Despite dilemma, better prospects ahead<\/p>\n
Khairil Anwar, Contributor, Jakarta<\/p>\n
Since the end of 1999, the country's pulp and paper industry
\nhas been enjoying huge demand both from the domestic and
\ninternational markets. Hence, plants are running at close-to-full
\nproduction capacity.<\/p>\n
Demand, which fell by about 30 percent during the country's
\neconomic crisis, has now increased again to 80 percent of the
\nindustry's total production capacity. The happy news is that in
\nthe near future the figure may exceed the available capacity.<\/p>\n
Due to a shortage of raw materials -- mostly wood-based -- for
\nthe industry in many parts of the world, price increases are
\ninevitable everywhere. In this difficult and challenging
\nsituation, the relevant companies are seeking alternatives as a
\nway out.<\/p>\n
One dilemma these companies face is to meet the current
\nupswing in demand on the one hand while on the other trying to
\ncope with not only diminishing raw materials but
\nenvironmentalists and environmental institutions who admonish
\ntheir \"plundering of the forests\".<\/p>\n
The public outcry against PT Inti Indo Rayon can be cited as
\nan example of community rejection of the activities of such
\ncompanies. Therefore, it is now clear that raw materials other
\nthan the current wood-based ones could be the solution. Again,
\nwhatever the raw material, it should not create a new cycle of
\nproblems for the environment.<\/p>\n
In the early 1990s, Indonesia was predicted by many, including
\nthe industry publication Asian Pulp and Paper Markets, as a new
\nplayer which would soon join the major league. During that time,
\nIndonesia was also seen as a lucrative place for foreign
\ncompanies to invest in the industry.<\/p>\n
Although the pulp and paper industry has grown significantly
\nfrom way back in the late 1980s, reforestation seems to have been
\nforgotten. Between 1988 and 1999, the total production capacity
\nof pulp grew fivefold, while paper manufacturing increased seven
\ntimes. About 24 million cubic meters of wood was required and
\nclearly the natural resources were greatly affected.<\/p>\n
Production was the main theme of the day, while preserving
\nmother nature as the provider of the raw materials was nowhere on
\nanybody's priority list. It was a party time, production and
\nsales went sky-high, natural resources were still abundant and
\nthe country's economy was booming.<\/p>\n
The good times, however, did not last long. The unexpected
\neconomic crisis and ensuing political upheaval in 1997 ended the
\nparty abruptly. The pulp and paper industry was no exception.
\nDomestic as well as foreign investors adopted a \"wait and see\"
\nattitude.<\/p>\n
Economically, at least in the macroeconomic sense, the country
\nis now gradually recovering. Likewise, the pulp and paper
\nindustry is also recovering. Being mostly export-oriented,
\nmeaning pegged to the fluctuating and frequently low prices on
\nthe international market, the domestic players are suggesting
\nthat the government should impose antidumping duties to protect
\nthe domestic market. They are not so worried about their export
\nbusiness as so far they have shown their prowess in the
\ninternational arena, both as regards price and product quality.<\/p>\n
Some time back, Indonesian manufacturers were alleged to be
\ndumping their products in Australia. The Indonesian side made a
\nstrong defense and clarified the situation. This is an example of
\nhow competitive the industry's products are on the global market.
\nAt home prices are just as competitive. A short visit at a local
\nwholesaler in Jakarta will instantly prove that.<\/p>\n
Another piece of good news is that although some pulp and
\npaper companies, including their plantations, are in the hands of
\nthe Indonesian Bank Restructuring Agency (IBRA) owing to the
\noriginal owners' unpaid loans, not a single company has been
\nforced to close down.<\/p>\n
In fact, both IBRA and international lenders have allowed the
\nsame owners and managers to run the companies and even provided
\nnew loans for further expansion. This is to enable the companies
\nto reschedule and pay back their loans. Another important reason
\nis that these companies are seen as highly prospective businesses
\nwith the potential to produce healthy returns in the near future.
\nThey are also major earners that enrich the state coffers with
\nhuge sums of foreign exchange.<\/p>\n
With the current economic recovery along with the companies'
\nserious efforts to tackle both internal and external problems,
\nbrighter days seem to be in store.<\/p>",
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