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A giant U.S.-based paper and pulp company, International
Paper, plans to invest more than US$4 billion in a pulp factory and
industrial forest.
Director general for forest product management at the Forestry
Ministry, Hadi S. Pasaribu, said the pulp factory would have the
capacity to produce 1.5 million tons of pulp per year.
"They are planning to establish a 500,000-hectare plantation forest to
support the pulp factory," he said, as quoted by Antara.
Hadi said Central Kalimantan and Papua had been chosen as the
investment locations despite a lack of supporting infrastructure
because no similar businesses operated there.
International Paper revealed their interest directly to Forestry
Minister MS Kaban last month. Representative president of International
Paper Asia, Thomas Gestrich, and the company's director for strategic
planning and development in Asia, Aaron Yu, met with Hadi last week to
discuss their plans.
International Paper is currently rated among the three largest pulp and
paper producers in the world. They operate two factories in Brazil and
Canada.
The company chose Indonesia for its business expansion, Hadi said,
after conducting a six-month feasibility survey in a number of Asian
countries.
He said the company planned to use 25 percent of its forest for
biodiversity conservation.
"They plan to allocate a further 25 percent of the forest to be managed
in partnership with the community or small-scale domestic enterprises.
The company will manage the remaining 50 percent," Hadi said.
The government offered International Paper two options: to develop a
new forest or to acquire existing forests owned by other companies.
Hadi said he had requested International Paper follow Indonesian
investment regulations by establishing a local company here.
By 2007, Indonesia had 84 integrated pulp and paper mills, with a total
production capacity of 6.5 million tonnes.
Two of its largest pulp and paper companies are PT Indah Kiat, a unit
of Asia Pulp and Paper, and PT Riau Andalan, a subsidiary of APRIL,
which is part of the Raja Garuda Mas International group.
These two companies produce more than 65 percent of Indonesia's total
pulp output. The companies require a total of 9 million tonnes of wood
each year.
Some raw material suppliers for the two companies have been banned by
the police from logging since last year, because of illegal logging
cases, making it difficult for the companies to obtain raw materials.
"If the bans continue to be enforced throughout this year, the
factories may need to import wood chips," said president of the
Indonesian Pulp and Paper Association HM Mansur.
He said the situation could result in a total loss of 4 billion tonnes
of wood production, worth at least $3 billion.
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