Indonesia: Sinar Mas pulp and paper plantations encroaching on forests and peatlands

Posted: 3 August 2010 in APP, Greenpeace, Indonesia

More on Asia Pulp and Paper’s destructive operations in Sumatra.

Indonesia: Sinar Mas pulp and paper plantations encroaching on forests and peatlands

WRM Bulletin 156, July 2010

Controlled by the Indonesian Widjaja family, the Sinar Mas group is one of the largest conglomerates in Indonesia engaged in clearing rainforests and destroying peatlands for their several bussinesses, including the pulp and paper industry through the Sinar Mas’ pulp and paper division, Asia Pulp and Paper (APP).

With a total pulp and paper capacity of over 7 million tonnes per year, APP is Indonesia’s largest pulp and paper producer. With its expansion into China in 1992, it became the fourth largest worldwide and, in 2008, it ranked as the world’s fifth largest tissue producer. The group has recently set up new sales networks in the US, the UK and Spain, and expanded its production capacities in Australia, Canada, China and the US. In China, where it claims to be the largest producer of pulp, paper and tissue products, APP recently set up the world’s largest paper machine at its Hainan Jinhai Pulp & Paper mill, where it expects to produce almost 1.5 million tonnes of coated fine paper per year for products such as magazines and brochures. Sinar Mas affiliated companies, such as Solaris and Mercury, market both APP branded products (Livi, Paseo), and manufacture own label products for retailers. These products include facial and toilet tissue, paper napkins and towels.

The Widjaja family is probably best known for escaping the Asian financial crisis of the 1990s. The APP group, considered the Widjaja ‘family treasure’, defaulted on nearly USD 14 billion in debt. Although APP was technically bankrupt, the Widjaja family succeeded, with support from the Indonesian Government, in restructuring approximately USD 6.5 billion of the original debt. This was the largest ever restructuring in Southeast Asia.

The final restructuring agreement meant that the Widjajas managed to keep control of APP and would only have to start paying the bulk of the debt between 2015 and 2025. At the end of 2009, APP’s Indonesian mills still owed at least USD 4.2 billion of the restructured debt.

By the end of 2007, Sinar Mas Forestry – APP’s “exclusive supplier” in Indonesia – controlled at least 2.4 million hectares of concessions for conversion into pulpwood plantations. Over a quarter of these concessions were still forested in 2006. Almost half of the area established with pulpwood plantations is located on peatland.

APP has recently released a series of adverts entitled “APP Cares” in order “to further convey environmental message to the world”. The adverts, broadcast on CNN International and published in The Times (UK), amongst other media outlets, aim to highlight APP’s efforts to conserve the environment, protect biodiversity, alleviate poverty and mitigate climate change.

However, this year Greenpeace International released a series of investigative reports on Sinar Mas disclosing the group’s expansion and encroaching on Indonesia’s remaining rainforests and peatlands. A leaked confidential document written by Sinar Mas in 2007 shows that the group was implementing plans to acquire new forest areas through its ‘Area Development Project for Supporting Mill License Capacity’. The Project would be “exposed to government” (i.e. used to lobby government) in order to gain approval for a massive increase of the group’s existing licensed pulping capacity and landbanks (i.e. new forest areas to clear for plantation development). While the overall capacity of its two pulp mills in Sumatra was 2.6 million tonnes per year in 2006, the Sinar Mas document indicates that APP was proposing to raise that to 17.5 million tonnes per year, a sevenfold increase in APP’s pulp capacity in Indonesia.

In Sumatra, the expansion of pulpwood plantations into rainforest is destroying the natural resources that indigenous communities depend on for their livelihoods, including the Teluk Meranti and Talang Mamak communities in Riau province and the Orang Rimba community in Jambi province. As one Orang Rimba leader stated: “One day came and told us to leave, we were pushed out. They cut down our homes and the forests. We no longer have the forest to live. We don’t have food or protection.” In the Sumatran provinces of Riau and Jambi alone, Sinar Mas was aiming to expand its concessions by 900,000 hectares between 2007 and 2009.

Of the pulpwood concessions Sinar Mas acquired since 2007, around 30,000 hectares are located on peatland areas over three metres deep, and therefore illegal to destroy, and over 100,000 hectares are located on peatland less than three metres deep.

APP is continuing to expand its pulp and palm oil operations into Indonesia’s remaining rainforests and carbon-rich peatlands. While most of Indonesia’s GHG emissions come from forest-related issues, such as forest fires and deforestation, annual emissions from peatlands are forecast to increase by 20 per cent due to the “continued conversion of peatland.”

With this record on its back, Indonesia has just received USD 1 billion as part of a ‘cooperation agreement’ on REDD with the Norwegian government signed in May this year. The agreement will implement a two-year suspension on new concessions on conversion of natural forests and peat lands into plantations. However, the agreement not only does not include an explicit recognition of indigenous peoples rights, including their land rights but also will not affect existing contracts which means it does not apply to the hundreds of thousands of hectares of forested concessions that Sinar Mas has already acquired but which have not yet been converted into plantations.

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Extracted and adapted from “How Sinarmas is Pulping the Planet”, Greenpeace International, 2010, http://www.greenpeace.org/international/en/publications/reports/SinarMas-APP/; and information from “Norway and Indonesia sign US$1 billion forest deal”, Chris Lang, 27th May 2010, REDD Monitor, http://www.redd-monitor.org/2010/05/27/norway-and-indonesia-sign-us1-billion-forest-deal/

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