Groups Slam World Bank’s Support for Massive Indonesian Plantation Increase

Wednesday, February 21, 2007

CAPPA, Yayasan Keadilan Rakyat, WALHI South Kalimantan, Yayasan PADI, WALHI National Executive, NADI, Environmental Defense ,Friends of the Earth-International

Jambi, Kalimantan, Jakarta (Indonesia) / Amsterdam (the Netherlands) / Honolulu (US), February 21, 2007-- Groups from three countries, today slam World Bank' support for increased industrial plantation scheme in Indonesia.

“In Indonesia, plantation establishment has traditionally been linked to extraordinary deforestation, uncontrolled forest fires impacting local communities and neighboring countries and significant human rights violations”, said Rivani Noor of CAPPA in Sumatra, a local NGO based in Jambi province of Indonesia.

The Bank’s plan identifies as “among the highest priorities”, support for the Department of Forestry’s plan for the acceleration of plantation development which includes the establishment of 5 million hectares of industrial timber plantations and 2 million hectares of so-called “community forests”.

“The push to establish between 5 to 7 million hectares of industrial plantations will cause tremendous harm to our forests and the women and men whose livelihoods depend on them,” said Farah Sofa, WALHI, the Indonesia's largest environmental group.

“So-called plantation - community “partnership” programs have generated conflicts, impoverishment, and environmental degradation for decades, said Rukaiyah Rofiq of Yayasan Keadilan Rakyat, a local group based in Jambi Province of Indonesia. “Lack of recognition of adat and community land and forest rights, the use of military security forces on behalf of plantation companies, the loss of lands due the vastly unequal power of the partners are all tremendous problems with ‘community plantation’ programs.”

“We oppose the application of ‘plantation partnership’ programs in the continued absence of full prior recognition of indigenous forest and land tenure rights,” said Koesnadi, Yayasan PADI of East Kalimantan.

Between 1985 and 2004, “donor” funding for Indonesia’s forestry sector totaled over US$1 billion, with the Bank providing approximately one third of these funds many of which must now be paid back by the Indonesian people. During this period, massive overcapacity was established in the forestry sector, illegal logging grew to astonishing proportions, the land and forest rights of indigenous communities were increasingly violated as entire areas were subject to military intervention on behalf of forestry companies, said Titi Sintoro, NADI.

“It is important to remember that the Bank withdrew from Indonesia’s forestry sector after disastrous projects with irreversible impacts on forests and indigenous peoples,’ said Dr. Stephanie Fried of Environmental Defense, U.S.A. “We do not see substantial positive change in terms of illegal logging, corruption, and human rights in Indonesia’s forestry sector.”

In the new plan, the Bank admits that the Indonesian forestry sector suffers from tremendous overcapacity, including large bankrupt paper and pulp mills operating without a legal supply of timber. The report mentions “corrupt practices” apparently involved in the sale and debt restructuring efforts of major forestry companies and cites as a “moral hazard” inappropriate debt write-offs and settlement agreements which plague the sector. Rather than recommending a downsizing of the industry in line with bankruptcy proceedings, however, the Bank calls for a vast increase plantation establishment which would keep these companies and, apparently, new companies planning on constructing additional mills afloat. The Bank suggests as a “policy of convenience” that “on conversion forest land, it may be appropriate to allow some added timber harvest (and forest/land damage) in the short run to balance industrial timber demand and supply”.[1]

“Reducing overcapacity in the forestry sector, through the downsizing of bankrupt companies and preventing the establishment of additional industrial capacity including new paper and pulp mills is one of the key first steps which must be undertaken to bring demand into line with legal timber supply, “ said Berry Nahdian Forqan, Director of Walhi South Kalimantan. “The troubled United Fiber System and Kiani Kertas mills are the perfect example of financially unstable companies without access to sufficient legal timber.” (See enclosed documentation on UFS and Kiani Kertas.)

“The bank claims to have followed a process of consultation during the development of this plan”, said Rivani, Facilitator of CAPPA. “Despite our repeated requests, they have refused to provide copies of their draft strategy and plan in Indonesian language, making it impossible to carry out proper consultation with affected peoples. It is as if nothing has changed.”

For more detailed information about the World Bank's history and involvement in Indonesia forestry sector, please see attached background information. For information on current attempts to expand the pulp and paper sector, see the attached account of proposed UFS and Kiani Kertas chip and pulp mills in Kalimantan.

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Background Information
Today, the World Bank is launching a new “strategic plan” for re-entry into the Indonesian forestry sector in support of a massive industrial plantation scheme promoted by the Indonesian government”.[2]

The Bank withdrew from direct involvement in Indonesian forestry sector finance almost a decade ago after disastrous projects with “serious and probably irreversible impacts on the forests and indigenous people[s]” of Indonesia, according to the Bank’s own auditing department, the Operations Evaluation Department.[3]

In 2000, during the World Bank’s regional consultation on Forestry Policy, prominent Indonesian NGOs, including WALHI, ELSAM, INFID, Solidaritas Perempuan, LPPMA, YALI, KSPPM, Evergreen KSPHK, called on the World Bank and the Government of Indonesia to take crucial measures prior to any consideration of engagement in the Indonesian forestry sector. Most of these core steps – necessary for the establishment of a sustainable and socially equitable forestry sector –have not been taken. They continue to be as important in 2007 as they were in 2000:

1. Any forest sector strategy must be predicated on prior full legal recognition by Indonesia of hukum adat,/ hak atas hutan adat -- indigenous rights to land and forest.
2. Postponement of Bank adjustment loans, which the 2000 OED study indicated have significant impacts on forests, until there is clear "ownership" by GOI of loan conditionalities including:
3. Prosecution of 176 companies alleged to have been involved in setting forest fires and not yet prosecuted;
4. Cancellation of the logging concession/plantation system that the OED identified as a “moral hazard” Revision of forestry law 41/1999 to recognize the rights of indigenous peoples and their forest management systems
5. Redefinition the forest areas in a participatory manner working together with indigenous and other forest dwellers;
6. Given the overcapacity in the paper and pulp sector identified by the OED as the largest threat to Indonesia's forests, and research indicating the likelihood that the paper and pulp sector is supplied by illegal logging, focus on reducing overcapacity in this sector.
7. Strong governmental action against private sector debtors in forestry sectors (in 2000, 70% of forest related debt was held by 10 big conglomerates including those owned by Bob Hasan, Barito Pacific, Salim group, Sinar Mas, etc). Do not absolve these debts. Collect where collection is possible. Shut down operations, including paper and pulp, where bankrupt. Private debts must not be come public debts.
8. Cessation of the use of military security forces in forest sector management.

September 21st: International Day against Monoculture Tree Plantations

In many southern countries monoculture tree plantations are advancing rapidly, causing serious negative impacts on local communities as well as on the environment.

In the year 2004, following an initiative of the Brazilian “Network against the Green Desert,” an organization with a long track record of resistance to tree plantations, 21 September -national tree day- was chosen as a significant date to commemorate internationally the struggle against monoculture tree plantations.

In spite of the innumerable complaints against the impacts of these plantations, governments continue to promote forestry plans consisting of a package of legislative measures promoting large-scale plantations, mainly through subsidies, tax exemptions, soft loans, land concessions or other promotional mechanisms.

Those policies are increasingly being challenged by organizations and communities in affected areas and what follow are opinions from some campaigners in Africa, Asia and Latin America on this third International Day against Monoculture Tree Plantations.

Soumitra Ghosh, from NESPON and National Forum of Forest People and Forest Workers says: “India has a long experience of monoculture plantations that have destroyed forests and pastures, and livelihoods of people. We want no more monocultures and demand that the Government makes no attempt to hand over forest land to industrial houses for raising more eucalyptus or pine plantations. Let monocultures be banned everywhere.”

"Timber plantation expansion now being promoted by the South African government in the Eastern Cape province will not benefit local communities. Instead they will only bring more suffering to an already impoverished and marginalised region." said Wally Menne, chairperson of the Timberwatch NGO Coalition. He concluded saying that "The South African government must reverse its decision to promote the expansion of unsustainable timber plantations and should rather assist rural communities with sustainable projects around organic food production, tourism and small-scale manufacturing, that will genuinely help to ensure their long term welfare and self-reliance."

In the case of Chile, Lucio Cuenca, Director of the Latin American Observatory of Environmental Conflicts, affirmed "that if the Government really wants people to believe in its slogan of 'Citizen Government' it should first eliminate the laws the dictatorship enacted to make the rich, richer and which even now are still in force, such as Decree 701 that gave subsidies and special credits and tax breaks to carry out plantations." Cuenca also denounced that the companies have managed to implement new strategies getting the State bodies to grant even greater amounts of public funds for the promotion of plantations. He concluded by saying that "an increasingly impoverished society is subsidising companies that are getting richer all the time. This cannot be defined as ‘citizen government’."

Indonesia has a long history of forest destruction and substitution by large-scale oil palm and pulpwood plantations. Rully Syumanda, from WALHI/Friends of the Earth stresses that “the introduction of oil palm plantations has been made at the expense of forests and forest peoples’ rights and have made local communities poorer. The main issue is therefore that indigenous rights to land are recognised in national legislation and that the right to free, prior and informed consent allows communities to accept or refuse plantations on their land.”

In the case of Brazil, Carla Villanova, from Friends of the Earth, stated that "taking into account the negative impacts of the plantation experience in other parts of Brazil, we totally oppose the State and Federal Governments' plans to support plantation companies." She added that "what is needed is not the support to major industries, but government support to other productive alternatives, benefiting those who really need it."

“Peoples throughout the South are struggling against large scale plantations”, said WRM international coordinator Ricardo Carrere. “On this International Day against Monoculture Tree Plantations, we demand that governments put an end to the promotion of these socially and environmentally destructive plantations and to instead support efforts made by local communities to improve their quality of life in harmony with their environment”, he concluded.

Sumatra´s peat swamp forest threatened with collapse, must be protected

Environmental organizations: Unique forest ecosystem in Riau province, Indonesia must be protected of further damage by loggers and paper industry

Environmental organizations Jikalahari, CAPPA, ROBIN WOOD and Friends of the Earth from Indonesia, Finland and UK warn today that one of the largest tropical peat swamp forests in the world might collapse if logging operations and conversion of peat swamp forests into plantations by the paper companies APRIL and APP continue.

Lowland rainforest on the Indonesian Island of Sumatra has been almost entirely destroyed. The Kampar peninsula in the province of Riau still contains more than 400,000 ha of peat swamp forest making it one of the largest remaining lowland forests in Sumatra. It provides habitat for the Sumatran Tiger and other species threatened with extinction. Destruction of these peat swamp forests releases significant amounts of carbon that may foil intentions to reduce climate change.

Forests in Riau are still being destroyed to meet the demand of pulp and paper companies APP and APRIL. Together the two paper companies have already devastated a million hectares of rainforest to supply their operations with raw material and convert forest into acacia plantations. In the last two years APRIL alone destroyed 50,000 hectares of peat swamp forest in its Pelalawan concession and built a road to access the Kampar peninsula.

The forest on the Kampar peninsula grows on top of more than three meters of peat soil. Due to the ecological fragility of deep peat soils, this type of forest is protected under the Indonesian law. Clearing and draining peat swamp forests cause peat degradation and disastrous fires. The resulting carbon emissions contribute to the greenhouse effect - in Riau province alone the carbon stored in the peat soils amounts to annual carbon emissions from fossil fuels in the whole world.

A study of ProForest, consultants hired by APRIL to assess ecological impacts of plantations in the Kampar Peninsular, indicates that the company has already damaged the water balance of the Kampar peat swamp by building a controversial road and drains that cut the peninsula in half. The existing road, along with further forest conversion and drains planned by APRIL may lead to the collapse of the entire swamp ecosystem. The Kampar peninsula was proposed as a national park by Jikalahari in December 2005 because of its cultural significance, unique biodiversity, ecological properties and importance for the world’s climate.

“Peat swamp forest on Kampar peninsula must be declared protected to stop any further intervention by loggers or the industry, and managed with the full involvement of local communities and indigenous peoples”, said Rully Syumanda, forests campaigner for Friends of the Earth Indonesia.

The environmental organizations demand a full stop to clearing of rainforests for pulp production. “As long as APRIL and APP continue to clear-cut natural forests, businesses, governments and nongovernmental organisations should freeze their relationship with this company” says Jens Wieting, ROBIN WOOD´s rainforest expert.

INDONESIA: THE HEALTH IMPACTS OF LIVING NEAR INDAH KIAT'S PULP AND PAPER MILLS

By Chris Lang. Published in WRM Bulletin 97, August 2005.


In 1999, the World Bank's Economics of Industrial Pollution Control research team published a report titled "Greening Industry". The report, which was the result of "six years of research, policy experiments, and firsthand observation", described Asia Pulp and Paper's PT Indah Kiat Pulp and Paper as a "success story".

Indah Kiat's operations at Perawang, Sumatra tell a different story, at least for local people. Indah Kiat started its first pulp mill at Perawang in 1984 with an outdated factory imported from Taiwan. The 100,000 tonnes a year pulp mill used elemental chlorine and wastes were discharged into the Siak River.

According to the World Bank, protests from local villagers about pollution from Indah Kiat's Perawang mill, led to "round one of the mill's cleanup". In 1992, Indonesia's Environmental Impact Management Agency, BAPEDAL, mediated an agreement in which, the World Bank tells us, Indah Kiat agreed to meet the villagers' demands.

Indah Kiat's factory at Perawang now covers an area of 400 hectares and has a capacity of two million tons a year of pulp and 700,000 tons a year of paper. Indah Kiat's new pulp mills use technology that is "largely chlorine free" according to the World Bank. Indah Kiat, the Bank would have us believe, is "an environmental paragon".

Unfortunately, as is often the case, the World Bank's enthusiasm about the environmental benefits of a massive industrial project bears little relation to reality. In 2004, Mats Valentin and Kristina Bjurling, researchers with Swedish NGO SwedWatch, reported that Indah Kiat uses a mixture of chlorine bleaching and elemental chlorine free (ECF) bleaching. Indah Kiat's management told SwedWatch that the company planned to change fully to ECF technology in the future, but added that "such an investment would be too large to bear right now".

In 2001, John Aglionby of the UK Guardian newspaper visited Indah Kiat's mill in Perawang. He described what he saw as "a monster blot on the landscape". The company's track record "has been a catalogue of environmental devastation, blatant disrespect for the local community and ignoring Indonesia's laws through a mixture of bullying and pay-offs to officials," Aglionby wrote. The journalist uncovered a list of payments made by Indah Kiat to government officials, police and army officers.

Six years research, it seems, did not help the World Bank's ace research team to uncover any pay-offs to government officials. The Bank's "Greening Industry" states simply that Indah Kiat's operation in Perawang "is fully compliant with national pollution regulations".

A year after the "Greening Industry" report came out, Inge Altemeier, a German film- maker, visited Sumatra to investigate the impact of pollution from pulp mills on local people and their environment.

She found and filmed an illegal outlet from Indah Kiat's mill, which the company used at night. During the day the output was not in use, but the air stank and dead fish floated in the river.

In a village near Indah Kiat's mill, people complained about the bad smell and told the film-maker that they were suffering from itching, headaches and vomiting. A villager called Tasjudin showed Altemeier his garden. Since Indah Kiat arrived, there are no more coconuts on his trees. The fruit on his trees is covered in black spots and it rots before it ripens. "Indah Kiat is ruining our lives. But what am I to do? This is my home, I have to live here," Tasjudin said.

Before Indah Kiat built its pulp mill, people could fish in the Siak River. They used the river for drinking water and for bathing in. Since villagers can no longer drink from the river, they demanded that Indah Kiat provide them with clean water. The company gave them a water pump. But villagers found that the ground water was also polluted and smelled bad. Villagers are forced to buy bottled water to drink. Many still wash in the river because there is not enough pumped water especially in the dry season.

Trabani Rab is a medical professor who has been monitoring the impacts of Indah Kiat's mill on villagers' health for several years. Altemeier travelled with him as he visited villages on the River Siak. In two days, he diagnosed more than 500 cases of serious skin diseases.

Earlier this year, two Indonesian NGO researchers, Rully Syumanda, Forest Campaigner with WALHI, and Rivani Noor, from the Community Alliance for Pulp Paper Advocacy, interviewed people in villages near to Indah Kiat's mill in Perawang. They also spoke to people living in Perawang. Villagers told them their vegetables, chillies and flowers did not grow normally, especially in the dry season. During the rainy season, a many of the villagers' hens and ducks die. They told the researchers they were sure that the cause was the smoke containing harmful chemicals from Indah Kiat's mill.

From 1987 to 1996, the air smelled very bad, villagers said. It has improved since Indah Kiat installed a filtering system on factory chimneys. But the air is still polluted and still causes respiratory problems, especially for visitors.

Villagers told Syumanda and Noor that before the mill started operations, fishers could catch 40 to 50 kilogrammes of fish a day in the Siak River. Today, they are lucky to catch four or five kilogrammes. Sometimes, they said, the river smells really bad and they cannot catch anything. Every month, the river gives off a bad smell for a week.

While consultants and financiers of Indah Kiat defend the company by pointing to company records of emissions from its factories, the smell, the pollution, the poisoned river and the dead fish remain. Local people continue to suffer from headaches, itching and incurable skin diseases. Far from being an "environmental paragon", Indah Kiat is destroying lives and livelihoods.


Related articles

• November 2004 - Social and environmental impacts of industrial tree plantations
• March 2002 - The Pulp Invasion: The international pulp and paper industry in the Mekong Region
• More articles about the pulp and paper industry here.

INDONESIA: THE INSATIABLE APPETITE OF THE PULP INDUSTRY

By Chris Lang. Published in WRM Bulletin 101, December 2005.
Based on a presentation by Rully Syumanda and Rivani Noor at an International Meeting on Plantations, 21-25 November 2005 in Vitória, Espírito Santo, Brazil (organised by WRM/FASE-ES/GJEP).


Asia Pulp and Paper (APP) is one of the world's largest pulp and paper companies. The company is responsible for large-scale deforestation of Indonesia's forests. APP has also generated a number of not-yet-settled conflicts with local communities in Indonesia.

Forthcoming research by Rully Syumanda, Friends of the Earth Indonesia/WALHI's forest campaigner and Rivani Noor of the Community Alliance for Pulp Paper Advocacy (CAPPA) documents the company's grim record in Sumatra.

"We in Indonesia are facing so many battles about forest destruction, including tree plantations and the oil palm industry," said Syumanda at the start of his presentation. There are seven pulp mills, 65 paper mills and 10 pulp and paper mills in Indonesia. We are focussing on the biggest - APP's pulp and paper mill in Riau. "We face problems because of APP's plans to become the world's biggest pulp and paper exporter," said Syumanda. "The Indonesian government supports the growth of this industry."

Foresters working in APP argue that the company is rapidly developing plantations in order to supply its pulp mills without continuing to cut down old-growth forests. "APP is the golden boy of the Forest Department," said Syumanda, "because logging, plantations, pulp and paper dominate all."

But this industry is not serious about developing plantations. Plantations still supply only 30 per cent of the raw material needed. Destructive logging and/or illegal logging provides much of the rest. APP is converting forest to plantations. The company has used subsidies from the rehabilitation fund, which should have been used for recovering forest areas. Vast areas of APP's concessions overlap with community lands.

The main problem, Syumanda explained, is the over-capacity of the industry. The sheer scale of the industry means that land tenure conflicts cannot be resolved equitably. There is no protocol for solving the problems caused. But the government is not concerned about overcapacity. Instead it likes to keep the attention on illegal logging. "This has impacts," explained Syumanda. "Several peasants and farmers have been arrested for clearing their farmland for their own needs."

Any idea of restructuring the industry, including reducing its size, has been brushed aside by the need for fast money, at least partly to repay the company's huge debts. APP's debt, at almost US$14 billion, is the largest debt of any company in Southeast Asia.

Violence, human rights abuses, water and air pollution, forest fires and floods have become business as usual for the pulp and paper industry in Indonesia.

"Now we face the next challenge", said Syumanda. The government plans to develop another five million hectares of acacia pulp wood plantations. This is in addition to the two million hectares it plans to plant to oil palm in the middle of Borneo, and perhaps another eight million hectares of oil palm around the archipelago. "It's crazy," Syumanda concluded.

During the 1970s, the Indonesian government declared 140 million hectares of land as state forests, "thus asserting state control over forest resources traditionally managed by tens of thousands of local communities," added Patrick Anderson, Policy Advisor at WALHI. As with industrial logging concessions, the government gives out concessions to the pulp and paper industry regardless of who lives there and who traditionally used the forest.

One of the few rules by which the pulp and paper industry operates in Indonesia is that you build the pulp mill first - the plantations follow. "So for at least the first ten years, while the plantations are planted and growing, the mill will use natural forests as raw material," explained Anderson.

Indonesia has about 50 million indigenous people, with about 1,000 different languages. Although in theory indigenous land rights are recognised in Indonesia, the government does not follow its laws that recognize customary rights. Now that the plywood industry is in decline due to lack of big trees, the government is doing all it can to create an export economy in the pulp and paper sector.

Rivani Noor pointed out that on Sumatra there simply isn't enough forest left for the pulp industry to keep expanding. So APP has started pulp mills and plantation operations in China. But as with the mills in Sumatra, APP failed to secure raw material supplies before starting up its mills in China. As a result, woodchips from Sumatra's forests will be exported to supply APP's operations in China. APP also has a new concession in Kalimantan.

There are an additional three pulp mills proposed for Kalimantan. The South Korean Korindo Group has produced a feasibility study for a pulp and paper mill in Central Kalimantan. A group of Indian and Malaysian investors have filed a proposal with the Ministry of Forestry for a US$1.3 billion pulp and paper mill. If it goes ahead, the project would convert about 300,000 hectares of forest into plantations. Singapore-listed firm United Fibre Systems (UFS) is planning a project for South Kalimantan and is looking to secure European financial support. UFS is also in the process of taking over the existing Kiani Kertas mill in East Kalimantan, with Deutsche Bank acting as financial advisor to the company.

Not willing to limit its forest destruction to the island of Sumatra, the pulp and paper industry is busy planning its expansion into Kalimantan. If it does so, the results will be predictable and disastrous for people and forests.


Related articles

• January 2006 - Indonesia: Deutsche Bank pulls out of UFS pulp project
• November 2004 - Social and environmental impacts of industrial tree plantations
• March 2002 - The Pulp Invasion: The international pulp and paper industry in the Mekong Region
• More articles about the pulp and paper industry here.