From: Chris Lang
To: Moray McLeish (IFC)
Date: 16.10.2006 22:18
Subject: Inhutani II, GFTN and UFS
Dear Mr. McLeish,
I am currently writing an article for the World Rainforest Movement about UFS’s proposed plans for the pulp sector in Kalimantan. According to a press release in May 2006, IFC “successfully assisted” Inhutani II in gaining membership of WWF’s Global Forest and Trade Network. The press release states that Inhutani II’s 50,000 hectares of acacia plantations on Pulau Laut will be used to provide raw material for the furniture industry in Indonesia.
As you know, UFS is currently building a wood chip mill on Pulau Laut and has stated that it will supply its raw material for the mill from Inhutani II’s plantations on Pulau Laut. UFS has other large-scale proposals in the pulp sector in Kalimantan. The source of raw material for all of these ventures is not at all clear.
The area of plantations on Pulau Laut is not sufficient to supply the wood chip mill. The plantation area will be even less able to supply the mill if Inhutani II is selling wood for furniture manufacture. IFC has been working with Inhutani II for several years, including (I understand) helping to find buyers for the timber. Could you please explain why Inhutani II is looking for furniture makers to buy its wood when it has a wood chip mill which is extremely likely to be desperate for raw material? I wonder whether you can shed any light on this as a result of your discussions with Inhutani II?
Please consider your response to be on-the-record. Thank you for your time and I look forward to hearing from you.
From: Moray McLeish (IFC)
To: Chris Lang
Date: 20.10.06 14:04
Subject: Re: Inhutani II, GFTN and UFS
Thanks for your mail and for giving us the opportunity to provide information to assist with your article.
IFC-PENSA works with several small to medium sized (SME) furniture manufacturers who have expressed an interest in using certified or ‘in progress’ wood from sustainable sources in their products.
In order to help create a supply of such timber and demonstrate methods that can be emulated by others, IFC-PENSA has been working with Inhutani II for almost 3 years now, providing technical assistance and advice. This is in line with IFCs commitment to play a leadership role in setting high environmental and social standards in the forest and forest products sector.
Inhutani II has improved it’s management practices to reach a standard which is acceptable to GFTN. A condition of GFTN membership is that the FMU has a credible, time bound plan to achieve FSC certification within 5 years. GFTN can give you more information on their internal standards and systems in this regard.
Some further facts:
- IFC has not provided any loan or financing to Inhutani II or UFS. We have no plans to do so.
- IFC has no relationship with UFS.
- IFC has had no communication with UFS in relation to it’s wood chip mill on Pulau Laut.
On Pulau Laut, Inhutani II produce Acacia logs, some of which are used to produce sawn timber (typically those with a diameter of >20cm), and some of which are sold to the pulp industry. With regards to the saw logs, PENSA works to create linkages between Inhutani II and SME furniture manufacturers looking to purchase ‘in process/certified’ timber. Any business which takes place is on commercial terms. With regards to the actual destinations of both sawn timber and pulp logs, I suggest you contact Inhutani II for up to date information on whom they sell to.
Using the best quality logs to make furniture rather than pulp is a sensible use of resources, as well as being logical from a business point of view (sawlogs tend to sell for a higher unit price). This also provides a further source of raw material for furniture manufacturers who have traditionally relied on teak and natural forest timbers, both of which are becoming increasingly scarce. In the face of increasing regional competition, supporting the Indonesian furniture industry through sustainable sourcing and reducing waste, therby maintaining employment, is critical. IFC PENSA aims to support all of these goals.
What has been created on Pulau Laut is one of the few sources of in progress/certifiable timber in the area. Irrespective of the ultimate destination of the timber, the environmental, social and economic benefits of a well managed FMU are desirable outcomes.
We wish you success in your mission and would be happy to assist you with further information.
On a related note, I’d like be clear that the World Bank Group fully share your mission to protect endangered rain forests. IFC do not and will not finance pulp projects which rely on wood sourced from primary or natural tropical rainforests. We will be happy to share a copy of a new World Bank report: “At Loggerheads? Agricultural Expansion, Poverty Reduction and Environment in the Tropical Forests” with you when it is released on October 23. Meanwhile, we have also recently released another report Sustaining Indonesia’s Forests: Strategy for the World Bank 2006-2009 at this link.