International Paper to invest $4b in pulp factory

The Jakarta Post ,  Jakarta   |  Mon, 03/24/2008 1:10 AM 

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. (lva)