NGOs oppose South Kalimantan pulp mill

Down to Earth No 62 August 2004

A group of thirty Indonesian and international NGOs have called for the cancellation of South Kalimantan's first pulp mill project. This is their 'open letter to actors of the forestry, pulp & paper and banking sectors in Europe.'

June 4, 2004

No support for the planned pulp mill of United Fiber System in Indonesia

We, the undersigned organisations, want to express our deep concern regarding plans to build a pulp mill in the province of South Kalimantan, Indonesia.

We expect the new mill to follow suit with other Indonesian mills whose development plans suggested responsibility and profitability while in practice these mills bring about environmental, social and economic havoc. The planned pulp mill would be operated by a company called PT Marga Buana Bumi Mulia, a joint venture by United Fiber System, Singapore, and China National Machinery & Equipment Import & Export Corporation. Thus far we are aware of involvement by Jaakko Pöyry (Finland), which made the pre-feasibility study, CellMark (Sweden), which has been mentioned as a buyer of pulp (90% of production) and whose owners are investors in UFS, ÅF-IPK (Sweden), which assessed environmental impacts of the mill, and Vivendi Water (France), supplier of the water treatment plant.

Eka Chemicals (Sweden) has withdrawn from the project.

A new pulp mill has to be viewed against the background of the forest situation in Indonesia. There is a huge overcapacity in the pulp industry. According to government policies, the pulp industry should be based on plantations.

When the existing, modern pulp mills were engineered and constructed by western companies, they were supposed to quickly establish plantations and become self-sufficient regarding their raw-material base. This has not materialized in most cases, as the pulp companies have expanded their capacities and focused on wood procurement from natural forests instead.

Approximately 75-80% of wood used in the pulp industry in Indonesia originates in natural forests, half of the use being from somehow illegal sources. Use of natural forests as a resource base leads to wide-spread deforestation. Every single one of the big pulp mills in Indonesia has caused either major social problems, pollution or deforestation, in most cases all of these. Economically, pulp and paper companies are heavily indebted and have caused massive losses to their lenders and to the Indonesian government. The planned pulp mill in South Kalimantan claims to avoid deforestation by using readily established plantations in the near-by areas. However, the company does not have enough plantations in place to feed the planned 600,000 t/y pulp mill at present, and with the present pace of planting, they never will. The pulp-wood plantation companies in South Kalimantan are far from fulfilling their planting targets and yield predictions, and the annual planted area has been minimal after 1999. Without sustainable plantations established before the mill construction starts, there is no reason to believe that the project would be on sustainable basis. We do not find company's claims of not converting natural forests to either make way for plantations or for pulping convincing given its record in plantation establishment and previous plans of large-scale conversion of natural forest. Since South Kalimantan has already lost most of its forests, wood procurement of the planned mill potentially has severe effects on the remaining natural forests. Furthermore, the lack of raw material is an economic problem in the long term since the mill can not operate without sufficient fibre resources after running out of natural forests and plantations.

Probably much of the deforested areas that the project will use for plantation establishment consist of bushy areas with natural forest regeneration potential.

"Reforestation" of such areas to pulp plantations accelerates loss of biodiversity in the area. The establishment of plantations has resulted, and will result if the plantations are extended, in land conflicts with the local people.

Land tenure situation in the existing and planned plantation areas should be mapped and conflicts solved before further plantation establishment. In addition, establishment of the pulp mill is seen as a threat by the community in the mill site near Java Sea due to its potential effect on water quality. The community depends on fishing as their source of living.

The main supplier of the planned pulp mill, plantation company ex-Menara Hutan Buana, has been found guilty of defrauding governmental reforestation funds by inflating its annual planting figures. Its licence was already once revoked by the Ministry of Forestry in 2002. However, the licence of the company was handed over to United Fiber System that has taken over the plantation and company infrastructure and changed its name into Hutan Rindang Buana. The status of the licence is disputable and the whole issue points in the direction of high-level corruption.

The new mill project presents itself as environmentally and socially progressive, claiming to be transparent. Yet despite requests, United Fiber System has not released the Environmental Impact Assessment (EIA) of the mill project. In Europe, the EIA of such a project would be a public document, and the project's policy of not distributing it raises further questions about the environmental sustainability of the project.

In this situation, building a new pulp mill can not be justified. It cannot be justified from the national-level point of view, with problems related to deforestation, overcapacity, illegal logging, and land tenure unresolved. Nor it is acceptable from the local and provincial point of view, with land conflicts, corruption, criminal companies, and deficit of natural forests and plantations present. We urge you to make sure for your part that this project does not materialize.

(Open letter signed by 32 NGOs - including Down to Earth - 4/Jun/04, posted circulated by WALHI, footnotes not included. For further background see DTE 56 and 58-box)