Rizal Harahap, Pekanbaru – PT Riau Andalan Pulp and Paper (Riaupulp) will dismiss up to 2,000 workers, or around half of its total workforce, to help stop the company from sinking amid a prolonged raw material crisis.

Riaupulp director Rudi Fajar said the raw material shortage had been plaguing the giant pulp and paper mill for the past two years.

"Timber supplies are inadequate to meet production needs and this has now been worsened by the global financial crash. Besides low demand from overseas buyers, the sale price has also dropped significantly," Rudi told a press conference Pekanbaru Thursday.

Before the layoff decision, he added, the company had carried out a number of efficiency measures to offset a drop in production and rising production costs, such as saving on fuel, electricity, water and working trips.

Those steps failed to yield results and left the company with no choice but to resort to dismissals, some permanent and some temporary.

"Tomorrow (Friday) we will officially dismiss 1,000 workers and temporarily lay off another 1,000. We have earlier discontinued contracts with our suppliers. We are aware of the impacts these decision will have, but these steps have to be taken to maintain operations," said Rudi.

Rudi added Riaupulp had also severed the working contracts of 25 of the 54 expatriates working for the company. The company currently operates with around 4,000 workers.

According to Rudi, the raw material shortage is attributed to difference of interpretation between government agencies on forestry regulations and bureaucratic red-tape on licensing procedures.

"The raw material crisis has had a direct impact on production. Riaupulp could yield between 6,000 and 7,000 tons of pulp daily during normal condition, compared to only up to 3,000 tons now."

Rudi expressed hope the government would help resolve the crisis by straightening the miscommunication between the agencies, especially on the definition of illegal logging.

"We hope the government addresses the problem hampering timber supplies. Currently around 1 million cubic meters of our timber is surrounded by a police line without a clear legal status. Such a volume is enough for two months production. "We urge the government to uphold legal certainty as it would support the pulp and paper industry in Indonesia."