who is LUHUT PANJAITAN in BATAK History?here some information tracked by roy_sianipar
In 1997, Indonesia was afflicted with a severe El Nino-induced drought, a plummeting exchange rate, and near paralysis of the banking sector. By early 1998, Indonesia was experiencing rising inflation, growing unemployment, revelations of foreign commercial indebtedness, and declining GDP growth. In March 1998, the People’s Consultative Assembly (MPR, Indonesia’s supreme government body) selected President Soeharto for a seventh five-year term with former Minister of Research and Technology B. J. Habibie as Vice President. In May 1998, after violence rocked the capital city, President Soeharto resigned and President Habibie was sworn in. In November 1998, a Special Session of the MPR approved advancing the date of the next elections. Parliamentary elections were held on June 7, 1999. The MPR convened on October 1, 1999. It selected Abdurrahman Wahid as President and Megawati Sukarnoputri as Vice President for 1999-2004. In late October, President Wahid’s new cabinet was inducted. In August 2000, after the first annual MPR session, President Wahid reshuffled his cabinet.
In late October 1997, the Soeharto government concluded an agreement with the IMF, which underwent regular modifications. The Habibie government concluded a new agreement with the IMF about a month after taking office and also amended it periodically. By the fourth quarter of 1998, the exchange rate had begun to stabilize and inflationary pressures had abated. Despite some incidents of exchange rate instability, the rupiah remained below Rp10,000/USD, inflation continued to be low or negative, and initiatives were launched to address pressing financial and corporate sector problems. In July 1999, the Bank Bali scandal broke. In September 1999, after a successful ballot consultation in East Timor (through which the majority of East Timorese voters opted for separation from Indonesia), violence erupted there and a multinational force was introduced under UN auspices.
President Wahid and Vice President Megawati accepted the outcome of the East Timor ballot. In their earliest statements, they and senior cabinet members expressed their intention of working with the international community on economic policy reform and growth issues. They stated that they welcomed continued foreign investment. The President highlighted this point during his trips to several countries, including the United States. On January 20, 2000, the GOI concluded a new Memorandum of Economic and Financial Policies with the IMF. On July 31, 2000, the economic team signed its second revision of the Memorandum of Economic and Financial Policies to the IMF. In early September, the economic team that took office in August negotiated some revisions to the July 31 document. This revised document was approved by the IMF board in mid-September.
|August 14, 1997||Rupiah was floated|
|September 3, 1997||The GOI announced budget tightening. To conserve budgetary funds and reduce pressure on the balance of payments, the GOI suspended major Projects undertaken by or in conjunction with government agencies and state-owned enterprises and financed with offshore commercial borrowing.|
|October 8, 1997||The GOI announced that it had requested IMF assistance.|
|October 31, 1997||The GOI concluded negotiations with the IMF|
|November 1, 1997||The GOI closed 16 ailing banks.|
|The IMF board approved a stand-by arrangement. The program had four basic elements: monetary policy; fiscal policy; financial sector restructuring; and structural reforms. Financial support for the package included: $10 billion stand-by loan from the IMF; $4.5 billion from the World Bank; $3.5 billion from the Asian Development Bank; and contingency second line of defense from several bilateral sources including the United States, Japan, Singapore, Malaysia, and Australia.|
|November 8, 1997||The GOI issued a decree restoring 15 of the projects suspended in September to active status.|
|Early January||Rising prices and fears of shortages led to panic buying of food.|
|January 10, 1998||The GOI issued a decree suspending again the 15 projects affected by the September and November decrees.|
|January 15, 1998||President Soeharto signed and released a Memorandum of Economic and Financial Policies (revised letter of intent) with the IMF. This letter significantly increased structural reform commitments. Commitments included: eliminating preferential treatment for the “national car” program; eliminating budget and off-budget support for the national aircraft industry; eliminating the clove monopoly; reducing import tariffs; eliminating forest product marketing monopolies; and reforming export taxes. The GOI stated that it had “canceled” 12 of the 15 infrastructure projects affected by the September, November, and January decrees (projects yet to be identified).|
|January 21, 1998||The GOI issued decrees to implement many of the trade and investment reforms described in the January 15 letter of intent.|
|January 27, 1998||The GOI announced measures to address the financial crisis, including extension of a government guarantee to Indonesian banks’ obligations to depositors and creditors and establishment of the Indonesian Bank Restructuring Agency (IBRA or its Indonesian acronym BPPN).|
|Former Minister Radius Prawiro and private sector representatives launched a proposal for dealing with private sector foreign commercial debt. The proposal specifically excluded the possibility of the GOI’s assuming responsibility for private sector obligations.|
|February 1998||Domestic economic debate focused on proposals for a currency board.|
|February 1998||Responsibility for 54 banks transferred to IBRA|
|March 1998||The People’s Consultative Assembly (MPR) selected President Soeharto for a seventh five-year term. It selected long-time Minister of Research and Technology B. J. Habibie as Vice President.|
|The “Seventh Development Cabinet” was sworn in. Members included President Soeharto’s daughter as Minister of Social Affairs and timber mogul Bob Hasan as Minister of Industry and Trade.|
|April 4, 1998||The GOI announced fuel price hikes. Riots ensued, particularly in North Sumatra. The fuel price hikes were quickly rolled back.|
|April 8, 1998||The GOI and IMF reached agreement on the second revision of the stand-by arrangement|
|April 22, 1998||The GOI announced economic reform initiatives, including: amended bankruptcy law (scheduled to enter into force on August 20, 1998); identification of state-owned enterprises to be completely or partially privatized during FY 1998/99; and further steps on corporate external debt.|
|May 4, 1998||The GOI announced fuel price hikes. Riots ensued, particularly in North Sumatra. The fuel price hikes were quickly rolled back.|
|May 12, 1998||Four students were killed at Trisakti University in Jakarta.|
|May 13-15, 1998||Rioting, arson, looting, and rape rocked Jakarta and other Indonesian cities.. The U.S. State Department ordered the departure of all USG dependents and non- essential personnel and recommended that all U.S. citizens depart Indonesia either via commercial means or on USG-organized evacuation flights.|
|May 21, 1998||President Soeharto resigned and was succeeded by Vice President Habibie.|
|May 22, 1998||President Habibie named his new cabinet, the “First Development Reform Cabinet.”|
|June 8, 1998||The private foreign commercial debt steering and contact committees announced a three-part arrangement to deal with trade credit, interbank obligations, and corporate external debt (the “Frankfurt Agreement”).|
|June 24, 1998||The GOI and IMF reached agreement on the third amendment to the stand-by arrangement.|
|June 30, 1998||GOI committed to pay trade credit arrears by this date as part of the Frankfurt Agreement on private external debt.|
|July 29, 1998||The GOI and IMF agreed to the fourth amendment to the stand-by arrangement. The IMF approved converting the stand-by to an Extended Fund Facility program. IMF disbursements resumed.|
|July 29-30, 1998||The Consultative Group on Indonesia (CGI) met in Paris under World Bank chairmanship. Donors pledged $7.9 billion in assistance for Indonesian fiscal year 1998/99 (April-March), largely to alleviate hardship esulting from the severe economic downturn. This in addition to extraordinary measures (including rescheduling of some sovereign obligations) was designed to cover the fiscal gap that had been exacerbated by declining revenues and rising subsidies for basic goods. The total in financial support mobilized for FY 1998/99 was $13.9 billion.|
|August 1998||Glenn Yusuf takes over as head of bank restructuring agency IBRA.|
|August 3, 1998||The Indonesian Debt Restructuring Agency (INDRA) for dealing with corporate external debt was launched. It offers a foreign exchange swap facility to Indonesian firms needing dollars to repay offshore debts.|
|August 20, 1998||The newly amended bankruptcy law entered into force|
|August 21, 1998||The GOI announced its plans for dealing with banks that had been closed, frozen, or taken-over. Banks were given one month to repay or come up with a plan to repay central bank liquidity support. Police investigations of bank operations ensued.|
|September 1, 1998||The special commercial court established under the newly amended bankruptcy law began accepting bankruptcy filings.|
|September 9, 1998||The “Jakarta Initiative” was launched. It provided a set of principles for out-of-court discussions between debtors and creditors.|
|September 11, 1998||The IMF announced that Indonesia was in compliance with its economic stabilization and reform program. The GOI and IMF agreed to the fifth amendment of the Memorandum of Economic and Financial Policies.|
|September 21, 1998||Deadline for owners of frozen and taken-over banks to repay central bank liquidity support and other obligations, per August 21 announcement. The repayment plan was subsequently revised, calling for repayment over four years, with 27 percent due in cash the first year. Details pending.|
|September 29, 1998||GOI announced key elements of a program to recapitalize potentially viable banks. The GOI offered to fund 80 percent of the recapitalization costs for banks with capital adequacy ratios between negative 25 % and plus 4 %.|
|October 16, 1998||Indonesian Parliament (DPR) passed amendments to the Banking Law. President Habibie signed into law in early November. Allows 100 % foreign ownership of Indonesian banks.|
|October 19, 1998||GOI and IMF agreed on seventh revision of the memorandum on Economic and Financial policies|
|October, 1998||Rupiah strengthens from Rp 11,000/US$ to 7,000-range|
|November 2-3, 1998||Jakarta Initiative conference draws over one thousand participants.|
|November 3, 1998||Presidential decree established a ministerial task force and monitoring team for the social safety net.|
|November 13, 1998||GOI and IMF agreed on seventh revision of the Memorandum on Economic and Financial Policies.|
|December 10-13, 1998||The People’s Consultative Assembly (MPR, the supreme body of Indonesia’s government) met to reset the date of the next elections from 2002 to 1999.|
|November 13, 1998||Violent clashes between student demonstrators and security forces near the MPR building.|
|December 9, 1998||Further details on bank recapitalization announced|
|December 16, 1998||IMF agrees to disburse approximately US$ 1 billion to GOI, bringing total disbursements to approximately US$ 9 billion since November 1997.|
|February 27, 1999||GOI scheduled to announce which banks would be closed and which qualified for recapitalization. However, it announced the day before that the announcement had been postponed for two weeks. Completion of the GOI’s next letter to the IMF similarly postponed, which delayed IMF Board review of Indonesia’s program for release of the next tranche.|
|March 13, 1999||Rescheduled date for bank closure/recapitalization announcement. The authorities announced the closure of 38 banks. It announced that nine private banks had qualified for participation in the GOI’s bank recapitalization program and that a further seven banks would be taken over. According to the Memorandum of Economic and Financial Policies to the IMF released that day, the target date for completing recapitalization of the nine private banks was the end of June.|
|April 1999||The nine private banks to be recapitalized signed investment contracts with the GOI. Eight of them subsequently placed funds in escrow. Standard Chartered Bank entered Bank Bali as an investor and placed the funds in escrow for that bank. Bank Niaga declined to place funds in escrow and was taken over (GOI spokesman predicted that the take-over was likely to be temporary because foreign investors were interested in that bank as well.|
|May 19-June 4, 1999||Parliamentary election campaign period.|
|May 14, 1999||Indonesia issues the next revision of its economic program with the IMF.|
|June 7, 1999||Parliamentary elections|
|June 1999||IMF Board approves disbursement of loan tranche|
|July 22, 1999||GOI issues the next supplemental Memorandum of Economic and Financial Policies, agreed to with the IMF.|
|August 30, 1999||East Timor consultation ballot scheduled.|
|End-August 1999||Following public listing of largest debtors to IBRA in June and ensuing discussions with them, GOI publicized names of non-cooperative debtors.|
|Early September 1999||East Timor ballot resulted announced: 78.5 percent voted against enhanced autonomy. Violence erupted. A multinational force under UN auspices was introduced.|
|October 1, 1999||People’s Consultative Assembly (MPR) session opened|
|October 14, 1999||President Habibie’s accountability speech to MPR (rejected).|
|October 20, 1999||People’s Consultative Assembly (MPR) selected Abdurrahman Wahid (PKB party) as president.|
|October 21, 1999||The MPR selected Megawati Sukarnoputri (PDI-P party) as vice president.|
|October 26, 1999||New cabinet announced. Ministers with economic portfolios:|
|November 2, 1999||The Government conveyed the “long-form” PriceWaterhouseCoopers report on Bank Bali to visiting IMF Asia Pacific Director Hubert Neiss.|
|January 20, 2000||GOI signs new Memorandum of Economic and Financial Policies to the IMF.|
|January 20, 2000||GOI presents FY 2000 budget to the DPR (nine-month budget for April-December 2000 as Indonesia shifts to a calendar-year fiscal year starting in 2001).|
|February 1-2, 2000||Consultative Group on Indonesia (CGI) meets in Jakarta, pledges $4.7 billion in assistance for FY 2000.|
|February 4, 2000||IMF board approves program.|
|February 8, 2000||As part of the process of selling its shares in Astra International, IBRA convenes an extraordinary shareholders meeting at which senior management was changed.|
|March 2, 2000||DPR approves FY 2000 budget, with some important changes from the government’s January 20 budget request.|
|end-March 2000||Completion of the first review of the IMF-supported economic program delayed.|
|April 2000||Second Paris Club rescheduling.|
|April 2000||President Wahid replaces Investment and Trade Minister Kalla (Golkar party) and State Minister for Investment and State-Owned Enterprises Laksamana Sukardi (PDI-P party)|
|May 17, 2000||Amended Memorandum of Economic and Financial Policies to the IMF issued.|
|June 2, 2000||IMF Board approves completion of the first (since January 2000) review of the program.|
|July 31, 2000||Amended Memorandum of Economic and Financial Policies to the IMF issued.|
|August 1-18, 2000||People’s Consultative Assembly (MPR) meeting|
|August 23, 2000||President Wahid names new cabinet. Key ministers with economic and related portfolios are:|
|September 7, 2000||Revised Memorandum of Economic and Financial Policies to the IMF signed|
|September 13, 2000||Bomb explodes in underground parking garage of Jakarta Stock Exchange building; multiple casualties.|
|September 14, 2000||IMF Board approves completing the second review (since January 2000) of the program|
|Early October 2000||FY 2001 budget to be presented to Parliament; this will be first budget to incorporate fiscal decentralization scheduled for implementation starting January 1, 2001|
|October 17-18, 2000||Consultative Group on Indonesia (CGI) meeting scheduled to be held in Tokyo|
|November 17, 2000||Several members of the Bank Indonesia Board of Governors resign. GOI and Parliament subsequently decide to amend the Bank Indonesia Law of 1999. The resigning members agree to serve until the new board members are named.|
|December 6, 2000||Bank Indonesia Governor Sabirin returns to the office after several months in non-active status related to the Attorney General’s investigation of the Bank Bali campaign finance scandal.|
|December 2000||Parliament approves FY 2001 budget. GOI issues decrees to implement Law No. 25 of 1999 on fiscal decentralization|
|January 1, 2001||Scheduled commencement of implementation of Law No. 22 of 1999 on political autonomy and Law No. 25 of 1999 on fiscal decentralization|
UT WHY LUHUT WEARING ISLAM HAT?TO PLEASE THE ISLAM JAVANEse right?
H.E. Gen. Luhut Panjaitan, Minister for trade and Industry, Government of the Republic of Indonesia,
Mr Chirayu Amin, President, FICCI
The two Co-Chairman, JBC,
Ladies and Gentlemen;
It gives me immense pleasure to address the 6th Joint Meeting of India-Indonesia JBC this afternoon. I must compliment both sides for keeping up the momentum of our bilateral ties.
This is a momentous occasion in the history of both countries. We have shared long-standing bonds of friendship and traditions and it is time that these lead to a leapfrogging of our economic relations in this millennium. I am happy that FICCI and KADIN have taken the initiative to organize this interactive meeting today. I am also happy that you recognize this not merely as an event but an ongoing forward looking process seeking to presage new opportunities.
Over the past few years, we have had a growing and multi-faceted interaction with Indonesia. It is a result of the growing economic dynamism of our relationship with all the ASEAN countries. It is in tune with the Look-East Policy that our businessmen today keenly look at Indonesia for strengthening trade and investment relationship.
We are here today not only to apprise you as our business partners of the immense business opportunities that India offers and the major initiatives that we have taken but also to understand your concerns so that we can best address them for strengthening economic ties.
As you may be aware, India’s economic reforms have helped strengthen the economic relations with your country. New vistas of cooperation have emerged which will be of mutual benefit. Today, our reforms have entered their second generation of implementation. The results have been satisfying. The economic growth has been in the vicinity of 6%. Over the last 4 years, our industry has responded well to the reforms process and globalisation, as India has emerged as one of the top ten fastest growing economies in the world. We are making rapid strides in the knowledge driven industry and I am sure that this is an area where Indonesia can be our partner in the coming years.
Today, FDI can enter almost all sectors of our economy except for a small negative list. In most sectors, FDI is automatic and our Government has been continuously rationalizing procedures and policies to encourage greater FDI inflow. The reforms have yielded positive response and we except FDI to increase to about US $ 5 billion this year fuelled by greater investor confidence.
We have taken several steps to create a conducive business environment and bridge the gap between FDI approvals and actual inflows. The FIIA has been set up to provide single point interface with approval authorities at the Centre and State levels. Further progress has been made in disinvestments and approval has been given for disinvestments in more PSUs. The new industries Act is also being formulated to give it a greater development thrust.
Liberal Tax Incentives have been provided to attract greater investment in infrastructure sector. Private sector has been invited to invest in ports, roads, telecom, power and we look forward to create inflow of foreign investment in this sector.
I am happy to note that FICCI and KADIN have recognized some thrust areas for enhancing their cooperation. Information technology, drugs and pharmaceuticals, joint exploration of forest and mineral reserves, joint research and development, especially in knowledge-driven industries are indeed the focus areas where enhanced cooperation would be rewarding to both the countries.
At present, the level of our bilateral trade which is around US $ 1.3 billion is heavily tilted in favour of Indonesia. Also the present level of bilateral trade is far below the true potential. I am sure that leaders of the business communities of both the sides will address this and identify ways and means not only to expand and diversify the respective export baskets but also to have a more balanced trade. In investments too, India and Indonesia with their complementarities can be natural allies in strengthening the economies of the two countries. We must also address the tariff and non-tariff barriers affecting our bilateral business and work in tandem with our industries in this regard.
We are now looking forward greatly, to the visit of H.E. Gen. Panjaitan to India in February, during which we hope to be able to show him the progress we have made in not only IT, pharma and other knowledge driven areas but in all areas of manufacturing. This, we hope will further cement the growing economic relationship.
It will also give us the opportunity to review our cooperation in the arena of the WTO.
Alow me to replace the favour of the anti-dumping investigations by asking that Indonesia jointly take a pragmatic view with respect to the Carbon black investigation.
We keenly look forward to your deliberations and suggestion for enhancing our bilateral trade and investment.
JAKARTA (JP): Governor Sutiyoso said on Tuesday he would meet with
Minister of Industry and Trade Luhut B. Panjaitan to discuss the city
administration’s plan to import 3,000 buses from China.
“I have to explain to Pak Luhut why we have to import the buses from
China, and discuss whether the plan is feasible,” Sutiyoso said on
Tuesday, adding that the buses were affordable.
The governor contended his only interest in importing the buses was to
replace the capital’s fleet of aging buses at a reasonable price.
“We want to provide better transportation services for the public,” he
In an open bid, the city administration recently appointed PT Dayu
Bahtara Kurnia to oversee the purchase and shipment of the
After being appointed the sole importer of the Chinese buses,
executives of PT Dayu Bahtara Kurnia said the Chinese bus factory
which produced the vehicles would provide a lifetime warranty for the
buses’ spare parts.
The first batch of 1,000 buses is expected to arrive in Jakarta
sometime in December.
When Sutiyoso initially approved the deal, he said he would ask Luhut
to lower the import taxes on the buses from the current 40 percent to
Late last week, however, Luhut was quoted by Warta Kota as saying he
opposed the importation of the buses.
“What’s going on here? (People) only want to take the easy way. If we
can construct (the buses) here, why should we import them?” he asked
on Friday. But a source at Luhut’s office said on Tuesday the minister
had not rejected the plan.
“The minister only said the important thing was that the importer
should meet the tax requirements accordingly,” said the source, who
refused to be named.
According to Sutiyoso, his planned meeting with Luhut would help find
a solution that would accommodate the interests of both the central
government and the city administration.
Prior to putting forward the proposal to import buses from China, the
governor’s office asked for interested parties to submit proposals for
replacing the city’s aging buses.
“But no one could beat the price of the Chinese buses, for vehicles of
a similar quality,” Sutiyoso said.
Asked about the city’s plan to import used taxies from Japan, the
governor said he was considering approving the proposal because the
taxies were reasonably priced and came with a safety guarantee.
“I see it as advantageous for us to have the four-year-old taxies to
replace our 20-year-old ones.
“Please, we have to see every policy from the positive side, not the
negative,” he said. (dja)
It looks as though the fate of PT Indorayon Inti Utama’s controversial paper pulp and rayon fibre plant in North Sumatra has been sealed – less by the Wahid government than by thousands of local protestors. Indorayon’s financial backers are tired of waiting for the company to break the deadlock with the Batak community in the Porsea district which has cost over two years of lost production and run up massive debts. Foreign banks and bondholders which own 86% of Indorayon stopped making monthly US$1 million operational payments on 1st September 2000. The company announced that it could hold out no longer and started to lay off its 7,000 workforce within weeks. A US$400 million debt for equity swap agreed last year was dependent on pulp production resuming (AXA Asia 25th Sept 2000). Meanwhile, the central government, after much wavering, seems to have lost the will to prop it up.
Why was Indorayon singled out among the plethora of cases in Indonesia where companies flout environmental regulations and violate local communities’ rights? What message does Indorayon’s closure send out to investors in other socially and environmentally damaging investments in Indonesia? What about the negative impacts of the pulp and paper industry as a whole?
Long-standing grievances against Indorayon over environmental and health issues erupted soon after the downfall of Suharto. Production virtually came to a halt in mid-1998 when thousands of local residents prevented trucks from bringing raw materials to the mill for 4 months. Months of violent confrontations between local people and the security forces resulted, in March 1999, in a presidential order to close the pulp plant pending a full audit of its social and environmental impacts. However, it never happened.
Indorayon has become a test case for the credibility of Wahid’s government at home and abroad. As an opposition figure during the Suharto years, ‘Gus Dur’ developed links with many leaders of civil society groups. Environmental NGOs broadly welcomed his appointment as president last October. His environment minister, Sonny Keraf, was quick to point out that companies investing or operating in the ‘new’ Indonesia must expect more scrutiny of the social and environmental impacts of their operations. A team would investigate the most obvious cases, including mines owned by Freeport, Rio Tinto and Newmont, but Indorayon was the only pulp plant. Although the independent review promised by Habibie never took place, the departmental review revealed that the company had violated pollution and toxic waste edicts and had not implemented its environmental management plans. On this basis, Sonny Keraf announced in early 2000 that Indorayon should be shut down for good.
Meanwhile, the company (part of local conglomerate Raja Garuda Mas, RGM) and its supporters (which include important local government figures) denied the allegations, promised to address community concerns and lobbied Jakarta intensively to allow the pulp plant to reopen. Jusuf Kalla, then Minister for Trade and Industry explained that Indorayon “is a big investment. Such a factory today will need US$1 billion investment to establish. The export value, which reaches about US$100 million a year, and the ability to absorb 7,000 workforce mean something to the state and the people.”(Indonesian Observer, 25th November 1999) Despite Keraf’s recommendations, no company in Indonesia has ever been shut down on environmental grounds and there was genuine uncertainty in Jakarta about how legally to do this.
In May 2000, the government decided that the paper pulp side of Indorayon’s operations could start up again, but the production of dissolving pulp (the raw material for rayon fibre) should not be resumed. The decision provoked appeals from all directions. Environmentalists argued that the company’s past pollution and community record justified a complete shutdown. The company claimed its survival depended on the Porsea plant’s unique facility to switch between pulp for the paper and textiles industries according to market conditions and relative profitability. The community was split between those who wanted the plant to close on environmental and health grounds and others, mainly workers at the factory, who supported its reopening. Protests involving thousands of local people, backed by students and NGOs, once again prevented the mill from resuming production. A student was shot dead by police in clashes between protestors in June. Around a dozen people have been killed and many hundreds seriously injured in the 27 month conflict. Indorayon’s increasing desperate bids to address local people’s grievances with promises of more employment, business opportunities and a community foundation funded by the company and its foreign investors have been rejected.
Business as usual?
The Wahid government is clearly reluctant to let Indorayon go to the wall. The closure of a company once listed on the Jakarta and New York stock exchanges sends out all the wrong signals to the investment community at a time when the government is desperate to attract foreign investment, increase tax revenues and boost Indonesia’s exports. It has lost at least $50 million in tax revenues and other fees from Indorayon last year alone (Jakarta Post, 2nd December 1999). Some companies have already threatened to take their investment elsewhere unless they can continue ‘business as usual’, even if this rides roughshod over local communities’ interests. Indonesian environmentalists are now disillusioned about the government’s stance. As Mas Achmad Santosa, executive director of the Indonesian Centre for Environmental Law (ICEL) said at a press conference this May, “Unfortunately, what the government cares about now is getting as many investments as possible. The preservation of the environment has taken a back seat.” (Jakarta Post May 15th 2000)
Given the terms of the IMF’s economic ‘rescue package’, Wahid’s government can hardly afford to close down export-orientated pulp plants. Indonesia exported about 3 million tonnes of pulp and 3 million tonnes of paper in 1999 (Jakarta Post 5th July 2000). Paper pulp prices on world markets have risen sharply in 2000, to US$579 per ton in September compared with US$372 per ton this time last year (IO 4/8/00). This has benefited Indonesian companies which export most of their production. These include pulp producer Indah Kiat and paper manufacturer Tjiwi Kimia – both part of the Sinar Mas/Asian Pulp and Paper group group, headed by Eka Tjipta Widjaja – and Riau Andalan Pulp and Paper, also owned by Sukanto Tanoto’s Raja Garuda Mas group (RGM). They have also benefited from the weak rupiah as their input costs are mainly in local currency but revenues are paid in dollars. This has helped the big pulp and paper companies to ride out economic and political storms despite shortages of raw materials, lack of domestic demand and investigations into their financial connections with the Suharto family.
On the other hand, the Indonesian government might decide to accept Indorayon’s closure as the lesser of two evils. To facilitate the resumption of production against the majority of the community’s wishes would smack of the excesses of the Suharto years. The North Sumatra pulp mill was a flagship development for the Suharto regime. The economy was booming when construction of the paper pulp mill began in 1986. The government wanted to boost the growth of Indonesia’s textile industry by developing rayon fibre production in order to reduce dependence on imported cotton. By 1993, Indorayon was the first Indonesian plant to produce dissolving pulp. It is now relatively old and small with a capacity to produce either 240,000 metric tons of paper pulp or 60,000 tonnes of rayon fibre a year.
Private financing and public debt
It is possible that RGM decided to abandon Indorayon with all its problems with the local community and the government to ensure the survival of the Raja Garuda Mas Group. The disruption of pulp production at Porsea put an added strain on the parent group’s cash flow and threatened to undermine its financial ratings at a time when RGM had been hard hit by the Asian financial crisis and the collapse of Indonesia’s banking system.
Raja Garuda Mas controlled both Indorayon and Riau Andalan Pulp & Paper through the Singapore-based holding company, APRIL (Asia Pacific Resources International Limited). RGM listed APRIL on the New York Stock Exchange in 1994 to generate equity capital and facilitate loans. The group borrowed over US$ 2 billion in offshore financing through APRIL (compared with total assets of US$3 billion in 1998). Even so, its exposure to US dollar denominated debt was far less than other big groups such as Sinar Mas/APP (C. Barr 2000*).
RAPP is a larger, newer plant than Indorayon, with a pulp production capacity of 850,000 tonnes per year. Despite the serious over-capacity in the pulp and paper industry in Indonesia, RAPP was seeking to expand its capacity to 2.0 million tonnes in two stages by 2004. The original plan was to finance this through a deal with Finnish paper giant UPM-Kymmene which included a share swap between RAPP and a paper mill in China owned by APRIL. Then the economic crisis struck, just as some of APRIL’s longer-term dollar loans were coming due. In late-1999 APRIL’s creditors agreed to reschedule US$ 800 million of RAPP’s debts so the expansion could go ahead, partly in the hope that a larger mill will help to pay off the debts faster (JP 30/Sept/1999). By that time, APRIL had already spun off Indorayon, in order to make itself more attractive. The share deal with UPM-Kymmene fell through in early 2000. The Finnish company converted its share option to a short-term loan and bought out APRIL’s interests in the Changsu mill for US$ 150 million in August 2000.
Millions of ordinary Indonesians are subsidising the pulp and paper industry through debt repayments to the IMF and international creditors. Despite the enormous debt load they carried when the financial crisis struck, none of Indonesia’s major pulp and paper producers has been forced to halt its operations due to bankruptcy. Like other major forestry and pulp companies, RGM had also borrowed heavily from domestic banks. When these banks went bankrupt in the Asian financial meltdown, their debts were taken over by the bank restructuring agency, IBRA. This agency is funded by IMF loans, to be repaid by increased taxes and decreased public expenditure on schools, hospitals and subsidies of basic necessities. Oddly, IBRA did not insist that APRIL sold its assets in China to repay the group’s debts. Instead, it allowed APRIL to delay payments on US$1.3 billion in outstanding loans, effectively giving the group a US$165 million capital subsidy. At the same time, APRIL can use the Changsu proceeds to pay off short-term debts to foreign creditors as they fall due. In this way, as with other companies, APRIL’s private debt has become Indonesia’s public debt.
Indorayon is a landmark case for the Indonesian environmental movement which had also boomed during the 1980s. It established the important legal precedent that NGOs had the right to sue companies or even the government over environmental issues. The largest and best known environmental group WALHI (Indonesian Forum for the Environment) filed a law suit against PT IIU and five government departments for failure to comply with the 1982 Environment Law. The case was lost on the flimsy grounds that the company had not started full commercial production when the action was brought (in late 1988), so the court considered it impossible to gauge potential pollution.
The outcome was that inhabitants of Sodorladang and other villages near the Indorayon plant suffered a decade of polluted air and water. The acrid fumes which poured out of the smoke stacks day and night could be smelt several kilometres away. Local people blame the high incidence of asthma, chest infections and other respiratory ailments on the factory, but health care facilities are so poor that there is no proof. The evidence of acid rain is obvious: corrugated iron roofs of houses and churches used to last two generations; since Indorayon, they corrode away within five years. There has been a dramatic improvement in environmental quality during the two years that the pulp mill has effectively been closed. Trucks no longer thunder through Batak villages every minute day and night, destroying roads and bridges. The air is refreshingly clear, as elsewhere in the Lake Toba region, and local people are again able to drink the water and to fish in the River Asahan.
Although Indorayon has been a cause celebre for environmentalists, the Indonesian government can rest assured in that this is one of the very few paper and pulp cases to receive NGO attention at local, national and international levels. There is no network of Indonesian civil society groups which focuses on the pulp industry comparable to the national information and advocacy networks which exist for the forest, mining and, more recently palm oil sectors. Indorayon is far from being Indonesia’s largest or most polluting pulp operation. The worst environmental problems may well be associated with the smallest and oldest pulp and paper mills, especially those in Java which are located in densely populated areas. The industry is keen to point out that it has cleaned up its act. Larger plants in Sumatra, like PT RAPP and Indah Kiat’s Perawang units have installed more advanced pulping, bleaching and waste management technologies.
Moreover, Indonesian groups have been strongly influenced by international campaigning on pulp industry pollution in the ‘North’ where – led by Greenpeace – the debate has largely centred around dioxins. Fears about the long-term health risks posed by minute quantities of these carcinogens promoted the introduction of ‘elemental chlorine-free’ technology (ECF), which use chlorine compounds rather than chlorine gas, in Europe, North America and some plants in South East Asia. ECF technology only became compulsory for new plants in Indonesia after a chlorine tank burst at Indorayon in November 1993. Thousands of people fled the Porsea area fearing another Bhopal incident.
Paradoxically, concerns about dioxins or accidental chemical releases have diverted attention from the everyday realities of people living in the pollution shadow of a pulp and paper plant. The fact remains that all current technologies turning wood chips into pulp require a large amount of fresh water, fuel and a cocktail of highly corrosive chemicals and produce substantial quantities of noxious wastes.
The Tanjung Enim Lestari plant (PT TEL) in South Sumatra is a case in point. This paper pulp mill which came on line in late 1999 will be one of the largest in Indonesia, with production rising from 450,000 tonnes to 1 million tonnes of pulp per year. Communities in the Muara Enim district complained to the local branch of WALHI about the stench from the factory and tainted water supplies within weeks of start-up. PT TEL’s environmental impact assessment, approved by local and central government, reveals that even when waste treatment units are working optimally over 18 tonnes of sulphurous gases will be released every day. Giant pipes, over two metres wide pour 80,000 cubic metres of waste per day into the River Lematang – the main source of water for drinking and all other domestic needs for the tens of thousands of people whose homes live along its banks. These discharges will deplete oxygen levels in the river and make the water murkier, affecting the aquatic ecosystems on which local fisherfolk depend for a living.
It is important to note that these levels of pollution are the norm: more serious impacts will result if waste treatment plants fail, as happened at Indorayon on several occasions, resulting in entensive fish kills. There are many examples of pulp plants which try to reduce costs by not using all technology intended to reduce pollution. In a telling phrase, PT TEL’s environmental impact document states that “the plant can produce 100% ECF pulp if needed”. In other words, unless local authorities insist, the company could opt for more polluting options.
Pulp and plantations
The impacts of Indonesian paper pulp production extend beyond the effects of pollution and social conflict in the vicinity of pulp mills. The Indonesian pulp industry is inevitably linked to the destruction of natural forests. The myth, promoted by pulp and paper producers and their financial backers, that pulp is produced from Indonesia’s industrial timber plantations (HTI) has two fatal flaws. Firstly, pulp plantations are established on forest land, not degraded areas or grassland. Secondly, too few plantations have been established to supply the pulp industry. Back in the 1980s ministers talked of Indonesia becoming one of the world’s top paper producers soon after 2000, with as much as 10% of its ‘forest land’ converted to plantations. Indonesia certainly has a natural advantage: trees which take 20, 40 or even 60 years to mature in Scandinavia, North America or even Australia can be harvested within 8 years in Indonesia. However, the government’s HTI programme to support the pulp industry never really took off. At best, only half of the 4.7 million hectares area officially allocated to HTI plantations became timber estates (World Bank, OED Report, Jan 2000). Furthermore, it takes time for the timber estates to reach maturity. Plantations established in the early 1990s will only be ready to harvest now. This means that the vast majority of the rapid growth experienced by Indonesia’s pulp and paper industry from the late 1980s until the mid 90s took place at the expense of the country’s tropical rainforest.
Indonesia’s vast forest resources, cheap labour, lax environmental controls and proximity to expanding Asian markets have attracted investment in the pulp and paper industry. It is three times cheaper to produce paper pulp in Indonesia than Sweden.** The key to the profitability of Indonesia’s pulp producers lies in the vertical integration of the timber industry. The most commercially valuable timber is first extracted by a logging company, then a sister company clear fells the remaining trees and sells them as raw material to a pulp factory (owned by another company in the same group) while yet another company from the same conglomerate may establish the plantation intended to supply the pulp mill in future. It is cheaper for a pulp plant belonging to a big group like Barito Pacific or Sinar Mas to use what the industry euphemistically calls “the waste material from logging operations, oil palm plantations and forest conversion activities”(JP August 29th 2000) rather than relying on its own plantations which must be protected against disease, fire and timber raids.
That over capacity in the pulp industry is an important factor driving illegal logging in Indonesia is clearly indicated by figures on the exports and imports of pulp and paper. In 1998, Indonesia exported 6.7 million tonnes of paper and pulp – three times 1997 levels – while domestic demand fell by half to 1.3 million tonnes. This level of production consumes the equivalent of 16 million cubic metres of timber (after imports of pulp and waste paper have been taken into account). Yet the official supply of all Indonesian timber, including ‘conversion forest’ was only 21 million cubic metres – just the capacity of Indonesia’s plymills (Scotland et al, ITFMP 1999). Nevertheless, the pulp and paper industry is set to expand further. Industry spokesman Muhammad Mansur claimed pulp production would reach 6.6 million tonnes and paper 10.3 million tonnes in 2000, although he did not indicate where the extra capacity would come from (JP 17th March 2000
It must also be remembered that the large forest and plantation concessions which the Suharto government granted to favoured business colleagues like Mohammed ‘Bob’ Hasan and Pangestu Prayogo were not ’empty land’. These locations and the sites for pulp mill complexes in Sumatra and Kalimantan were the traditional lands of indigenous peoples. Deprived of their agroforestry systems or subsistence agriculture, local communities were dispossessed and destitute. Plantations established with fast-growing exotic species such pine (P. merkusii), acacia (A. mangium), albizzia (A. falcataria) and eucalyptus (E. deglupta) do not provide the same social, economic, cultural and ecological functions. Local people are not allowed to cultivate the land, cut timber for firewood or to build homes. The forest products which supplemented people’s household needs are not to be found in this artificial environment. As a result, Indorayon, Indah Kiat, Riau Andalan have all been the focus of local struggles over land and forest tenure over a number of years. As at Porsea, social conflict is intensified due to lack of employment opportunities for local people. Typically, companies use transmigrant labour in their logging concessions and plantations and skilled labour imported from urban areas in the pulp plants. Horizontal conflicts arise within communities where some people have become dependent on their lowly jobs at the pulp plant while their neighbours are demanding fair compensation for land or property taken or damaged by pollution.
The bottom line
Indonesia used to boast that it was one of the world’s lowest cost sources of paper and pulp. Yet the real cost for ordinary Indonesians, especially indigenous forest peoples, is very high. It may also be higher than some foreign investors expected. Indorayon may be international financiers’ first salutary lesson that investing in socially and environmentally damaging developments can also hit them where it hurts.
UPDATE (9th January 2001) Events have taken yet another dramatic turn since the above piece was written for the magazine ‘Inside Indonesia‘ in early November. PT Indorayon Inti Utama decided to change its name and its senior management at a shareholders meeting in Jakarta on November 15th. The company’s new name, PT Toba Pulp Lestari, reflects the fact that the government had put a stop to rayon fibre production at its Porsea plant in North Sumatra on environmental grounds. The factory would resume paper pulp production immediately. The announcement was made within a few days of Indorayon’s statement that the rayon and pulp company had run out of finance during nearly two years of lost production and that hundreds of workers were being laid off (Kompas 16/Nov/2000)
INDORAYON LIVES AGAIN AS PT TOBA PULP LESTARI
The management line-up is:
Chairman: Bilman Philipus Butarbutar MBA
Directors: Lennardi P, Anggijono BSc, Rosman and Dedy Sutanto.
Comissioners: Julian Christopher Hill (chair), Dr Raider Per Haugen and Michael Utama Purnama MA.
The new management said that it would be setting up an independent commission and an audit committee before December 2001 to review social and environmental issues. The company had promised in October that it would upgrade the technology and improve its commitment to the community.
Foreign investors are reported to have stepped in with US$4 million on top of the $25 million invested over the past three years. The consortium includes the Bank of Boston, Bank of New York, Bank Namura, ABN Amro Bank and Credit Lyonnais ( Pulp and Paper Online 11/Dec/2000). PT IIU has outstanding bonds amounting to US$285 million and owes another US$70 million to banks.
At the time of writing , PT Toba Pulp had not restarted operations. The Porsea factory remained the target of protests even though, according to North Sumatra governor, traditional and religious leaders had urged local people to accept the company and its new promises to the community (SP 30/Nov/2000). In a move strongly reminiscent of the Suharto years, Governor Rizal Nurdin has ordered military personnel to guard the plant against protestors (IO 5/Dec/2000).
Local community organisations and NGOs have strongly condemned the governor’s position. They claim that prominent local figures, tribal groups and NGOs totally reject the decree issued by the central government on May 10 to reopen Indorayon. They still want Indorayon to hold talks with grass-roots representatives (not so-called community leaders in Medan or Jakarta) about the losses caused by the environmental damage. Compensation should be paid and the company must pledge to contribute positively in future to local development (MI 5/Dec/2000).
Trade and Industry Minister, Luhut Panjaitan, visited the Lake Toba area (his homeland) on January 8th 2001 to attend an traditional thanksgiving ceremony. In his address, he told thousands of local people that the reopening of the pulp plant under its new name PT Toba Pulp Lestari was going ahead, starting with a big public awareness initiative. “If the community still refuses (to accept the reopening of the plant), we must convince them otherwise,” he said (SP 9/Jan/01).
Snow Ball of Struggle to Stop Negative Impacts of Pulp and Paper Industry in Indonesia
Disampaikan dan ditandatangani di Riau, Sumatera, 13 Januari 2007
What was mentioned with the ecology disaster from the Big Pulp Industry Development evidently was not yet responded wisely by the Indonesian Government. Several new plans from the industry to do expansion to other area in Sumatera and outside Sumatera still still accomodated with planning and still ignoring the transparency and the public’s participation towards better condition. On the other side, social reality that happened on the field did not fail to make the Central government tidy up to put the involvement of the community and due diligence for the pulp industry in the strategic importance plan. After the big case which had been written by Humans Right Watch (HRW) about the violation of humanity in Riau that fell on the traditional community Sakai for example, was not influential for efforts to speed up the policy of Fiber Woods Plantation such as Decision Letter of Forest Minister No.SK 101/Menhut-II/2004 about acceleration of Fiber Woods Plantation Development for Pulp Industry needs and SK No.32/Kpts-III/2003 about permission of forest harvest utilisation only to the nature forest or Fiber Woods Plantation through bargaining and auction that could take over ex Logging Concession area also could have permission for hundred years.
The Role of the Government in The Policy of Forestry Industry Debt
Was not doubted again post the economic crisis that struck Indonesia in the end of 1990s, made many sides fall back how fragile is our national industry including the industry in forestry sector. Monetary that heaved and the instability of economics must put the international hands like International Monetary Fund [IMF] that push the birth of National Bangking Recovery Biro [BPPN] that must overcome debts stalled from at least 128 companies which operated in forestry sector. At that time the value of assets that must be borne by BPPN revolving 21,9 trillions [3,1 billions US dolar]. Several among them approximately 176 debtors with the debt stalled about 19,78 trillions was sold to several bank and the agency of the non bank’s finance. And the sale that conducted by BPPN was by means to sell off without doing any restructuring of these debts. Apparently this sale was estimated only coulc return the debt of 20 percent of the total value which was 6 trillions.
Up to the end of its life before being replaced with the Assets Management Company (PPA) in year 2004 and managed around approximately 500 trillions was a big figure in view of the fact that some among them were The Pulp Industries. But up to the BPPN replacement that canned be heard was the unilateral news would their success and the recovery rate for 28 percent. Meaning that on the other side the government frankly was not able to return national assets that was taken by conglomerates in the form of assets and the accumulation of capiral that was produced. Compared with the level of forest damage that was in the really danger position as the impact of Pulp Industry Development. Meaning that BPPN professionalism in managed and manajerial stalled credits and banking recapitalization and this was the history where the fund that so many disappeared in a short time for the Indonesian Government.
Meaning that after showing out the achievement that did not persuade through BPPN ought to re think over in their policies in the forestry sector in the future. Debts stalled and destruction of the nature forest ought to produce the policy of the reduction in the capacity was installed by the timebr industry. Like IWGFF said that not only this will improve the total return of the debt but in parallel with the Indonesian Government ccommitment against CGI as well as helping to maintain the Indonesian forest resource and guaranteed its conservation. On the other side according to its study is was not reduces the economic potential value of the forest for 7.3 billions US dollar will vanish as the substitute of current economic value of the forest for 1.7 billion US dollar that was resulted from the forest command at this time with the consequences of the Indonesian production forest will vanish in 10 years [Simangunsong 2003]1. Something that ought to be recorded from this important study was to be estimated fro about 30 millions m3 of logs stolen each year, millions of people who lives around the forest in many places in Indonesian Provinces, their live and livelihood were threatened as the impact of illegal logging that is very destructive. Simangunsong also estimated the environment cost that must be borne by the community as a result of forest damage at this time was 609 million US dollar each year.
Damaging Role of Fiber Woods Plantation to Nature and Community Forest
In line with above very natural the assumption that the allocating of the Fiber Woods Plantation development on unproductive lands was did not benefit still current till at this time. The mechanism of the change in the function of the region by the forestry Service through Decission Letter of Forestry Minister. Old days according to the Director General’s INTAG Data up until March 1998, was recorded measuring 4.03 million ha the forest region and the area of the other use
page 33/study about forestry Industry restructuring handled by BPPN/IWGFF 2004.
that was changed by his function into the Production Forest, this policy that supported the Fiber Woods Plantation development to be carried out dihutan second-hand Logging Concession and virgin forest that was changed by his function into the Production Forest. The Fiber Woods Plantation development was carried out dikawasan the production forest continue to because in this scheme could be done by the system cut down was finished. Like the data along with that the realisation of Fiber Woods Plantation planting very small at least up until January 2001. From the total area around 8 million ha that was managed by 175 companies, the realisation of planting just reached 23,5 peren or 1,85 million ha. The other data showed on Fiber Woods Plantation area was still being met the region that still was productive in general as big as 22 percent of all over the region that managed by them. Imagined when it was considered be the same as with the HTI development other up to January 1999, the number of nature forests that was converted measuring 1,6 million Ha. Through to very justified was gotten by the view of many sides that Fiber Woods Plantation only took wood from Woods Use Permit (IPK).
The main problem that still accurate until now is the capacity was installed, the forest could not comply with the national and international market request that so high. The gap that was so high between the request and the provisions of the wood raw material to supply the standard requirement for the timber industry in Indonesia. Especially for the pulp industry, data from APKI 2000 named the total install capacity almost 5 million ton/year, the total capacity of the paper industry reached almost 9 million ton/year. To produce 1 ton pulp need 4,5-5m3 pulp wood then the requirement for pulp wood during 2000 around 22,5-25 million m3, now the total production of Fiber woods Plantation in year 2000 only reached 3 millions m3. Assumpt until now 90 percent of the material raw used by the Pulp mills come from nature forest. Addition with the replacement scheme of industry from Logging Concession to Fiber Woods Plantation came from the same source or forest industry company, large damage of forest in the past on behalf of Logging Concession were Company’s Strategic Network to save their assets and what more confidence were this is the way they covered their tracks in spending a lot of Country Fund and Deforestation which they’ve done. The strange thing is unnatural behaviour from these blind industries always get supported by government policies on behalf of Country Income and Revitalisation, keep producing the policies that profitting the Pulp Industry and Fiber
Box: Natural Forest and People Life Source Robed by Pulp and Paper Industry
Pulp and Paper mill first time operated in Riau in the early of 1980s which were built the PT. Indah Kiat Pulp and Paper Industry ( APP Goup) in Perawang Siak District (Which were Bengkalis District). Then it was followed by PT. Riau Andalan Pulp and Paper (APRIL GrouP) built on 1993 in Pangkalan Kerinci Pelalawan District (which was Kampar District). And then these two industries seems like in competition to increased their industry capacity, until year 2006 each capacity of those Pulp and Paper Industry has reached 2 million tons/year.
They need 18 million m3 woods every year to producing 4 million tons pulp in Riau, and 70% of these woods were taken from nature forest in Riau for years, so that pulp industry contribute large on the lost of 3,6 million hectares nature forest in Riau since 1982 -2005. Riau nature forest conversion will still continue in the future at least there will be lot of conversion permit on nature forest to supply the pulp and paper industry needs. These permits located on the forest area which has High Conservation Value or HCVF (wwf 2005) so that estimated that Riau nature forest will remain only 476.233 hectares on 2015 by destructiuon level 150.000 hectares per year.
Peat forest on Kampar Peninsula for example, on this forest area there a lot of conversion permits on nature forest which in controversial to be built fiber woods plantation even given by the District Government or Forest Minister. Beside the existing permits, APRIL is in progress proposing new permit for 215.795 thousand hectares to Forest Minister of Indonesia.
The impact of forest conversion in Riau has causing negatives effect like flood, forest, human and animal conflict, corbon released and etc. According to the grenomic and Walhi research, the lost caused by flood in 2003-2004 in Riau reached numbers 841 billion or 51% of Riau Province Annual Local Budget and flood disaster in the end of 2006 has caused lost much bigger from before, recorded there were 20.000 houses sinked in 7 district/city in Riau Province.
To guarantee sustainability of material raw, pulp and paper industry must build Fiber Woods Plantation by mastering wide land, at least until the end of 2006 APP and APRIL and their parners had mastering land in Riau for 1,8 million hectares or equal to 21% of Riau Province wide land ( 8,6 juta ha). Land dispute for such wide oftenly conduct by violence method and intimidation to the people and intend to not put any respect of local/custom community’s rights. Lot of land, community’s garden and community’s farm area taken over by c ompany to build their Fiber Woods Plantation. Dispute land practices which conduct these days had causing a lot of conflict between community and company which in the end will harming the community
Conflict between PT. RAPP (APRIL) with Villagers of Gading Permai
Villagers of Gading Permai has worked on 200 hectares land for palm oil plantation, they were collaborated with local
Snow Ball of Struggle to Stop Negative Impacts of Pulp and Paper Industry in ….. Bob Hasan 20% and Luhut Panjaitan 10%. This condition was not last long, …