Pulping the South:
Industrial Tree Plantations in the World Paper Economy
Ricardo Carrere and Larry Lohmann

Back to Book Index

Chapter 11

Indonesia:
Deforestation, Plantations and Repression

Early in 1994, the countryside around what was formerly the little village of Kerinci, 10 kilometres south of Pakanbaru, Sumatra, was witness to an extraordinary scene. Working to a plan formulated by Helsinki-based consultants Jaakko Poyry, some 4,ooo Indonesians laboured day and night, often in mud and rain, to finish the biggest single-line pulp mill in the world by October 1994. Under the eye of a Finnish project manager, an immense soda boiler built by Finland's Tampella firm was assembled on the three-square-kilometre site, supplemented by complicated machinery from a score of other companies including Finland's Kone, Valmet, Ahlstrom, Sunds Rauma and Outukumpu; Sweden's Sunds Defibrator, Noss and Asea Brown Boveri Flakt; Japan's Mitsubishi Heavy Industries and Nippon Sanso; Canada's Chemetics and Bailey; the US's Cranston and Solarturbines; Germany's Siemens and Voith; Britain's ICI; Taiwan's Teco; and India's Ion Exchange (Helsingen Sanomat 23.1.1994, PPI 9.1994).

Built to be capable of converting four million cubic metres of wood into 75o,ooo tonnes of pulp each year by the time it comes up to full capacity, the mill, known as Riau Andalan, will cost its owner, the Raja Garuda Mas company, US$75o million. Two-thirds of its output is slated for export. To satisfy the mill's appetite for wood, the equivalent of one log truck must pass through its gates every three minutes from 16o,ooo hectares of logged-over timber estates southwest of the mill and sources elsewhere. The mill's needs of approximately 4,75o cubic metres of water per hour will meanwhile be supplied by the nearby Kampar River. According to company executives, the mill, which will require the establishment of a port and 45 kilometres of railway for the transportation of wood and wood products, will employ a mere 1,ooo people -- $75o,ooo of capital investment per mill job. The startup of an integrated 28o,ooo tonne-per-year paper mill is scheduled for the end of 1996 (Wright 1994; FT 14.12.1992; PPI 7.1994, 9.1994, 7.1995; DTE 4.1994).

Concentration

Riau Andalan, as one of a number of enormous pulp mills which have been springing up across Indonesia's 'hinterland' island of Sumatra, is in many ways a fitting symbol of a boom which has seen the country's pulp production rise from 167,ooo tonnes in 1983 to 1.4 million tonnes in 1994 and paper production increase from 377,ooo tonnes to 3.o5 million tonnes over the same period (PPI 7.1995, 8.1985; Wright 1994).

For one thing, the mill exemplifies a trend toward concentration of both production and ownership. As average Indonesian pulp plant capacity has leapt from around 5,ooo tonnes per year in 197o to 85,ooo in 1991 and 217,ooo in 1994, the explosively-growing industry has gravitated ever more clearly into the hands of Indonesia's biggest business families, many of whom have built their fortunes through commercial logging or plywood. Reinforcing th's trend is a recent government proclamation requiring that any pulp and paper firm exploiting an industrial timber estate (Hutan Tanaman Industri or HTI) must develop an associated site to bring in Javanese labourers under the transmigration programme; only the largest companies are likely to have enough capital to develop such sites (Brooks 1994).

All of the largest new pulp installations are associated with some of Indonesia's most influential business families:

* Riau Andalan's parent conglomerate, Raja Garuda Mas -- which also runs the 24o,ooo tonne-per-year Indorayon mill in Northern Sumatra and is building a 75o,ooo tonne-per-year pulp mill on a 3oo,ooo-hectare site in Sarawak, Malaysia -- is headed by Harvard-educated Sukanto Tanoto (Tan Kaung Ho), the 'timber king' of Northern Sumatra (NST 16.3.96). Among the many state subsidies which Tanoto has been able to attract for h's operations are a US$5oo million loan from the Domestic Lending Board for the Indorayon plant.

* The 45o,ooo tonne-per-year Tanjung Enim Lestari (TEL) mill in Musi, South Sumatra is a cooperative venture of (1) Pangestu Prayogo's Barito Pacific Timber Group, Indo-nesia's largest wood-based industries group and one of the world's largest plywood manufacturers, which holds over 4.5 million hectares of Indonesia's forest lands and a one-million-hectare concession in Viet Nam; (2) President Suharto's daughter Siti Hardiyanti Rukmana (Tutut); and (3) a consortium of Marubeni, the Japanese Overseas Economic Cooperation Fund and Nippon Paper. The mill, starting up in 1997, has a raw material catchment area of at least 3oo,ooo hectares.

* Two giant pulp mills in Perawang, Sumatra, with a combined capacity of 79o,ooo tonnes per year, are run by Indah Kiat, one of around 135 subsidiaries of the Sinar Mas group. In addition to producing one-third of Indonesia's paper output (the firm is Southeast Asia's largest producer of pulp and paper and the largest stationery producer in the world), Sinar Mas also shares the world's largest holdings of palm-oil lands as well as interests in chemicals, finance, banking, hotels, telecommunications, pig-breeding, and, in collaboration with Suharto's children, various real-estate ventures. Sinar Mas is directed by Eka Tjipta Widjaja (Oei Ek Tjhong), and five of h's eight children hold top posts in Sinar Mas companies. Sinar Mas also boasts another huge pulp mill called Wirya Karya Sakti at Jambi, Sumatra, with a rated capacity of 41o,ooo tonnes per year. Feeding the Sinar Mas mills are concessions totalling over 54o,ooo hectares (Soetikno 1993, Paper 4.2.1992, Paper Asia 8.1991; PPI 2.1994, 7.1995; TAPPI Journal 6.1995).

* Mohammad (iBobi) Hasan (The Kian Seng), Indonesia's top timber businessman, chair of the loggers' and wood-processing trade association, and longtime Suharto crony, has also moved into pulp and paper. Hasan holds interests in the 165,ooo tonne-per-year Kertas Kraft Aceh cement-sack mill in Northern Sumatra -- built as a joint venture with the US's Georgia-Pacific and partly owned by the state and by Suharto's son Sigit Harjojudanto -- and in a Korean/Hong Kong joint venture called Aspex Paper. In 1997, Hasan is also planning to start up a 472,ooo tonne-per-year pulp operation in Kaltim, East Kalimantan called Kiani Kertas, whose industrial plant alone will cost around $7oo million.

Export focus

Although Indonesia's pulp and paper industry has high hopes of building a bigger domestic market among the country's 19o million people (per capita consumption, now only 1o kilogrammes per annum and concentrated 6o per cent in Jakarta, could rise quickly), new capacity for both pulp and paper of the type which Riau Andalan represents is focused largely on exports.

In net terms, the country became self-sufficient in paper in 1987, with paper exports (mainly fine paper and packaging boards) rising from 2oo,ooo tonnes in 199o to 6oo,ooo tonnes in 1994. (In 1993, Indonesia also imported over 12o,ooo tonnes, or US$168 million worth, of paper and board -- a third from the Nordic countries, another third from North America, and much of the remainder from Japan and Germany. Sinar Mas, for example, has been buying pulp and paper on the open market to supply domestic customers, even while continuing to supply overseas customers [UN 1994, Sonnenfeld 1995].) Pulp exports, in 1994 around 3oo,ooo tonnes, are expected to triple by 1996, and Indonesia may soon be shipping 6o per cent of its total production abroad (Wright 1994; PPI 2.1994, 7.1994). Part of th's market is being created by Indonesia's own Sinar Mas conglomerate, as it invests in paper plants in Bombay and in Ningpo and Cheng Chiang, China which can take Indonesian pulp as raw material; and Raja Garuda Mas, which is also planning two paper mills in China. Sinar Mas already exports nearly half of its production of pulp and paper, while Indorayon's North Sumatra plant at Sosor Ladang, Porsea, has recently been exporting 6o per cent of its pulp production to Japan, Southeast Asia, Europe, Taiwan, the Middle East, China and Korea (PPI 8.1993, 2. 1994, 7.1994, 8.1994, 1o.1994, 5.1995; WALHI 1992). Indonesia as a whole has recently risen to be the 17th largest paper producer and the 18th largest pulp producer in the world (PPI 7.1995).

Just as Indonesia shifted years ago from exporting raw logs to exporting value-added processed wood, it is now shipping far more pulp and paper than wood chips. Hundreds of thousands of tonnes of hardwood chips left the country in 1993 valued at tens of millions of US dollars, bound mainly for Japan, but the trade in paper and pulp is already valued in the hundreds of millions. (Indonesian government hardwood ship export figures are wildly discrepant with official Japanese import figures, making it difficult to quantify the trade. According to Indonesian figures, a total of 385,466 metric tonnes valued at US$13.5 million, was exported in 1993, with 161,78o tonnes, or 42 per cent, going to Japan and the rest going to unspecified 'developing countries' in Asia. Japanese statistics, however, indicate that in the same year the country imported 331,198 tonnes of hardwood chips from Indonesia at a valuation of $4o million [UN 1994]. FAO, meanwhile, estimates that of 1.o65 million cubic metres of chips, particles and wood residues exported from Indonesia in 1993, 6o per cent went to Japan, 32 per cent to Taiwan, and six per cent to China [FAO 1994].) In 1993, 44 per cent of Indonesia's pulp exports went to South Korea, Japan and Thailand, and the rest to the Philippines, Bangladesh, Malaysia, Pakistan, India, Viet Nam, Singapore, China and other Asian destinations (UN 1994). The same markets, together with Taiwan, are likely to remain at the centre of the Indonesian industry's international marketing strategy as the country becomes a net pulp exporter.

Indonesia's foreign paper and board shipments meanwhile, go to a somewhat different range of countries. In 1993 half of the country's exports ended up in Hong Kong, Malaysia, Singapore and South Korea, with the bulk of the remainder going to Australia, China, Thailand, Egypt, Sri Lanka, Saudi Arabia, and the US. The paper sector's growing export orientation helps further to concentrate industry ownership. As Sinar Mas executive Suresh Kilam explains, '[t]he companies which cannot export will go under, with the smallest mills being closed down rather than taken over. With an annual capacity of only a couple of thousand tonnes, they are not economical' (PPI 2.1994).

Foreign involvement

A third industry characteristic exemplified by Riau Andalan is heavy Northern involvement. Most of the hundreds of millions of dollars spent to build and plan the wood supplies for new mills goes to Nordic, Japanese, and North American suppliers and consultants and their consortia (Allen 1992; PPI 8.1993, 2.1994, 1o.1994; DTE 1991; Paper 4.2.1992). Sinar Mas's Perawang and Jambi mills, for example, carrying total price tags of US$52o million and $63o million, use pulp lines supplied by Sweden's Kvaerner Pulping, power and recovery boilers purchased from Ahlstrom, a Kone woodyard, and other equipment from Andritz Sprout-Bauer and Asea Brown Boveri Flakt (Wright 1994, Pappens 1993, TAPPI Journal 6.1995). Finland's Rauma Repola, meanwhile, provided washing and bleaching equipment for Indorayon's pulp and rayon project in Porsea (DTE 1991), with the mill's waste-based energy turbine being supplied by Ahlstrom and Sunds Defibrator of Sweden and its wood yard by Elof Hansson (Paper 4.2.1992). Bob Hasan's Kiani Kertas firm in East Kalimantan has meanwhile ordered a woodyard and 472,ooo tonne-per-year fibre line from the US's Beloit and other machinery from IMPCO (Ingersoll-Rand). Also important in Indonesia's pulp and paper industry are German, Austrian and Swiss technology and engineering services suppliers such as Voest-Alpine, Voith Sulzer, Klockner Stadler Hurter, Bielomatik and E.C.H. Will, as well as Sweden's Asea Brown Boveri and Belgium's Novarode (PPI 2.1994; Sonnenfeld 1995).

Japanese paper manufacturers have also long been interested in Indonesian wood fibre. Kojin, Kanzaka Paper, MDI, Sanyo-Kokusaku and what was then Jujo Paper were all involved in the Chipdeco mangrove chipping plant in East Kalimantan, and Marubeni in the chipping of Southeast Asia's largest mangrove forest at Bintuni Bay, West Papua. Barito Pacific Timber's 45o,ooo tonne-per-year pulp mill, meanwhile, is to be one-third owned by Japan Sumatra Pulp, an investment company jointly owned by Marubeni, OECF, and Nippon Paper, who together put up US$1oo million for the project. Japanese pulp and paper equipment is now also being sold to Indonesia, aided by the attractive financing made possible by Japanese trading houses. Indah Kiat's Perawang, Riau plant, for instance, uses machinery from Hokuetsu Paper Mills of Japan as well as from Beloit-Mitsubishi, and Kotobuki, together with Valmet, supplies Tjiwi Kimia, Sinar Mas's huge paper firm (PPI 8.1993, 2.1993, Paper 4.2.1992).

In order to land machinery or forestry contracts or negotiate partnerships, of course, industrialized-country firms have to engage in a great deal of stage-setting beforehand. Here a local presence is crucial, and inter-industry collaboration extremely useful. Sweden's Sunds Defibrator and Ahlstrom Machinery, for example, have regional offices, and work together with each other and with Kvaerner and Valmet to provide complementary equipment. Valmet sells its machinery through Swedish-based CellMark, one of the largest commodity traders in the world, which plans also to join Marubeni in marketing pulp from Barito Pacific's TEL mill (see below) (Kuroda 1995).

Acting as brokers, planners and coordinators are forest industry consultancy companies such as Finland's Jaakko Poyry and Canada's Sandwell and H. A. Simons. Such consultants profit from adjusting resources to technology, bringing together Northern machinery suppliers, local business groups, and Indonesian leaders with power over land, forests, finance and labour in a way which benefits all. Working through a network of old colleagues, friends and like-minded technocrats in overworked donor agencies who are happy to be relieved of onerous planning and monitoring duties, the consultants have been able to use public funds to build up a private forestry industry sector in Indonesia which ensures them a continuing stream of future contracts. For example, a 1984 contract with the World Bank and the Indonesian government to do a sector analys's of the country's paper and pulp industry helped Jaakko Poyry land over 3o subsequent contracts to plan or implement public and private sector projects to supply mills with pulpwood from natural forests or plantations. In addition, the company has picked up scores of contracts -- some of them subsidized by Finnish taxpayers through Finnish Export Credit and the bilateral 'aid' agency FINNIDA -- to plan or engineer pulp or paper mills for Indonesian clients or do market surveys for Western machinery manufacturers (Jaakko Poyry n.d.). It has also benefited from other agreements, as when Finnish Export Credit and FINNIDA granted a 13-year interest-free loan worth US$4 million for a forestry development and training centre for the Indorayon firm in Northern Sumatra (DTE 1991, USDT 1993, ODA 1992, Westoby 1987).

Using Canadian government lobbying and handouts, H. A. Simons and Sandwell also mediate politically between the interests of Northern and Indonesian elites. In March 1992, for instance, the Canadian Embassy in Jakarta hosted a mission of 35 companies from the pulp and paper sector to promote Canadian pulp and paper expertise and technology through seminars and top-level meetings with government and trade officials and local industrial officials and associations. CIDA, the Canadian bilateral 'aid' agency, is meanwhile funding a feasibility study for a plantation and pulp and paper mill in Sorong, West Papua owned by the Kayu Lap's Indonesia group. While Sandwell provided engineering, design, training and operation services to Indorayon, and also helped to plan Barito Pacific's TEL mill (DTE 1991, Paper 4.2.1992), H. A. Simons's supervising site preparations for Bob Hasan's Kiani Kertas plant in East Kalimantan (PPI 9.1994).

Foreign investors and financiers are also joining Indonesia's pulp and paper tycoons in helping to get the industry's immensely capital-intensive projects off the ground. Already by 199o the pulp and paper sector was Indonesia's seventh largest in terms of forest investment, receiving $73o of the total $8.75 billion invested that year (WALHI 1992).

Helping to start up Sinar Mas's lucrative exploitation of natural forest, for example, was the Taiwanese firm Chung Hwa Pulp, which shipped one of its used pulp lines to central Sumatra in 1984 as part of its joint venture with Sinar Mas subsidiary Indah Kiat (DTE 1991, PPI 8.1993); today Chung Hwa and Yuen Foong Yu own a quarter of the shares in Indah Kiat. The partly state-owned Finnish paper giant Enso, meanwhile, has been involved in forestry in Indonesia since 1981, most recently as a consultant for a FINNIDA-funded plantation trial and 'reforestation' project. ENSO is now teaming up with state-owned forestry company Inhutani III and Gudang Garam (Indonesia's biggest cigarette firm) in a 1o-year plan to develop an approximately 139,ooo-hectare acacia pulpwood plantation in Sangau, western Kalimantan, partly on grasslands -- some 8o,ooo hectares of which is already claimed by local residents (JP 22.7.94; PPI 8.1994; Enso Vision 9.1994; Junus 1994; Rasmusson 1995). Enso and its state backer the Finnish Fund for Industrial Cooperation are contributing $3o million of the total $1oo million cost of the project. Enso may also participate in the 5oo,ooo tonne-per-year pulp mill which would be built on site after the acacia matures, and plans to develop a liquid and food packaging board plant with Gudung Garam, which it would supply with chemical pulp and knowhow (PPI 8.1994).

Foreign finance is also crucial to industry development. Some 7o per cent of the capital needed for the US$1 billion Barito Pacific TEL project, for example, is being sought through a flotation of an international stock issue with the assistance of Morgan Grenfell Asia. Finance will be in the form of loans for which sales of the product will serve as security (JP 9.4.1994). Sinar Mas, in the guise of a holding company called Asia Pulp & Paper, has filed an initial public offering worth $39o million in the US to help finance mills in China, India and Indonesia. And Raja Garuda Mas has set up a Bermuda-based holding company, Asia Pacific Resources International Holdings, which recently carried out a $15o million offering in the US and Canada to obtain finance for projected operations in both Indonesia and China. The US's Chemical Bank, as well as other Northern banks, are helping to organize similar offerings for other mills in Indonesia (PPI 8.1993, 1o.1994, 5.1995; Kuroda 1995; DTE 1991; Sonnenfeld 1995). Foreign finance is necessary not only to build big mills, but also to set up huge plantations, which, at a cost of at least $3,ooo per hectare, require injections of capital 'beyond reach' of domestic groups (Data Consult 199o).

International promotion of the mainstream pulp and paper industry in Indonesia, as elsewhere in the South, involves a reapportioning of risk from the private to the public sector, and from North to South. The inequities involved are obvious. The immense price tags of Kvaerner or Tampella machinery constitute a far greater proportion of Gross National Product in Indonesia than in the US, straining not only clients but also public guarantors. And while the hard-won knowledge of a subsidized Jaakko Poyry consultant about how to work Indonesian bureaucracies is a permanent gain for the firm in its future dealings abroad, Indonesian magnates' profits in a volatile global pulp and paper market may be less secure. Still more precarious are the livelihoods of the ordinary people from whose land, water and labour Indonesian officials and pulp and paper businesses must squeeze their margins and taxes.

It is often remarked how debt and poor terms of trade provide incentives for Indonesia to rush to cash in on its forest land. As income from oil and gas, Indonesia's top earners, falls, the contribution of the forestry sector to GNP, foreign exchange earnings and the payment of the national debt becomes more and more significant. After log exports were banned in order to add value to forest exports, and after the huge wood-processing industry began to face the prospect of eventual raw materials shortages from existing concessions, pressures grew to focus on pulp and paper. As Eddie E-Tak Shaw of Sinar Mas explains:

In 198o the government set aggressive targets for the development of plywood and softwood production. Indonesia was the number one plywood manufacturer in the world. But ten years on the government has realized that with 6o-1oo years' growing time (the plywood industry) couldn't survive. . . . it initiated a study into how to develop other wood-related industries. And there was environmental pressure. Paper and pulp was the right one to go for (Paper 4.2.1992).

Thus the government has spoken of making the country into one of the top ten paper producers in the world by 2oo4, with as much as ten per cent of its land under tree plantations. Industry Minister Hartarto has even voiced the hope that Indonesia will become ithe biggest paper and pulp producer in the worldi. In addition to opening up much of the nation's forest land to the industry, the state has also provided it with incentives such as exemptions on import duty for pulp and paper machines (Data Consult 199o).

Whatever the external pressures are which have led to such actions, however, translating them into working logging concessions, tree plantations, pulp and paper mills, and other types of forest-consuming technology would be impossible without the concrete activities of foreign consulting firms and foreign investors, as well as their helpers in their countries' bilateral 'aid' agencies, export-credit organizations, and so forth. It is largely through these activities that opportunistic tycoons and others are enabled in practice to integrate more and more of Indonesia's forest lands into the world economy (incidentally helping to keep world markets flooded with fibre products). The destructive results are sketched in the next section.

Plantations and deforestation

A fourth characteristic of the new Indonesian pulp mills is that they are, by and large, fed in their initial stages by natural (though often logged-over) forests. While plantations are often advertised as improving 'degraded' or 'unused' lands, the most obvious candidates for this treatment -- anthropogenic, homogeneous *alang-alang* grasslands colonized by Imperata cylindrica -- are difficult and expensive to convert, due to low soil fertility, the grass's toughness, and their tendency to be scattered in patches over a large area. Such grasslands are, in addition, far from being unused by local peoples (WALHI and YLBHI 1992, Sonnenfeld 1995). While the state timber firm Inhutani III and Finland's Enso have established plantations on grasslands in West Kalimantan, it generally makes far more sense for pulp tycoons with privileged access to the Ministry of Forestry, which has jurisdiction over about two-thirds of the country's surface area, to take out what are essentially large, contiguous logging concessions at a rent of approximately US$o.3o per year, clear-cut them, claim the wood as raw material for pulp, apply for HTIs, and then replant the land with pulpwood monocultures. Plantation entrepreneurs who do so are entitled to equity capital and no-interest loans from the Ministry of Forestry. Such loans cover, in effect, 2o per cent or more of the costs of setting up and maintaining HTI plantations through an eight-year cycle (Fearnside 1993). Plantation companies can also use revenues collected from logging companies and earmarked for rehabilitating logged-out concessions as a way of financing tree-planting. Logging concessionaires' ability to hold onto deforested land and convert it to tree plantations has meant that it is less available to inmigrating smallholders, who may therefore have to invade forest land elsewhere.

So easy, in fact, has it been for business to gain or keep control over forest land by claiming to be interested in pulp and paper -- by 1992, 37 companies had submitted applications for seven million hectares of pulp estates, although only eleven bothered even to undertake feasibility studies on estate development -- that the government recently had to stop granting the concessions (PPI 9.94). The state has also helped companies acquire land by discouraging enforcement of customary adat claims to many of the territories affected. Such claims, although they are recognized in theory, are in practice overridden by the demands of idevelopmenti. As former Forestry Minister Hasjrul Harahap said in 1989, iIn Indonesia, the forest belongs to the state and not the people . . . they have no right to compensationi. In South Sumatra, out of ten million hectares, farmers hold only 1.5-1.7 million hectares, while 19 companies own 1.9-2.o million (Kuroda 1995).

Thus, until at least 2oo2 Riau Andalan will be harvesting 5o species of native tropical hardwood from its concessions while waiting for Acacia mangium and eucalyptus plantations established on cut-over sites to mature. By the end of 1993, however, only 4,ooo hectares of clear-cut forest had been replanted (PPI 9.1994). Elsewhere in Sumatra, Sinar Mas's 79o,ooo-tonne-per-year, 1.2 square-kilometre Perawang installation will consume 2oo square kilometres of old-growth forest per year until the year 2ooo, much of it cut by transmigrant labour, before switching over to acacia; the company's 41o,ooo tonne-per-year Jambi mill further south will denude its 2,4oo-square-kilometre concession of logged-over forest at perhaps half that rate (PPI 1o.94). By 1988, the first of the two Perawang mills alone was reported to be consuming 4oo,ooo tonnes of wood yearly from over 1oo species of tropical hardwood. 'Basically,' the company's vice president Eddie E-Tak Shaw explained at the time, iwe are looking for forest which can be clear-cut and replaced with eucalyptus and acacia' (PPI 1.1988). The site's new 41o,ooo tonne-per-year pulp mill will also feed on mixed tropical hardwoods until 1999 before switching to acacia from plantations which will ultimately total 14o,ooo hectares, of which 6o,ooo have already been planted. Sinar Mas's Wira Karya Sakti mill in Jambi, Sumatra, also at 41o,ooo tonnes per year, had by 1994 planted only 7,ooo hectares of pulpwood trees on its 241,ooo-hectare concession of logged-over secondary forest, although there are plans to add 15,ooo hectares per year from 1994 (PPI 8.1993).

Indorayon's 240,000 tonne-per-year pulp and rayon mill in North Sumatra, which started off using 86,000 hectares of old stands of indigenous Pinus merkusii planted during the Dutch colonial period, has also clearcut mixed hardwood forests from a 150,000-hectare selective logging concession and planted eucalyptus there. Natural forests elsewhere are also falling prey to Indorayon, most notably 40,000 hectares of what was formerly Harionboho Protection Forest. Some 100,000 hectares of pine forests in Central Aceh, meanwhile, will feed the Kertas Kraft Aceh cement sack mill in Northern Sumatra through the turn of the century, until replanted pines become available. Mills projected for Kalimantan and West Papua, such as Bob Hasan's Kiani Kertas, will also consume natural hardwoods during the first years of operation (TAPPI Journal 6.1995). Of the major new plants now coming on line, or about to, only Barito Pacific Timber's planned TEL mill will not start out by being mainly dependent on natural forest, benefitting from at least 300,000 hectares of concession, of which 210,000 has already been planted, mainly to acacia (Wright 1994, Allen 1992). Even here, however, natural forest has been cleared in preparation for plantations (Kuroda 1995). Although some observers expect future mills to rely in their initial stages less on mixed tropical hardwoods than on pulpwood or even palm oil plantations (Sonnenfeld 1995), industry analysts suggest that even if the government is able to develop its originally projected 4.4 million hectares of industrial plantations by 2004, pulp mills will continue to have to rely heavily on the 55.4 million hectares of designated natural forest logging concessions until well after that date (Data Consult 1990).

Legal restrictions on clearcutting or on logging on steep slopes or near watercourses, such as they are, carry little meaning in this context. The Department of Forestry itself admits that over 86 per cent of timber concession holders violate government logging rules, while the Environment Ministry confesses that 500,000 hectares of forest are cut illegally each year (JP 18.2.1994, Tempo 5.2.1994). According to the World Bank, meanwhile, 'only 2.2 per cent of cutover lands have ever had a legally required residual stand inventory, and cutting outside approved boundaries is frequent'; the Bank warns that timber companies are cutting 50 per cent more logs than can be replaced through replanting (World Bank 1994; IHT 22.9.1994). In 1994 it was reported that some 248 logging concessionaires had recently been found guilty of logging violations (PPI 9.1994). To take just one example, Indah Kiat, which, as the government acknowledges, has insufficient access to forested land to meet its pulpwood requirements legally, was fined US$1.4 million recently for employing transmigrants in its charge to carry out illegal logging (JP 8.9.93, 27.9.93, 3.6.94, 30.7.94; Kompas 27.9.93; FT 9.9.1994; Forum Keadilan 6.1.94; DTE 1991; Zerner 1993). Companies' own conservation pledges _ for example, Riau Andalan's promise not to cut endangered species or log on slopes of 23 degrees or more within 200 metres of rivers _ are even less likely to be acted upon than the forestry laws themselves.

Moreover, if plantations do not mature as expected _ which is not unlikely given scant experience with them on the generally poor soil of the Outer Islands _ then pressure on natural forests may increase yet further (PPI 8.93, 10.94; WALHI and YLHBI 1992). Although thus far the largest contiguous plantation of any kind in Indonesia has occupied some 20,000 hectares, P"yry consultants are recommending plantation units of 30,000-50,000 hectares. The risks are considerable. Plantations of Leucaena leucocephala on unforested land, for example, ran into disaster during the 1980s when insects attacked the plants on a large scale. Given that no pest-resistant species of acacia have been found, similar problems may await pulp plantations. A prominent softwood silviculture researcher has gone so far as to comment that 'Indonesia may be a disaster waiting to happen' due to hasty plantation planning (WALHI and YLBHI 1992).

No less signficant in forest destruction is the disruption of community-based resource-management systems through, for example, road-building, site clearance, land takeovers, the blocking of tributary streams and the disruption of local irrigation systems and fisheries. Indah Kiat's Riau concessions, for example, are largely on ancestral lands belonging to the Sakai people, who have been resettled outside the area. Imported labourers also play a part in deforestation. In the words of the World Bank, the fact that only a small fraction of [traditional] adat rights have been registered makes it difficult for existing forest dwellers to prevent spontaneous transmigrants from taking over traditional clan lands and, lacking the cultural traditions of the indigenous agriculturalists, farming the soils to exhaustion before moving on in search of new land (1994).

As Charles Zerner points out in a suppressed World Bank report, the agricultural and forestry systems threatened in these various ways have been not only effective in sustaining forests in the Outer Islands, but in some cases have even enhanced biological diversity (Zerner 1993). Through displacement, impoverishment and deskilling of local people, pulpwood developments are thus undermining one of the main bulwarks of forest protection in Indonesia.

Forest fires linked to pulpwood operations are another important cause of deforestation. Logging often leaves behind large amounts of dry wood and scrub which provide ideal fuel, as does the practice of clearing scrub and remnant forest in order to plant fast-growing trees. Fires can also be deliberately set in order to provide a rationale for declaring the burned-over area a timber estate, or as an act of retaliation or resistance by evictees or underpaid transmigrant timber workers. Fires can be particularly extensive in certain areas of Kalimantan, where a layer of subsurface coal provides additional fuel: in 1982-3 a single gigantic blaze devastated 3.6 million hectares of the island's forest cover, an area 56 times the size of Singapore. Huge fires in succeeding years have wiped out further thousands of square kilometres and disrupted air traffic over wide areas. Plantations themselves, of course, often fall victim to fire, resulting in millions of dollars in damage (Setiakawan 1-6.1992, SKEPHI 1995).

Further subsidies

Subsidized land, wood and technology, in sum, have helped make Indonesia into one of the cheapest pulp and paper producers in the world. But the subsidies do not stop there. Salary levels are also among the world's lowest, kept that way partly through state-supplied suppression of labour movements. As the Financial Times wrote in November 1990, 'The almost total absence of labour unrest, together with officially-sanctioned low wages in Indonesia, has been one of the main factors in attracting large amounts of foreign investment to the country'.

Near-captive labour, meanwhile, is provided by the transmigration programme for projects such as Barito Pacific's TEL pulp installation. At Sinar Mas's Perawang complex in central Sumatra, inadequately-housed transmigrants required to do illegal logging have had to wait up to three months at a time for their wages, on one occasion being paid only after they took some of the company vehicles hostage (Forum Keadilan 6.1.94). Tree-planting wages offered by the Jayanti Group to transmigrants on the company's timber reforestation site on Seram Island, Maluku, meanwhile, amount to only one rupiah per seedling planted. At a rate of one tree a minute this earns only Rp 600 per day, or about $0.30. The nucleus estate/smallholder model, which the government is hoping to adapt to pulpwood plantations, also has a record of poor wages (DTE 1991).

At a time of tightening controls in the North, lax enforcement of pollution laws (however strict some of them may be on paper) also attracts pulp investors. To take one example, Sinar Mas's Indah Kiat _ the subject of a lawsuit threat in 1992 for its pollution of the Siak River _ uses its wastewater treatment facilities when there is an inspection but otherwise only sporadically, and has consistently failed to meet deadlines for waste control. Another firm which installed over $30 million worth of expensive-to-run pollution control equipment also operates it only rarely.

During Indorayon's startup period, similarly, the company paid no attention to an official directive that it construct an aerated waste-treatment lagoon according to a government plan. When the waste lagoon it did build collapsed, sending effluent into the Asahan River, no compensation was paid to fisherfolk, who, up to 40 kilometres downstream, saw their yields fall by up to 90 per cent and were forced to find another source of income. When local NGOs undertook studies that showed persisting high levels of pollution six months after the accident, Indorayon staff succeeded in intimidating affected villagers into not taking the case to court, appearing at meetings only in the company of district military officers, showering locals with gifts of food and offers of jobs, and insinuating that NGOs interested in the case had a hidden Communist agenda (WALHI 1992; JP 7.9.92, 10.9.92, 22.9.92, 24.9.92, 8.10.92; Suara Pembaruan 31.8.91, 4.9.92; Kompas 17.11.93; Anon n.d.). Following the explosion of a chlorine tank at Indorayon in November 1993, which drove away many terrified local residents, Environment Minister Sarwono Kusumaatmadja ordered the mill to halve its production pending completion of an environmental audit by an independent consultant. However, the audit, carried out by the US firm Labat Anderson, cannot do more than recommend how Indorayon can best continue to use chlorine. In November 1995, rumours of a hazardous gas leak provoked hundreds of local protesters into burning 100 houses, a radio station, and vehicles owned by Indorayon (FEER 15.2.96).

A final selling point for Indonesia in the eyes of the plantation industry is a climate which allows pulp species to mature three to four times faster than in, say Finland, theoretically making possible shorter lead times, smaller plantations, and more efficient use of a given land area.

Disintegration and resistance

Many ordinary Indonesians, unsurprisingly, experience the integration of local land and forests into the world pulp and paper economy as a disintegration of local livelihoods and relationships, and gifts of low-cost forest land and riverine waste sinks to the industry as something more closely akin to theft.

When, following independence, the Indonesian state arrogated to itself the country's forest lands in a move which has paved the way for many of today's pulpwood developments, it was not imposing its legal order on a vacuum, but on the customary and informally-enforced claims of local communities. Industrial timber estates (HTIs) and nucleus estate schemes have often functioned essentially as ways of redistributing customary lands to the wealthy _ although they are advertised as ways of reclaiming critical lands, providing an alternative to logging natural forests, supplying an incentive to reforestation, and providing employment to predominantly Javanese transmigrants in a way which will prevent them from having to resort to destructive forms of agriculture on the unfamiliar soils and terrain of the Outer Islands. The effects that Zerner (1993) has enumerated for timber concessions, HTIs, and nucleus estate schemes generally also apply to pulp plantation development in particular:

[T]he effectiveness of local resource management institutions has decreased and community control over historically owned and managed forest territories and resources has been eroded. Community nutrition has declined as the quality of hunting territories and fishing sites has decreased and access to these areas is progressively limited. Access to markets through river-based transport networks has been reduced. In addition, . . . community health and food security may have declined and the incidence of . . . sexual abuses and assaults has increased. In the vicinity of logging camps, prostitution has increased and venereal disease has spread. . . . exclusion of local communities from . . . forest territories has often resulted in the political polarization of communities rather than their integration as citizens. Alienation, opposition and violence are among the social costs of a failure to recognize community needs and rights to equitably participate in the forest management enterprise.

In Northern Sumatra, to take one example, Indorayon's clearcuts, roads and plantations have displaced thousands of Batak people in the Lake Toba area through usurping their traditional lands and degrading the environment which sustains them. Logging-related droughts have depressed rice harvests over wide areas, and a pine plantation has been established in the Sibatuloting Protection Forest, a catchment area of two river systems supplying water to 65,000 hectares of wet rice paddies and 688,000 people thorughout the 'rice bowl' of Northern Sumatra. Logging roads built into pine forests have meanwhile destroyed rice fields and resulted in two landslides, one in October 1987 and another in November 1989, taking a total of 30 lives. Painstaking attempts to use official channels, and then road blockades, to get the company to accept responsibility for the damage have resulted mainly only in arrests and military intimidation of villagers, clergy and NGOs. The company has also succeeded in dividing villagers by offering them partial compensation.

In March 1987, in addition, without permission from local elders, Indorayon began stripping ancestral pasture lands legally belonging to Batak people of the village of Sugapa and planting them to eucalyptus. A fine of 10,000 rupiah was imposed on any animal found grazing in the area where seedlings had been planted. Distraught villagers' attempts to pursue the case with local and district authorities through 1988 bore no fruit. To forestall further opposition, village- and local-level government officials tricked villagers into signing blank sheets of paper that were then turned over to Indorayon staff, who appended them to an agreement awarding the pasture land to the company. This was then shown to Sugapa residents at an official meeting at which they were protesting the abuse of their land rights. At the same time, local government officials claimed that they had already been able to induce several villagers into accepting compensation for the lost land. Enraged by these machinations, Sugapa villagers, particularly women, in whom according to matriarchal custom land rights are invested, finally exploded in April 1989, when Indorayon employees were caught sexually violating local women _ an action considered by the Batak people to be the most heinous of all crimes. When the men were released by the police without charge, infuriated Sugapa women marched on Indorayon's plantation and ripped up thousands of eucalyptus seedlings planted on adat soil. Charged with destruction of company property, the women subsequently traveled to Jakarta to take their case to the Minister of Home Affairs. At the February 1990 trial at which ten women involved were sentenced to six months' imprisonment (later reduced on appeal to probation), they vehemently defended their rights to the property: 'The land is the only source of income that the people have. If it is planted with eucalyptus, how are we going to eat? How are we going to feed and herd our cattle?'. By this time, however, Indorayon had succeeded in dividing the community sufficiently to blunt the movement for return of the land (WALHI and YBLHI 1992, Anon n.d.).

Indorayon has also provoked local resentment by blocking access to woodlands which villagers rely on for rattan, fodder or carving wood; by planting eucalyptus on an ancestral graveyard; and by demeaning villagers by forcibly overriding traditions of hereditary land transfers important to clan identity. In November 1992, farmers in Gonting Silogomon village, 156 hectares of whose land had been appropriated for an HTI to supply pulpwood to Indorayon, asked the firm's workers to stop clearing their cultivated fields. During the following days, local farmers were repeatedly threatened by military officers from the District Infantry armed with M-16s, with several shots being fired (Tjahjono 1993). Farmers from one village who agreed to grow eucalyptus for Indorayon subsequently regretted becoming involved since they were no longer allowed to pasture their animals on their land and feared Indorayon would set low prices for the wood they produced. The Indorayon pulp plant's pollution of the Asahan river, meanwhile, has resulted not only in degradation of fisheries but also in health problems and loss of village water supplies, while air pollution has brought on nausea and dizziness as far as 40 kilometres from the factory (Environesia 4-8.1990, Anon n.d.).

In South Sumatra, meanwhile, PT Musi Hutan Persada, one of Barito's timber estate management companies, when it found that the 300,000-hectare concession it had been awarded overlapped with one given to another timber company in the area, took over fertile land belonging to 200 farmers in Muara Enim regency without warning, destroying durian and jackfruit trees, rubber plantations, wet-rice fields and forest commons. Protesting farmers were arrested and their claims dismissed out of hand by the provincial governor, who claimed they were merely seeking financial gain. Minister for Forestry Djamaloeddin Soeryohadikoesoemo, for his part, claimed it was the responsibility of the company to settle the dispute _ despite the fact that the concession was awarded only on the condition that fertile or privately-owned land would not be used (Brooks 1994, Tempo 18.12.93, SKEPHI 1995). The fate of the displaced villagers remains unclear. In other locations in Muara Enim and Muara Rawas regencies, thousands of hectares of other forests and farmland have also been seized by company agents for pulpwood plantations (sometimes on the pretext of establishing oil palm or rubber plantations) without consultation with local farmers (WALHI 1995, JP 15.6.1995). In many cases, promised compensation for seized land in the form of rubber plantations, livestock and hospital services has not been forthcoming (SKEPHI 1995, Kuroda 1995). Nor have villagers now farming on the TEL mill site been informed of the details of the factory (Kuroda 1995).

In Kalimantan, finally, in one of dozens of such examples, logging roads constructed parallel to a river on one plantation concession blocked tributaries, halving the river's flow and creating a malarial swamp. Filled with sediment from erosion from logging and road-building, the river became useless for transport to market or for fishing. No compensation was paid, meanwhile, for the logging of lands which had been owned and managed by the local community for 400 years. The company involved also put up a sign indicating that subsistence swidden farming on community land was now a crime, and ordered local residents and Javanese transmigrants to use hoes instead. Although only the transmigrants obeyed, catastrophic erosion was the result. Another disaster was precipitated when the company tried to 'develop' the villagers' traditional rattan cultivation methods by getting them to plant rattan in straight lines without regard for site conditions, with the result that 90 per cent of the crop died (Zerner 1993).

In another Kalimantan case, a company planned to establish an HTI, apparently for a paper mill, not on degraded land, as regulations require, but on secondary forest land. This land had been under adat ownership for 200 years and used, among other things, for rotational swidden and rattan gardens. Company 'experts' did not recognize these productive agroforestry systems even when they were walking through them. When the local community refused the company permission to survey the area, the company claimed ownership of the land and promised compensation for destroyed rattan of 300 rupiah per cluster. It is estimated that the 20-year value of returns for one cluster of rattan, however, is between Rp 500,000 and Rp 1 million. That is, the compensation offered was only .06 per cent or less of the market value of the commodity in question.

Such cases underscore the role plantation projects have in degrading forests through displacing people and disrupting community-based forest stewardship systems. In contesting the actions of plantation and pulp companies _ whether by appealing to local, district, provincial and national bureaucracies and parliaments, taking firms to court, blocking roads, seizing company vehicles, pulling up stakes put down by survey teams, tearing down signs criminalizing traditional agricultural practices, cutting bridges built by encroaching companies, pelting company houses with rocks, or simply refusing to cooperate with firms who do not consult with residents according to locally-approved political processes _ local villagers are also attempting to defend the main features in their social landscape which hold out a secure promise for the future.

In doing so, they have often worked with local legal aid groups or NGOs. On some occasions, national-level alliances have also been formed which use national law as a tool, as in the late 1980s when WALHI, a Jakarta-based NGO, began working with North Sumatra community development NGOs in surveying Indorayon's abuses with an eye to taking the firm and the government to court in Jakarta to test a 1982 statute on environmental regulation. Foreign groups have meanwhile demonstrated solidarity by asking funding agencies (for example, Japan's OECF) and foreign investors in Britain and the US to reconsider their support for projects such as Barito's TEL scheme (Tjahjono 1993, WALHI 1992, Kuroda 1995).

All alliances critical of the Indonesian pulp industry carry risks. Villager-NGO alliances may provoke an official backlash in which both allies are charged with 'Communism', an accusation which has proven fatal to many in the country since the massacres of the mid-1960s. Villagers may be beaten, arrested, or coopted, while NGOs may be faced with closure and intimidation. International campaigns, if they are seen as linked with local struggles, may increase government intolerance of local groups even further.

Yet alliances can also bring gains. The lawsuit initiated by WALHI, for example, helped catalyze coordination among Northern Sumatran NGOs on broader environmental issues and laid a foundation for further united action. It has also yielded the lesson that by presenting their demands as coming from forums rather than from individuals or organizations, villagers and NGOs can be protected to some extent from corporate or official retribution. At the same time, the experience of the lawsuit _ which, predictably, was lost _ has helped impress upon urban-based NGOs the importance of patient work in the field with villagers and rural NGOs.

As the government's investment in global public relations testifies, international campaigns can also affect the development of the pulp industry in Indonesia. A campaign involving the threat of a boycott in Europe and North America, for instance, helped force Scott Paper to withdraw in 1989 from a joint venture in West Papua which would have displaced 15,000 people. Scott's partner, Astra, Indonesia's second largest business conglomerate, has vowed to continue the scheme, but financial difficulties have slowed its progress.