Danielle Knight, Washington DC – Indonesian pulp and paper facilities, supported in the 1990s by financial institutions in Europe, Japan and North America, have caused widespread deforestation and human rights abuses, according to a new report released here.
Hundreds of thousands of hectares of Indonesia's remaining forests were clear-cut in order to feed the nations rapid expansion of pulp and paper production during the last decade, says a report released this month by Bioforum, an Indonesian environmental group, and Environmental Defense, based in New York.
Export credit lending agencies based in industrialized nations that backed these production facilities failed to require even minimal environmental standards, says Stephanie Fried, a scientist at Environmental Defense that co-authored the report.
Most of the internationally financed pulp and paper mills in Indonesia have been accompanied by destruction of local peoples' rights to land and livelihood and the armed suppression of dissent, she says.
"As a result, massive public protests occurred against the forced seizures and clear-cutting of community forests, against air pollution, and against the pollution of major waterways by paper and pulp mills and factories," she says.
The report is part of an international campaign by human rights and environmental organizations to get government-backed export credit agencies that are designed to promote investment overseas to develop social and ecological guidelines for project funding.
Most of these institutions do not have environmental and human rights standards and therefore end up competing with each other to fund destructive projects, which other institutions that have such guidelines will not touch, say activists.
The report describes the environmental impact of several large Indonesian pulp and paper manufacturing plants, such as one facility known as the Tanjung Enim Lestari pulp mill, or TEL, located in the Benakat region of the island of Sumatra.
TEL's sister company, Musi Hutan Persada, was designated to prepare massive pulp plantations to feed the mill. According to the report, however, in 1992 Persada began illegally logging, despite protests by local villagers.
"Inhabitants of Benakat were threatened by local authorities and security forces who insisted that they give up 1,250 hectares of their productive rubber gardens, upon which their livelihoods depended," says the report.
Local officials, according to the report that was partially based on testimony by villagers, threatened protesters with being accused of "hindering development" a charge of subversion that could lead to a prison sentence.
Despite outcries from the local community, in 1994 a $1.5 billion finance package was approved for the mill by Canadian, Finnish, German, Japanese, and Swedish export credit agencies. Three years later, an additional $ 1.3 billion finance package was approved for the mill by the same governments.
Last year, the authors of the report visited a village located on a portion of a river near the mill's wastewater disposal site. They said that adults and children who bathed in the river developed skin ulcers after TEL had started its operations.
Villagers "described the forced land seizures carried out by the company under military guard and the heavy-handed way in which the security forces had terrorized them when they had dared to voice their opinions," says the report. Another pulp mill in Sumatra, known as Indah Kiat consumes 200 square kilometers of old-growth tropical forest per year because its accompanying tree plantations are not yet mature, it says.
Over the past 12 years, Indah Kiat has deforested 278,000 hectares, an area the size of Luxembourg, according to a recent report by the Center for International Forestry Research (CIFOR), an organization based in Bogor, Indonesia that is part of the Consultative Group on International Agriculture Research.
"It is clear that Indonesian pulp and paper producers have assumed a high degree of financial risk by developing large-scale processing facilities without first securing a legal and sustainable fibre supply," says Chris Barr, a researcher with CIFOR.
The Bioforum and Environmental Defense Report says the mill has been "embroiled" in conflicts pertaining to the sources of its timber for pulping and was fined $1.4 million for using illegal timber.
Indonesia's main environmental coalitions, WALHI, documented the mill polluting a river downstream, noting dead fish near the factory's waste outlet and complaints of skin rashes by local villagers.
The Indah Kiat mill, which is owned by the company Asia Pulp and Paper, was financed through a $500 million investment package supported by Canadian, Finnish, Swedish, and Spanish export finance institutions, according to the report.
German and US agencies also provided million-dollar loans and guarantees to the project under separate financial arrangements.
Export credit agencies "must begin to correct their shameful record of environmental and social negligence," says Bruce Rich, senior attorney with Environmental Defense.
He says wealthy countries have failed so far to adopt common environmental and social guidelines that are at least as rigorous as existing standards for other publicly-backed lending institutions, like the World Bank. "This is financial and environmental folly," he says.