanese newspaper, the Daily Yomiuri, "There is no doubt that afforestation is one of the most significant measures in controlling global warming. We hope that tree planting will be carried out on a larger scale in the future" (Daily Yomiuri 6 January 2001). Similarly, Chittiwat Silipat of FIO pointed out the benefits to his institution of carbon forestry, "FIO will be more than happy if we can get some fund for helping us running our plantations" (Chittiwat 2000b). However, not all Thai government officials offer such unreserved support for helping Northern governments evade their responsibilities. Wanee Samphantharak, deputy secretary general of the Office of Environmental Policy, leads the Thai delegation at the UN Conference on Climate Change. In March 2001, Wanee told the Nation that to rush to accept funding for "reforestation" would cause more damage to Thailand than benefits. He warned that "Free food would be poisonous," and pointed out that Thailand might lose sovereignty over forest areas, as an increasing area must remain green to absorb carbon dioxide from the atmosphere. He added that saying yes to the offer would automatically mean that Thailand agrees that those who are causing global warming need take no action to reduce their own greenhouse gas emissions, but can pay others to act for them (Kamol 2001). So far there are few carbon forestry projects in Thailand. Problems with Thailand's position of allowing carbon forestry projects, without allowing "carbon credits" to the funding country are already appearing. A joint project, between Kansai Electric Power Co and the RFD, aims to restore mangrove forests at the Khanom River in Nakhon Si Thammarat Province in southern Thailand. The project will also explore the possibility of using mangrove trees to absorb carbon dioxide (Daily Yomiuri 6 January 2001). Since 1975, up to 200,000 hectares of mangrove forests in Thailand have been destroyed to make way for shrimp ponds. The project plans to plant 80 hectares with mangroves over four years (Daily Yomiuri 6 January 2001). At the COP-6 negotiations, which took place in November 2000 at the Hague, one of the Thai delegates claimed that at 4.00 a.m. a Japanese delegate inserted a claim for carbon credits from the Thai project into a document presented to the president of the negotiations. The Thai delegate added, "How could we argue about that when we were in our hotel beds?" He pointed out that while Thailand sends 10 people to cover the negotiations, countries like Japan and the US sent as many as 150 officials (Kamol 2001). Kansai Electric Power officials admitted to the Japanese newspaper, the Daily Yomiuri, that the company may pull out of the mangrove project in Thailand, as a result of the confusion over whether Thailand will allow Japan to claim Carbon credits from the project. A Kansai official revealed where the importance of the project lies, at least as far as the company is concerned: "it . . . is important to produce research results that show that afforestation contributes to curbing global warming" (Daily Yomiuri 6 January 2001). |
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