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

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Chapter 5

Actors behind the Scenes

The plantation boom this book describes is not the consequence of a conspiracy among a small group of like-minded industrialists, implemented with the careless ease of omnipotence. Nor is it the result of 'free-market mechanisms' or an inevitable and impersonal 'drive for economic development' which must now be made 'sustainable'. It is, rather, a complex social, cultural and political struggle featuring a multitude of agents with different interests, cultural inclinations, and motivations, acting against a constant and varied background of resistance. It is only by working in loose conjunction with each other (although usually in a contingent and sometimes uncoordinated and ad hoc fashion) that these actors can make paper and pulp machinery saleable, debt finance possible, political interests meshable, and centralization of resource control achievable. As a prelude to the case studies of Part Two, this chapter will introduce some of the most prominent of these actors, sketch something of their interactions, and outline a few of the strategies which shape their actions.

Pulp and paper firms

The most important customers for plantation fibre, of course, are paper manufacturers. Together, these firms form one of the top ten industrial sectors in the world, representing one per cent of the world's total economic output. The 65 leading producers of paper are listed on pages 106-113.

As Chapters 2 and 3 have pointed out, the industry is dominated by the North, where as much as 90 per cent of the world's pulpwood, over four-fifths of the world's pulp, and between three-quarters and four-fifths of the world's paper is produced. It is dominated particularly by the United States, which boasts between a third and a half of the world's pulpwood production and a rate of paper production about equal to that of the total of the next four largest-producing countries combined (Fernandez Carro and Wilson 1992, Wilson 1991, IIED 1995, PPI 7.1994, FAO 1995, Van Hook 1994). Nevertheless, as Chapter 3 argues, much future plantation pulpwood capacity will be established in the South, with a good deal of manufacturing capacity following suit, and several large Southern conglomerates are already climbing into the world league tables.

Given the size of large paper firms -- the sales figures of International Paper alone rank above the Gross Domestic Products of more than 75 countries -- it is hardly surprising that many of the largest paper firms are important political as well as economic actors. Some firms, in addition, can take advantage of the political clout that comes with being a member of even larger conglomerates. Arjo Wiggins Appleton, for example, whose sales figures alone exceed the Gross Domestic Product of Honduras, is a subsidiary of the much larger British-American Tobacco firm, as is Aracruz's parent firm Souza Cruz (WRI 1994, PPI 9.94). Carter Holt Harvey, a firm with pine plantations in Chile and New Zealand, is run not only by International Paper, but also partly by Brierly Investments of New Zealand, a firm with US$4.75 billion in assets worldwide, mainly in the UK.

As the list of firms on pages xx-xx shows, many prominent paper producers supply themselves with the pulp, chips, and logs they need from timberlands that they own or lease. Others buy pulp on the open market from producers elsewhere on the list, or from other market pulp specialists such as the US's Alabama River and Parsons & Whittemore; Brazil's Bahia Sul Celulose; Sweden's ASSI Karlsborg and Iggesund Paperboard; Swaziland's Usutu Pulp; Spain's Sarriopapel y Celulosa; Indonesia's Wirya Karya Sakti; and Canada's Canfor, Cariboo, Crestbrook, Irving, and Malette (the first three of which involve joint ventures with Japanese paper interests) (IIED 1995, PPI 3.94). While Brazil is the South's leader in the pulp trade, Indonesia is currently the fastest-growing market pulp producer, with growth in the sector averaging nearly 29 per cent yearly between 1980 and 1991.

Still other corporations may not be directly involved in the business of producing either pulp or paper, yet are involved in the wood trade or in the development of plantations which sell wood fibre to pulp producers. Shell International, for example, began forestry operations in Brazil in 1980 and by 1991 was involved in plantation projects in Congo, Chile, New Zealand and South Africa, as well as research operations in Australia, Thailand, France, the US, the UK, and New Zealand (Bissio 1991). While Shell's long-term interest is partly in developing petroleum replacements from biomass (an interest shared by FLORAM in Brazil), its wood-fibre operations are currently linked to the paper economy. Itochu, similarly, has been involved in the wood chip trade in Southeast Asia and elsewhere. Traders such as Sweden's CellMark -- which is to join Marubeni in marketing pulp produced by the giant new Tanjung Enim Lestari mill in Indonesia -- meanwhile sell pulp and paper which other firms produce.

Consultancy companies

Playing a crucial indirect role in pulp and paper manufacture are a handful of Northern forestry and engineering consultancy firms whose business is promoting, investigating, planning, designing and setting up pulp and paper mills or logging and plantation operations.

Such companies include Canada's H. A. Simons, Sandwell, Reid, Collins and Associates, and SNC Lavalin; the US's Brown and Root, Babcock and Wilcox, CH2MHill, and Rust Engineering; the Nordic countries' Silvestria, Swedforest and ENSO/Indufor; Switzerland's and Britain's SGS Silviconsult; New Zealand's FORENCO Consultants; Australia's FORTECH; Germany's DFS Deutsche Forestservice; and France's Cirad and Chleq Frote.

Preeminent on the international scene, however, is Finland's Jaakko Poyry -- the largest forestry and engineering consulting company in the world, with an estimated 40 per cent of the forest industry consultancy market worldwide and a turnover of more than US$300 million in 1994 alone. Poyry, which has recently absorbed the large Swedish consulting firm Interforest, has over 60 offices in 25 countries around the world -- 11 in Brazil alone -- and thousands of employees, and has been involved in hundreds of major commercial forestry and pulp and paper projects in the last two decades across North and Latin America, Africa, Asia, Oceania and Europe (FT 8.3.95; Jaakko Poyry 1994, n.d. a, b, c, d).

Firms such as Poyry are typically in the vanguard of industrial tree plantation expansion. Wherever there are possibilities for industry growth, consultants are likely to be on the scene early, lobbying governments, evaluating forest and land resources, lining up contracts from close colleagues in 'aid' agencies, subcontracting lucrative work out to potential local allies, doing feasibility studies or market surveys, establishing tree nurseries, and designing or engineering factories. Relying on contracts both from state and international agencies and from the private sector, Poyry and its fellow consulting firms serve as crucial go-betweens linking the interests of international and national business and officialdom and bringing together Northern machinery and techniques with Southern land and forests.

The better that such consultancies succeed in establishing or expanding industrial forestry or pulp and paper sectors, of course, the more consulting work they are ensured in the future. Essential here are influential contacts both inside and outside government and international agencies. In 1994, for example, Poyry, which has no previous experience in India, was selected over 15 Indian bidders to carry out World Bank forestry projects in Kerala and Uttar Pradesh. Surprise at this remarkable coup was somewhat lessened by the revelation that the person in charge of Bank forestry programmes in India was a former vice-president of the Jaakko Poyry Group, Christian Keil. India's Inspector General of Forests, A. K. Mukerji, meanwhile, who had recently been a guest of Jaakko Poyry in Finland, was reportedly preparing to open a branch of the firm in India upon his retirement from the civil service (Nation 27.11.94; Statesman 16.9.94). As Part Two will document, such coincidences are common. There are, moreover, virtually no official or professional sanctions which can be applied in the home countries of such consulting firms against their questionable practices abroad.

The population density of Northern consultants in the South is increased when some of them hive off from their old firms and set up their own companies in Southern countries in which they have worked -- thus giving themselves, and the Northern consultancies with which they are still linked, an inside track on future contracts. A US$1.5 million Asian Development Bank contract for developing fast-growing tree plantations in three Lao provinces bordering Thailand, for example, is being shared by Jaakko Poyry AB of Sweden and the Vientiane-based Burapha Development Consultants, whose staff is partly Swedish (DT 9.94).

Providing additional support to pulp and paper development are consultancies which specialize in market forecasting, technical research and training. The UK's Pira International, for example, performs information and research services for the paper, packaging and publishing industries, while firms such as Wood Resources International and Jay Gruenfeld Associates of the US and Hawkins Wright Ltd. of the UK monitor pulp or wood markets. Organizations such as London's Financial Times also provide valuable research and information for the industry, as well as hosting inter-industry meetings.

Technology suppliers

Working together with forestry and engineering consultants for mutual benefit are the major Northern suppliers of pulp- and paper-making technology. Because these firms depend on sales of large-scale, expensive machinery, it is to their advantage too to support and lobby for expansion of large-scale monoculture tree plantations. The profits to be made are enormous, with the machinery costs of each new pulp mill running into the hundreds of millions of dollars.

Unsurprisingly, technology suppliers tend to be based in the same countries as forest industry consulting firms. Like the more prominent consultants, the larger technology suppliers maintain offices in Southern locations from Singapore to Sao Paolo, and often team up in multinational consortia to develop or market various combinations of machinery.

Among the main world suppliers of pulping and bleaching equipment are Finland's Ahlstrom and Valmet-Tampella, Sweden's Kvaerner Pulping and Sunds Defibrator, the US's Beloit, Switzerland's Sulzer, and Britain's Black Clawson. Other major suppliers include the following:

* Papermaking equipment: Valmet (Finland); Beloit (US); Voith Sulzer Papiertechnik (Germany/Switzerland); Mitsubishi Heavy Industries (Japan) and Sunds Defibrator (Sweden).

* Power and steam equipment: ABB and Gotaverken (Sweden); Ahlstrom, Tampella, Outokumpu and Valmet (Finland); Babcock & Wilcox (Canada); General Electric (US) and Voith (Germany).

* Finishing and converting equipment: Beloit (US); Sulzer (Switzerland) and Valmet (Finland).

* Instrumentation, process control and automation: ABB (Sweden); Allen-Bradley, Modicon, Measurex, Rosemount and Texas Instruments (US); Black Clawson (UK); Fischer & Porter and Honeywell (US); Kytola and Valmet (Finland); Siemens and Voith (Germany); Sulzer (Switzerland); and Yokogawa (Japan).

* Pulp- and paper-making chemicals: BASF, Dow and Texaco (US); Ciba-Geigy and Sandoz (Switzerland); Eka Nobel (Sweden); Kemira (Finland); Nalco (Austria); Grace Dearborn and SCM (UK); and Rhone Poulenc (France).

* Chemical recovery equipment: Ahlstrom and Tampella (Finland); Babcock & Wilcox (US); and Gotaverken (Sweden).

* Woodyard equipment: Kone and Sunds Defibrator Wood-handling (Finland); Iggesund and VME (Sweden); and Maschine-fabrik Andritz (Austria).

* Environmental control equipment: Babcock & Wilcox (US) and Voith (Germany).

Industry associations and alliances

Like their counterparts in other sectors, pulp and paper industrialists have long been aware of the need to join forces to achieve common goals. In addition to constant flows of personnel and day-to-day efforts at coordination among suppliers, buyers, consultants, machinery manufacturers, and so on, the industry holds regular conferences to consider general market prospects, technological developments, challenges from environmentalists and environmental legislation, and ways of capturing subsidies.

Such meetings -- underwritten by industry groups and organized by such bodies as the Financial Times or paper industry journals -- are often heralded by the obligatory disclaimer that they will, for example, 'comply with the antitrust laws applicable in the United States and the European Union'. This does not stop their participants from urging more inter-industry collaboration to deal with difficult 'issues that go beyond the immediate realities of our competitive marketplace'. Industry unity is vital, many of its leaders insist, to prevent consumption from peaking. They add that different companies should also pool 'our substantial R & D funds and expertise' to come up with new, more efficient technologies which can comply with environmental standards; must contribute more to environmental standard-setting and certification; and must learn to present a single public-relations front on environmental matters in order to build the right 'public perceptions'. A united front with customers in publishing is also crucial, many executives insist, and industry must take care not to let environmentalists push firms into destructive competition over such issues as recycling and chlorine-free paper production (Oberlander 1994; Paper Europe 1995).

In fact, of course, many industry alliances already exist. Associations such as the the Indonesian Pulp and Paper Association, Confederation of European Paper Industries (CEPI), the American Forest and Paper Association, the Council of Forest Industries of British Columbia, the Japan Paper Association, the Associaao Brasileira de Exportadores de Celulose, the Thai Pulp and Paper Industries Association, and the Paper Federation of Great Britain have long represented corporate interests to governments and the public. Firms such as Beloit and Mitsubishi Heavy Industries have combined research efforts to come up with new papermaking technology. Northern manufacturers have also banded together to work out common strategies for marketing machinery in the South with the help of development 'aid' (WW 6.92).

Industry associations play a significant role in international politics. Sweden's pulp and paper associations, eager to gain more political clout in Brussels at a time when the industry is rapidly internationalizing throughout Europe -- some 40 per cent of Swedish-owned paper production capacity is already sited abroad -- were influential in persuading the country to join the European Union. The increasingly aggressive Canadian Pulp and Paper Association, meanwhile, is seeking closer alliances with paper users such as the New York Times, Wall Street Journal, and Knight Ridder Newspapers, and has set up an office in Brussels to coordinate campaigns to secure European clients in the face of environmental protests against forestry practices in North America (PRW 1.95). The Finnish industry's jointly-owned Paperinfo, an 'information service company', monitors international markets and environmental groups, while the Finnish Forest Industry Federation mounts international public-relations blitzes. And in 1990, an opinion-management organization called the Pulp and Paper Information Centre was set up in London by several inter-industry groups. The public-relations functions of such alliances will be examined in more detail in Chapter 6.

Bilateral agencies

Many of the Northern companies discussed in this chapter -- whether forestry and engineering consulting firms or paper, pulp, wood or machinery companies -- owe their survival largely to handouts from their governments for their work in the South. Without grants, cheap finance, and other subsidies, billion-dollar mills and tropical plantations -- which cost, on average, US$1,000 per hectare to set up (Pandey 1992) -- would never make it into production.

Some of these subsidies, as will be discussed below, are transferred to multilateral agencies before being shunted to the business sector. In other cases, funds collected from Northern taxpayers are laundered through governmental bilateral 'aid' agencies before being channelled into the coffers of private firms. To take just one example, roughly half of Norway's 1994 aid budget was spent on Norwegian firms' goods and services (DT 20.10.1995).

Like the states to which they belong, bilateral agencies are nonetheless far from being mere creatures of their countries' corporations. The staffs of such agencies need to be responsive not only to pressures to subsidize national industries but also to imperatives to ensure their own institutions' survival, meet their governments' foreign policy objectives, and live up to their name by making at least some token gestures toward 'helping' the poor abroad.

State investment and export credit agencies

Multilateral agencies

Still more subsidies flow directly or indirectly to the pulp, paper and plantation industry, including Northern consultancy, construction and machinery firms, from multilateral development banks (MDBs) such as the Asian Development Bank (ADB), African Development Bank, Inter-American Development Bank (IDB), the World Bank and the European Bank for Reconstruction and Development. Of the US$40 billion which MDBs loan annually on favourable terms, a considerable mite goes toward planning and reviewing pulp or plantation operations and facilitating investment in forest industries.

Between 1984 and 1994 alone, for example, the World Bank provided cheap finance for the establishment of 2.9 million hectares of tree plantations, largely for commercial purposes, at a cost of US$1.416 billion. Countries affected have included China, India, Bangladesh, Algeria, Tunisia, Zimbabwe, Kenya, Peru and Poland (World Bank 1994). Multilateral development banks have provided support for analyses describing how to build up Indonesia's pulp and paper industry (1984 and 1987-8, involving the World Bank and ADB), studies of investment opportunities in Latin America, Viet Nam and Nepal (1981-2, 1990-1, and 1986-present, involving IDB and ADB), and forestry development plans for Cameroon, Central African Republic, Congo, Ethiopia, Ghana, Nigeria, Sudan, Bangladesh, Bhutan, Laos, Nepal, Pakistan, Papua New Guinea, the Philippines and Sri Lanka (Jaakko P"yry n.d. b, c, d).

Although World Bank loans for pulpwood plantations are often concealed within larger loans for forestry or agroindustry or disguised under the euphemism 'resource expansion', blatant handouts to industry are common. In Minas Gerais, Brazil, for example, a Bank-financed project is inducing local farmers to raise eucalyptus saplings to provide raw materials for the pulp and paper industry and fuel for steelworks, thus diverting and degrading soil resources which would otherwise be used for food production (WRR 2.94). And in Kenya, the Bank loaned US$19.9 million for a forestry development project promoting tree farming at a time when the International Finance Corporation (IFC), the Bank's private investment arm, had invested $86 million in Kenyan pulp, paper and packaging production (including a TetraPak packaging plant).

MDBs, through their reassuring presence and groundbreaking operations, have also encouraged ordinary commercial banks to get involved in tree plantations or pulp and paper operations in the South -- as lenders, guarantors of export credit agency loans, or advisers on the raising of debt finance. By financing export-oriented industrial development, moreover, they stimulate local markets for packaging and business papers.

Some of the money used by MDBs to subsidize the pulp and paper industry is derived from past and present contributions from Northern taxpayers. The rest is 'donated' by the South itself in the course of paying off debts incurred through the construction of previous MDB-initiated projects, many of which are now acknowledged by MDBs themselves to have been boondoggles (Wapenhans 1993, Rich 1994). The specific destinations of the money which cycles through MDBs vary. Some of it is skimmed off by Southern elites. Huge amounts, however, materialize almost immediately in the bank accounts of Northern consultants, contractors and suppliers.

The mechanisms by which this happens are not hidden. The World Bank, for example, has a policy of financing components of its projects that must be purchased with foreign exchange -- on average, about 40 per cent. With about US$23 billion committed annually, some 30,000 contracts are awarded to firms annually by borrowers of World Bank funds, 70 per cent for goods and equipment, 20 per cent for civil works, and ten per cent for consultancies. This structure encourages close links between the Bank and representatives of private firms who are seeking outlets for their equipment or expertise.

Northern firms in particular enjoy a number of resources which help them build such links. The US Department of the Treasury, for example, has instructed its representatives on the boards of directors of MDBs 'to make [US] business development and exports one of their highest priorities within the MDBs' and to impress on the MDBs the virtues of 'one-stop shopping' at US firms. The UK's Department of Trade and Industry (DTI) employs no less than six desk officers to provide the British private sector with pointers on how to 'gain business' from multilateral development bank-funded projects through cultivating the right staff members, visiting World Bank headquarters, and so forth. In addition, a whole satellite industry of consultants -- many of them former World Bank staff or the spouses of current staff -- has sprung up in Washington, London, and other capitals to monitor MDB procurement and offer inside information and services to private firms; and MDBs and Northern governments hold regular meetings in Northern capitals to help the Banks and prospective Northern contractors get to know each other (World Bank n.d., Treasury News 18.11.93, DTI 1994).

The result is predictable. According to Britain's Department of Trade and Industry, in the financial year ending in June 1994, companies in the US, UK, France, Germany and Japan captured over 46 per cent of the cash value of the contracts awarded by the World Bank (DTI 1994), or more than US$10 billion. Some 64 per cent of the value of IDB disbursements, meanwhile, went to firms in five wealthy Northern countries: US, Japan, Germany, France and Italy. As the UK's Overseas Development Administration (ODA) complacently observes, 'British firms and suppliers receive orders for goods and services that are used in aid projects far exceeding the value of Britain's contributions to [multilateral] agencies' (ODA 1992).

Much of the money captured by MDBs thus follows a roughly circular pipeline from Northern taxpayers to Northern governments to MDBs to Southern governments to Northern companies, leaking copiously through cracks along the way. Replenishments are meanwhile being continually pumped from both Southern and Northern catchment areas directly to MDBs to be periodically injected at the top of the cycle; the Southern component of these topups makes up a significant part of the current net annual US$50 billion capital drain from South to North (Rich 1994).

The damage inflicted on the Southern catchment area in the process is, of course, considerable. As a price for the privilege of being able to insert a small tap into the circular financial flows to which their countries already contribute so much, Southern elites are compelled to commit themselves to projects and austerity programmes of staggering economic, social and environmental destructiveness. For nearly fifty years, in addition, Southern elites have been prodded by MDBs to set up or augment state institutions which will nurture the growth of local commercial elites -- including local contractors who quickly learn to feed at the MDB trough themselves. One result has been the creation of a permanent infrastructure for negative redistribution of wealth both within Southern countries and between the South and the North. The ratio of wealth between North and South has increased from 10:1 in 1948 to 30:1 in 1960 and 60:1 in 1990 (Rich 1994, Payer 1991, Adams 1991, Oxfam 1994).

Other multilateral agencies such as the Food and Agriculture Organization (FAO) and the United Nations Development Programme (UNDP) cooperate closely with MDBs and private sector consultants in using public funds to provide 'free lunches' for the plantation and pulp and paper elite. Such bodies are particularly helpful in studying business opportunities in the forestry sectors of Southern countries and planning rural development and forestry programmes which can feed the industry. FAO has also performed the valuable service of discrediting, through bogus science, the environmental soundness of certain indigenous land-use patterns, including various types of swidden agriculture, which were seen to be in competition with industrial forestry interests. As anthropologist Anders Baltzer Jorgensen (1979) notes, FAO 'took over a special branch of silvicultural opinion: the one formerly contained in the forest departments of earlier colonial governments' as part of a post-colonial project of saving the 'productivity of the tropics for the world as a whole, but specifically for the occidental world' (Spencer 1966).

Another intergovernmental agency, the Institute of Applied Systems Analysis based in Austria, meanwhile provides computer-assisted databases for industry about timber supply in Siberia, Europe and the rest of the world. The World-Bank-sponsored Center for International Forestry Research (CIFOR), a new branch of the Consultative Group on International Agricultural Research (CGIAR) located in Bogor, West Java, with 100,000 hectares of research forest in East Kalimantan, may also be an institution to watch. Experience suggests that there will be heavy pressures on CIFOR to devote much of its time to helping fit tree characteristics to industry needs through genetic research in much the same way that the International Rice Research Institute in the Philippines (another part of the CGIAR network) has helped to adjust rice to the chemical regimes of the Green Revolution (Jaakko P"yry n.d. b, c, d; Interforest n.d. a, b, c; Moniaga 1993; IIASA 1994).

As the case studies of Part Two will propose, one of the most important functions of subsidies from multilateral agencies to Northern consultants for initial studies is that they often lead to knock-on contracts for the firms involved. After landing a contract in 1984 from the World Bank to make recommendations for the pulp and paper industry in Indonesia, for example, Jaakko P"yry's consultancies for the Indonesian private sector mushroomed. Occasions such as the 1992 Earth Summit in Rio de Janeiro also provide rich opportunities for firms such as P"yry to lobby for the diversion of public funds to their corporations in the guise of 'environmental aid'.

In summarizing the role of multilateral agencies in the promotion of pulp and plantations, it is hard to improve on the words of Jack Westoby, the late head of forestry at FAO. In 1975, Westoby described how international 'aid' had helped in 'identifying for foreign capital those forest resources suitable for exploitation' and in many cases had 'borne a substantial part of the cost of making inventories of those resources':

In not a few cases it has compiled the data, and helped provide the justification, for international financing agencies to provide loans to create some of the infrastructure needed to assist the penetration of foreign capital. It has helped to train some of the manpower to be placed at the service of foreign enterprises [and] assisted some irresponsible governments to alienate substantial parts of their forest resource endowment . . . the growing interest in, and acceptance of, forestry projects [by development agencies] had little or nothing to do with the conversion of the development establishment to [foresters'] idea that forestry and forest industries had a significant and many-sided contribution to make to overall economic and social development. It had everything to do with the fact that many of the rich, industrialized countries needed, and needed badly, new wood material resources; and their forest industries, their equipment manufacturers, together with miscellaneous agents and operators, scented golden opportunities for profit in those underdeveloped countries with forest resources. This was the dominant consideration which determined the location, shape and direction of forest and forest industry development projects. . . . The international financing agencies knew what foreign investors wanted, and the multilateral and bilateral agencies fell into line (Westoby 1987).

National governments

Some of the most important subsidies for the plantation, pulp and paper industries are furnished by national or provincial governments, often at the behest of international agencies.

State agencies set up originally under the aegis of the World Bank, for example, such as Thailand's Board of Investment, have provided tax writeoffs, technology import exemptions, and rent-free loans to industry, as well as infrastructure. Fiscal incentives including subsidies for plantation establishment, tax exemptions, and grants, were also extended by governments to commercial plantation firms in Brazil (1966-1987), Argentina (from 1974), Chile (from 1960, revised in 1974), Paraguay (1980-4) and Uruguay (1960-78) (Pandey 1992, Sawyer 1993).

State forestry departments in Asia, meanwhile, redistribute vast swathes of land over which they have jurisdiction from their occupants to industry, often charging miniscule rents or stumpage fees. In Indonesia, for example, where 70 per cent of the land area is managed by the state forestry bureaucracy, industry is charged as little as US$0.30 per hectare per year for the use of plantation land. In both Indonesia and Thailand, special replanting funds are shunted selectively to plantation businesses, and in the former, plantations are further subsidized by logging revenues recycled through the state (see Chapter 13). The smaller the rents, stumpage fees and timber prices levied by forestry departments, of course, the more resources have to be diverted from other sectors into forest management. Among the losers are programmes which might promote non-pulp-plantation, community-based land uses.

Costs of land and labour are also kept down through subsidies provided to military and police forces by local and foreign taxpayers. The minimum legal daily wage in Yogyakarta in Indonesia, for example, is US$0.60 and in West Nusa Tenggara $0.72; plans by a Japanese investor who proposed to pay workers $2.40 were rejected by officials of the Investment Coordinating Board on the grounds it would damage Indonesia's cheap labour advantage (DTE [London] 6.1993). Where customary lands have to be seized forcibly by the state before being turned over to industry, and where smallholders and migrant labour are used essentially as slave labour, repression -- much of it underwritten by foreign training programmes and foreign military hardware -- is a particularly important ingredient in the economic mix. Export taxes on staples can also help subsidize cheap labour for foreign investors. State university forestry faculties -- many of them staffed by foresters trained in industrial forestry in countries such as Finland, Canada and the UK -- can meanwhile be relied upon to provide useful lobbying and technical support for commercial schemes.

Competition with Northern wood-producing nations' own subsidizing apparatuses, moreover, is tough, forcing Southern nations to dig even deeper into their pockets to attract investors. In 1988, for example, the Canadian province of Alberta presented the Japanese firm Daishowa with C$70 million worth of infrastructure to help induce it to build a $579 million bleached kraft pulp mill in the middle of a forest. The Japanese-controlled Al-Pac plant in Alberta, meanwhile, has received, in addition to $75 million worth of infrastructure and construction finance, a $275 million subordinated income debenture -- not to be repaid unless and until the mill is profitable -- and a $125 million standby debenture for future expansion. The timber subsidy for the plant is an additional $78.7 million yearly. In addition to making a down payment of $125, then, each citizen of Alberta is donating an additional $28 per year for the privilege of allowing Al-Pac to use up the province's resources (TN 5.94, WCWC 1994, Pratt and Urquhart 1994). A further $47 million has been committed by Canadian governments for public relations for overseas forest industries extracting Canadian pulpwood (MacIsaac and Champagne 1994). According to forest economist Randall O'Toole, the US government showered $7.2 billion in tax breaks on the US timber industry between 1980 and 1989 and fed it $449 million worth of below-cost timber in 1992 alone (Letto 1994). Forest and paper industry Political Action Committees, of course, help fund US legislators' election campaigns. Many originally state-owned Nordic forest industries which have been recently partially or fully privatized, meanwhile, have benefited from decades of government-enforced privileges.

So widespread are such corporate welfare programmes, indeed, that even the government of a relatively poor US state such as West Virginia can be prevailed upon to offer $200 million in construction loans, $60 million in road improvements and further millions in tax incentives to help the world's largest builder of pulp and paper mills, British-based Parsons & Whittemore, turn several hundred thousand hectares of Appalachian hardwood forests into pulp. Still further subsidies were secured by West Virginia governor Gaston Caperton, who, after receiving campaign contributions from Parsons & Whittemore, pressured US government regulators to allow the firm to pollute the Ohio River without baseline studies of dioxin levels being done (NFN 1995). George F. Landegger, Parsons & Whittemore chairman, had summed up the thinking behind such subsidization during earlier dealings in Canada:

Adam Smith's invisible hand will not build pulp mills, particularly in the kinds of forest areas that remain available in Canada for exploitation. It requires a great deal of coordination between private interests and public interest, and the public interest being willing to take a risk for development. That risk has primarily political dimensions for the public sector, but financial dimensions for the private sector (Pratt and Urquhart 1994).

Thai economist Pasuk Pongpaichit offers a less mystified view of the matter:

Economic theory tells us it's all right to subsidize education because it benefits the whole society. But while eucalyptus and pulp and paper industries earn profits for some, they cause problems for society. Therefore, economic theory tells us, they should be taxed. But instead the government does the opposite. This is a matter of influence and power (Pasuk 1995).

Research institutes and NGOs

A final type of subsidy comes from governmental and non-governmental research institutes which provide free or low-cost ideological or scientific backing for the plantation boom. One example is Australia's state-supported Commonwealth Scientific and Industrial Research Organization (CSIRO), which brings together academics and industry to conduct research and development on hardwood plantation techniques. Another is the Swedish Pulp and Paper Research Institute, which is supported by both industry and government. Many state universities in the US and Europe -- including the University of Idaho, Oregon State University, and the University of New Brunswick -- meanwhile accept research support from the pulp and paper industry (Cromer and Kile 1993). Of course, foresters and scientists with no direct ties to industry also contribute heavily to the industry-friendly component of the 'two libraries' which Chapter 4 has described.

On the non-governmental side, the UK's International Institute for Environment and Development has helped Shell plan and legitimize a plantation project in east Thailand, since cancelled due to local resistance, and has also conducted a favourable mid-term review of Jaakko P"yry's plantation-promoting Forestry Sector Master Plan for Thailand. In the 1980s, the IIED's US counterpart, the influential World Resources Institute, trumpeted the Aracruz plantation operation in Brazil as a model for forestry development. More recently, the World Wide Fund for Nature has collaborated with Shell on an 11-volume review of, and guidelines for, tree plantations. On a more rarefied level, independent researchers such as Norman Myers have lent credibility to the plantation boom by sketching grandiose and highly-theoretical schemes for carbon-fixing through 'grand-scale' tree-planting. Think tanks such as Resources for the Future in Washington meanwhile provide strategic information of interest to the industry on the long-term availability of industrial wood. No less important are NGOs, foresters and economists who, although acquainted with and concerned about the problems of the pulpwood plantation boom, find it strategic to defer to industry on the issue. The role of such experts and NGOs in supporting the industry will be probed at greater length in the next chapter (Sargent 1990, Sargent et al. 1992, Shell/WWF 1993, Myers 1991).

Conclusion

This chapter has profiled some of the leading protagonists in the drama of pulp and paper. It has also suggested some of the mechanisms by which they coalesce, capture subsidies, and -- against a background of constant challenge and resistance which will be described more fully in Part Two of this book -- act in a way which results in the expansion of pulpwood plantations in the South.

These mechanisms both presuppose and facilitate an ability to shift resources within a regionally- and globally-organized system. In order to be able to make effective inroads into rural societies in (say) Kalimantan or Bahia Sul, pulp and paper interests must be able to tap revenues which government bureaucracies have collected from office workers or landowners in Helsinki or Quebec, or cite arguments which the World Bank, using debt service payments from the Philippines or Mexico, has hired hack consultants from New Delhi or Virginia to rehearse and polish. Yet applying such resources effectively across extensive geographical and social landscapes presupposes that, to a certain extent, these inroads have already been made, that a far-flung political infrastructure sensitive to the needs of pulp and paper interests is already in place. Moreover, it is only when such inroads have already been started, and local barriers have already been breached, that the pulp and paper industry can gain access to the fresh flows of subsidies which make its continued expansion, and that of the globalizing system it relies on, possible.

Here, as elsewhere, globalization and subsidization advance hand in hand; neither can succeed without the other. Trade has not only continued to follow the flag but has also continued to help keep it flying. 'Trade', however, covers a greater multitude of activities today than formerly, and the 'flag' may bear the logo of a development bank, foreign charity, agriculture ministry, local police force, investment promotion board, or any other of the plethora of contemporary official institutions which serve elite interests without the possibility of democratic scrutiny ever even having to be raised.

Part Two will spell out in more detail how resource transfers between expanding public and private sectors in Southeast Asia, Japan and the West subsidize the pulp and paper industry. In particular, it will discuss how, in Asia, commons are dismantled and the fragments reassembled into a capitalist structure; how, in Latin America, the emergence of locally-appropriate alternatives to industrial plantations is being thwarted; and how, nearly everywhere, land and water is being expropriated. The next chapter will preface these studies by examining how an increasingly global system has taken on another challenge: managing resistance to its expansion. In particular, it will examine how globalization both enables, and is enabled by, attempts to block potential alliances between grassroots groups fighting monoculture pulpwood plantations in the South and environmental and social activists elsewhere.

TABLE 5.1: 
THE TOP 65 WORLD PAPER PRODUCERS

table under construction

Sources: Olsson 1995, Lamb 1992, JATAN 1994, Marchak 1992, corporate reports, Rahikainen et al. 1995, PPI 9.95, FT and other newspaper reports.