Sateri International

Posted: 12 May 2007 in Pulpmillwatch.org

Pulpmillwatch

(February 2007): Sateri International is planning to expand the capacity of its dissolving pulp mill, Bahia Pulp, from 150,000 t/yr to 365,000 t/yr. [1] The mill is in Camaçari, in the north east of the Brazilian state of Bahia. [2]

In April 2006, BNDES approved US$212.9 million financing to Bahia Pulp. The total cost of the expansion is US$466.14 million.3 Metso Paper is supplying the pulping line and the new line is planned to start up in 2007. [4]

Sateri International owns 150,000 hectares of Eucalyptus urophylla plantations in Bahia, [5] the raw material to produce viscose – used in producing textiles, artificial leather, [6] glasses, films, cigarette filters and low-conductivity transparent cables. [7]

Sateri International bought the Brazilian pulp company Klabin’s Bahia operations in 2003. The pulp mill was previously called Bacell S.A. [8] Bahia Pulp is now controlled by Sateri Bacell, a subsidiary of Sateri International. [9] Sateri International is owned by Raja Garuda Mas (RGM) International. Based in Singapore, RGM International owns the two million t/yr Riau Andalan Pulp and Paper mill in Sumatra. RGM International is owned by Indonesia’s richest man, Sukanto Tanoto.

Other companies in the Sateri International Group include Sateri Oy, Finland and Sateri (Jiangxi) Chemical Fibre, China. The Group is one of the largest viscose and dissolving pulp producers in the world. [10] The pulp from the Bahia operations will go to Sateri’s viscose plants in Finland and China. [11]

The model of plantation development and pulp production is precisely that opposed by a network of NGOs in Brazil: The Alert Against the Green Desert Network. [12]

SUKANTO TANOTO

Sukanto Tanoto, the founder and chief executive of RGM International is the richest man in Indonesia. Sukanto and his family are worth US$2.8 billion, according to Forbes’ ranking of Indonesia’s wealthiest people. [13]

“Everyone has the right to be rich, but debts must be settled,” said Mansyur S Nasution, Bank Mandiri’s corporate secretary, when he heard of Sukanto’s ranking in Forbes, according to an article in Koran Tempo. Sugiharto, the minister for state enterprises, is quoted by Koran Tempo as saying that Bank Mandiri must use the law to get debtors to clear their borrowings, including RGM. [14] [15]

Shortly after Forbes published its list of wealthy Indonesians, the police reopened the investigation of Sukanto’s involvement in Unibank. Media Indonesia quoted Paulus Purwoko, chief of public relations at National Police Headquarters in Jakarta, as saying: “Based on a meeting between the police chief and the attorney general on August 2006, Sukanto’s case has to be continued and he remains a suspect.” [16] Paulus added that “The case is being handled by the team for corruption crime [Tipikor].” [17] The case involves Unibank, which was once controlled by Sukanto and his wife Tinah Bingei. The bank closed in 2001 leaving the state to pay out more than US$400 million to settle third party claims. [18] Journalist Yosef Ardi reports that “Sukanto was suspected of irregularities on an export loan facility worth US$230 million.” [19]

Sukanto Tanoto is also involved in a high-profile Singapore court case against Deutsche Bank and Indonesian firm Dianlia Setyamukti (DSM). Sukanto claims they were involved in a conspiracy to take away his shares in a coal mine in Kalimantan. [20] Sukanto’s legal council alleges that the bank illegally sold the share in the coal mine, which Sukanto put up as collateral for a US$100 million loan from Deutsche Bank [21] in November 1997. The loan was supposed to be a six-month bridging loan, [22] but by June 2001, the bank had seen no repayments. “I knew in my mind the bank was literally being held to ransom,” wrote Wolfgang Topp, managing director of Deutsche Bank’s Asia Pacific office, in an affidavit to the High Court of Singapore. [23] In November 2001, Deutsche Bank sold Sukanto’s shares to DSM for US$46 million. [24]

The Jakarta Post reports that a Deutsche Bank lawyer described Sukanto as a “crook”. The owner of DSM, Edwin Soeryadjaya, said that Sukanto “is someone with whom I will never do business.” [25]

RGM GROUP’S DEBTS

RGM companies, PT Riau Andalan Pulp & Paper, PT Riau Andalan Kertas and PT Riau Prima Energi, have debts of US$1.4 billion. The loan will mature in 2010. [26] In June 2006, the Indonesian state-owned Bank Mandiri named the Raja Garuda Mas Group as one of 30 defaulting borrowers which owed money to the bank. RGM denied the charges, saying it signed a loan restructuring agreement in 2002 with which it has complied. The Jakarta Post reported that when asked whether RGM would sue Bank Mandiri for making the announcement Ibrahim Hasan, president director of the Raja Garuda Mas Group, said there were no plans to take legal action.

Bank Mandiri was asking for an increase in monthly payments. “We don’t agree with this. We’ll only comply with the terms of the restructuring agreement that we signed with the 15 banks,” Ibrahim said. [27] In September 2006, RGM Group was reported to be negotiating the repayment terms of its debt to a syndicate of banks, including state-banks Bank Mandiri and Bank Negara. It currently pays US$61 million a year. [28]

ENVIRONMENTAL AND HUMAN RIGHTS ABUSES

Sukanto’s pulp and rayon mill, Inti Indorayon Utama, near Lake Toba in Sumatra, was involved in serious conflicts with local people during the 1980s and 90s. The mill started up in the 1980s and ran into a series of conflicts about pollution and land disputes. A land-slide related to the expansion of the plant killed 13 people. The plant’s waste tailings pipe leaked damaging farmers’ fields nearby. [29] In 1998, local people set up a series of road blocks, effectively closing down the mill. [30] In a crackdown on protestors in 1999, police shot seven people, killing one of them. Another 90 people were detained and tortured. One later died. The company denied any involvement in the police action but Sukanto was forced to close the mill for five years and later sold off much of his share in the mill. [31] [32]

RGM International’s Riau Andalan Pulp and Paper mill in Riau province, Sumatra, is run by Asia Pacific Resources International (APRIL), part of the RGM Group. The company is notorious for its environmental destruction. [33] Human Rights Watch reports one protest, in October 1997, in which police fired on demonstrators near the mill. [34]

Sukanto dismisses the criticism as in the past. “We made some mistakes” Sukanto told the Financial Times in February 2006. [35] APRIL now claims to be working to alleviate poverty in local communities around its mill and plantations, through building schools, and training programmes in livestock rearing, fish farming and so on. [36]

But APRIL is responsible for clearing vast areas of forest in Riau. Chris Barr, a scientist at the Centre for International Forestry Research in Bogor, points out that APRIL and its main competitor, Asia Pulp and Paper, built their pulp mills in Riau before establishing plantations to supply raw material. “I don’t think anyone is going to criticise companies like APP and April for making investments in schools and development programmes,” Barr told the Financial Times. “But how do you weigh the benefits from those types of programmes with the very substantial negative impacts of clearing large areas of native forests?” [37]

In October 2006, journalist Yosef Ardi wrote in The Edge, Singapore: “Investigators with Jikalahari (a network for forest conservation in Riau) have found evidence that APRIL’s mills accepted wood from a legally questionable third-party source as recently as May 2006.” [38] In a June 2006 report, WWF points out that deforestation in Riau province, where APP and APRIL have pulp mills, has accelerated in recent years, in spite of APP and APRIL’s promises to conserve forests. [39] [40] APRIL’s security guards were recently involved in clashes with local people who were allegedly planting oil palm within a concession owned by one of APRIL’s joint venture partner companies. [41]

WWF Indonesia calculates that timber plantation concession directly or possibly associated with APRIL include 570,000 hectares of forest. WWF estimates that APRIL uses 70% mixed tropical hardwood in its Riau Andalan pulp mill and therefore pulped about 90,000 hectares of forest in 2005. [42]

A July 2006 report in the Japanese newspaper The Daily Yomiuri describes the scene at one of APRIL’s logging operations: “Drying tropical timber was stacked in piles between thick tree stumps–as if it were a heap of bones. The place looked like a field that had been hit by a bomb.” [43]


Footnotes

[1] Chan Chao Peh “Corporate: Tapping the Latin American market”, The Edge Singapore, 21 August 2006.

[2] “Brazil BNDES Approves $212.9 Mln Financing to Bahia Pulp”, Latin America News Digest , 25 April 2006.

[3] “Brazil BNDES Approves $212.9 Mln Financing to Bahia Pulp”, Latin America News Digest , 25 April 2006.

[4] “Metso to supply pulping line to Bahia Pulp in Brazil”, Metso Paper Press Release, 22 March 2006.

[5] “Metso to supply pulping line to Bahia Pulp in Brazil”, Metso Paper Press Release, 22 March 2006.

[6] Chan Chao Peh “Corporate: Tapping the Latin American market”, The Edge Singapore, 21 August 2006.

[7] “Brazil BNDES Approves $212.9 Mln Financing to Bahia Pulp”, Latin America News Digest , 25 April 2006.

[8] “Metso to supply pulping line to Bahia Pulp in Brazil”, Metso Paper Press Release, 22 March 2006.

[9] “Brazil BNDES Approves $212.9 Mln Financing to Bahia Pulp”, Latin America News Digest , 25 April 2006.

[10] “Sateri to expand capacity of Bahia Pulp mill in Brazil”, Asia Pulse, 17 March 2004.

[11] “RGM Int’l to acquire Bacell from Klabin”, Asia Pulse, 21 August 2003.

[12] Green Desert Movement.

[13] Laurel Teo, “Paper tycoon Tanoto tops Indonesia’s rich list; Forbes’ first ranking of Indonesians values him at US$2.8b”, The Business Times Singapore, 6 September 2006.

[14] Conrad Raj, “Forbes’ list turns spotlight on Indon tycoons; Many had accumulated vast debts just before the financial crisis”, The Business Times Singapore, 11 October 2006.

[15] Yosef Ardi, “My Say: Irony of the Indonesian rich list”, The Edge Singapore,2 October 2006.

[16] Conrad Raj, “Forbes’ list turns spotlight on Indon tycoons; Many had accumulated vast debts just before the financial crisis”, The Business Times Singapore, 11 October 2006.

[17] Yosef Ardi, “My Say: Irony of the Indonesian rich list”, The Edge Singapore,2 October 2006.

[18] Conrad Raj, “Forbes’ list turns spotlight on Indon tycoons; Many had accumulated vast debts just before the financial crisis”, The Business Times Singapore, 11 October 2006.

[19] Yosef Ardi, “My Say: Irony of the Indonesian rich list”, The Edge Singapore,2 October 2006.

[20] Laurel Teo, “Paper tycoon Tanoto tops Indonesia’s rich list; Forbes’ first ranking of Indonesians values him at US$2.8b”, The Business Times Singapore, 6 September 2006.

[21] Kornelius Purba “S’pore courts win trust, Indonesia courts ‘win the bribes’”, The Jakarta Post, 28 August 2006.

[22] Donald Greenlees “German bank and Asian loans: How it all went wrong”, The International Herald Tribune, 20 February 2006.

[23] Donald Greenlees “German bank and Asian loans: How it all went wrong”, The International Herald Tribune, 20 February 2006.

[24] Donald Greenlees “German bank and Asian loans: How it all went wrong”, The International Herald Tribune, 20 February 2006.

[25] Kornelius Purba “S’pore courts win trust, Indonesia courts ‘win the bribes’”, The Jakarta Post, 28 August 2006.

[26] “Indonesia’s Raja Garuda negotiates repayment of US$1.4 bln debt”, Asia Pulse, 27 September 2006.

[27] “Garuda Mas denies defaulting on debts”, The Jakarta Post, 16 June 2006.

[28] “Indonesia’s Raja Garuda negotiates repayment of US$1.4 bln debt”, Asia Pulse, 27 September 2006.

[29] Budi Putranto “The Golden King Garuda”, Indonesian Business, December 2001.

[30] “April Group reports US$11.5 mln profit in 2nd qtr”, Asia Pulse, 31 August 1998.

[31] Joe Leahy, “Indonesia’s corporate clean-up”, Financial Times, 21 February 2006.

[32] “Without Remedy: Human Rights Abuse and Indonesia’s Pulp and Paper Industry”, Human Rights Watch, January 2003.

[33] See, for example, Robin Wood’s research on deforestation in Sumatra;
Friends of the Earth EWNI;
Eyes on the Forest;
Jikalahari;
Maan Ystävät (Friends of the Earth Finland) and
APRIL-Watch.

[34] Joe Leahy, “Indonesia’s corporate clean-up”, Financial Times, 21 February 2006.

[35] Joe Leahy, “Indonesia’s corporate clean-up”, Financial Times, 21 February 2006.

[36] Joe Leahy, “Indonesia’s corporate clean-up”, Financial Times, 21 February 2006.

[37] Joe Leahy, “Indonesia’s corporate clean-up”, Financial Times, 21 February 2006.

[38] Yosef Ardi, “My Say: Irony of the Indonesian rich list”, The Edge Singapore,2 October 2006.

[39] Shawn Donnan, “WWF rounds on paper groups over Sumatran jungles”, Financial Times, 13 July 2006.

[40] “WWF Monitoring Brief June 2006: Asia Pacific Resources International Holdings (APRIL)”, WWF Indonesia.

[41] “WWF Monitoring Brief June 2006: Asia Pacific Resources International Holdings (APRIL)”, WWF Indonesia.

[42] “WWF Monitoring Brief June 2006: Asia Pacific Resources International Holdings (APRIL)”, WWF Indonesia.

[43] Hiroko Kono and Jun Sato “ENVIRONMENTAL CHALLENGES–Saving forests; Effects of deforestation felt”, The Daily Yomiuri(Tokyo), 30 July 2006.


Further reading

APRIL-watch
Eyes on the Forest

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