Japanese firms turn up heat on APP<\/p>\n
Dow Jones, Jakarta<\/p>\n
Asia Pulp & Paper Co. (APP), embroiled in talks with creditors
\nover restructuring US$13.9 billion in debt, appears to have
\nanother problem on its hands: The company's important Japanese
\ncustomers are threatening to stop buying paper from APP unless it
\ncleans up its environmental record.<\/p>\n
Japanese companies led by Ricoh Co., the country's top
\nmanufacturer of copy machines, have demanded APP take steps to
\nprotect the forest near its pulp-and-paper mill on Indonesia's
\nSumatra island. Environmentalists estimate that at current rates
\nof deforestation, Sumatra's lowland forest, home to tigers and
\nelephants, would disappear within five years.<\/p>\n
Stung into action, APP signed an agreement with the World Wide
\nFund for Nature (WWF) this week. Indonesia's Sinar Mas Group,
\nwhich owns APP and a number of forestry companies, has agreed to
\nset aside 58,500 hectares of its concessions in Sumatra's Riau
\nprovince as a conservation area. The company also pledged to
\ntighten up procedures to stop illegally logged wood ending up in
\nits mills, and to publish by January a plan to make its forestry
\noperations self-sustaining over the next few years.<\/p>\n
This kind of action is unprecedented for APP, which built its
\npaper empire in the 1990s on vast forestry concessions from
\nformer President Suharto's government, and by selling bonds to
\nforeign investors to fund the expansion of its mill.<\/p>\n
After becoming one of Asia's largest paper manufacturers, APP
\nstopped repaying its borrowings in March 2001 amid slumping
\nglobal paper prices, and is still trying to clear up the mess.<\/p>\n
During the boom years, APP made little effort to replant the
\nforest it cut down, forcing it to rely increasingly in recent
\nyears on wood from third parties to feed its mills. APP admits
\nsome of this wood is cut down illegally by local villagers from
\nprotected areas, but has previously claimed it could do little to
\nverify the origin of every log entering its plant.<\/p>\n
APP's attitude appeared to change after the Japanese customers
\npaid a visit to the mill in early July. The Japanese, which are
\nAPP's largest foreign customers, threatened to pull their
\nbusiness if the company didn't clean up its act. APP says it
\nsells around 20,000 tons of photocopy paper per month to Japan,
\nor about a quarter of its total sales.<\/p>\n
\"Without the Japanese companies, this agreement wouldn't have
\nhappened. There's been an escalation of corporate involvement,\"
\nsaid Michael Stuwe, a WWF consultant that has worked extensively
\nin Sumatra.<\/p>\n
The agreement shows how companies in Japan, which depend
\nheavily on foreign countries for their natural resources, are
\nbecoming more sensitive to environmental issues due to pressure
\nfrom non-governmental organizations. It also highlights how the
\nWWF is aiming to change the way APP operates, through working
\nwith the company rather than calling for a boycott of its
\nproducts.<\/p>\n
The WWF is hoping the risk of losing its Japanese customers
\nwill push APP to seriously implement the agreement. APP
\nacknowledges corporate pressure had a role in pushing it toward
\nan agreement with the WWF, but says it's also committed to saving
\nthe forest. \"We are trying as much as we could not to receive
\nillegal logs,\" says Joice Budisusanto, a spokeswoman for AAP.<\/p>\n
Still, the WWF admits it's running a risk by engaging APP,
\nwhich is owned by Indonesia's Widjaja family, rather than
\norganizing boycotts of its products as other NGOs have done.
\nDespite warnings that Sumatra's forest could be soon wiped out,
\nthe company has continued to gobble up trees: 60 million of them
\nlast year alone, environmentalists say.<\/p>\n
The first major test of whether APP is serious about the
\nagreement with the WWF will come in November, when it must
\npublish the results of an independent survey on its wood supply.
\nThe survey will identify where the company's wood is coming from,
\nand propose measures to stop accepting illegal wood. Much of that
\nwood comes from villagers that are infringing on Tesso Nilo, NGOs
\nsay.<\/p>\n
APP must then produce a plan by January, which will set a
\ndetailed timeframe to make its wood supply sustainable. The
\ncompany has begun working to establish self-sustaining
\nplantations on deforested land, but they won't be ready until
\n2007 at the earliest.<\/p>",
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