American firm to invest $50m in Gowa pulp plant

JAKARTA (JP): Washington DC-based First Asia Financial Services Ltd. (FAFS), a company which manages pension funds in the United States and Britain, plans to invest a total of US$50 million for the establishment of a pulp and paper plant in the regency of Gowa, South Sulawesi.

FAFS president director Anthony Stout said here on Monday about $25 million of the planned investment would be used for the purchase of equipment and machinery.

Stout said that the expenses for the purchase of the equipment could be reduced if local companies could supply some of them.

"We want 80 percent of the equipment to be made available by local suppliers," Stout said following a meeting with representatives of the Gowa regency at the Grand Hyatt Hotel in Jakarta on Monday evening.

Gowa regent Syahrul Yasin Limpo represented the Gowa administration in the meeting.

Stout cited state-owned heavy industry PT Barata as a possible supplier.

"If the investment requirement exceeds the committed figures, we may cooperate with a consortium," Stout said. "The return on investment will be made in the next six to seven years."

The new pulp and paper factory, which will replace the defunct paper factory Pabrik Kertas Gowa (PKG) will be named PKG-Raya.

According to Stout, the Gowa administration had agreed to initially provide 5,000 hectares of land for the location of the new plant.

Unlike PT Inti Indorayon Utama in North Sumatra which processed pine trees for its pulp, the raw material of the PKG- Raya pulp will be the kenaf plant.

He said that intensive talks were being held with the local administration. "We are sending our team of experts to Gowa to ascertain the readiness of the local administration."

Stout reiterated his confidence that the establishment of the new pulp factory in Gowa could be realized. "I see the Gowa administration as very serious in our negotiations."

"We've invested in several countries for the past 25 years, and Gowa is serious in accepting us and took us to the defunct paper factory."

Stout also expressed his optimism that the paper product would be absorbed well by the local market. "There is no paper factory in the eastern part of the country."

He said that the initial production capacity of the factory would be 40,000 tons per annum. "The figures will change based on the market demand."

Sources at the Gowa regency said that the main constraint in the agreement on investment in the regency was a security guarantee.

"The prospective investor (FAFS) has frequently asked for a guarantee of security for their investment, and Stout has reiterated that non-governmental organizations could play a significant role in the business," a regency official, who asked for anonymity, said.

Regent Syahrul said that the pulp industry would bring about economic progress in Gowa and in the South Sulawesi province.

"We want that all layers of society to support the mega project," said Syahrul. (31/sur)