Sorry about stating the blinding obvious, but Asia Pulp and Paper is still destroying forests to feed its pulp mills. WWF put out a report in July 2006 which states that APP is responsible for 80,000 hectares forest loss every year. Nazir Foead, WWF-Indonesia’s Director of Policy and Corporate Engagement says, “We estimate that around 450,000 hectares of natural forests have been cleared over the past five years to supply APP’s pulp mill in Riau.”
I recently took part in a meeting at the German Ministry for Economic Co-operation and Development (BMZ) in Berlin. The meeting, with BMZ’s Ute Heinbuch (whose job title is “Export Credit Guarantees/Guarantees for Direct Investments Abroad”) was about possible export credits to future pulp developments in Indonesia. We were there to suggest that these would not be a good idea, given the social and environmental record of the pulp industry in Indonesia (and elsewhere).
I asked Heinbuch to say a bit about the due diligence process that Hermes carried out before agreeing to give a guarantee to APP China. She replied that APP had carried out a restructuring of its approximately US$14 billion debt. The restructuring included a clause on the environment. The environment clause was worked out with WWF. Officially WWF withdrew from its partnership with APP, but it “continued to work behind the scenes”, said Heinbuch. Anyway, the agreement with APP China said that the wood should come from “clean sources”, she said.
“ECAs are a means of supporting German companies in difficult markets,” said Heinbuch. By now I was struggling to keep quiet. China a difficult market? For the pulp industry? I kept quiet.
Then things got really strange. Heinbuch explained that the difficulty with a paper machine is that it can function with legal raw material. The machinery manufacturer has nothing to do with APP.
Heinbuch’s argument boils down to the fact that the guarantees that Hermes gives (and that she is supposed to be monitoring) go to German companies who are manufacturing machinery. The fact that they are selling the machinery to a company with a record of pulping 80,000 hectares of forest a year is irrelevant, because the machinery would still function no matter where the wood came from. So that’s all right, then.