Foreign investors watch for outcome of Indorayon case
Foreign investors watch for outcome of Indorayon case
JAKARTA (JP): Although Indonesia's pulp and paper industry
remains attractive to foreign investors, they are monitoring the
resolution of the PT Inti Indorayon dispute, the chairman of the
Indonesian pulp paper association (APKI) said.
Muhammad Mansur told reporters on Wednesday that foreign
companies were eager to invest in Indonesia's paper industry
because of access to vast forestry resources, cheap labor,
skilled workers and expanding Asian markets.
"But they are still waiting for conditions to improve,
politically and economically," he said on the sideline of a
hearing with the House of Representatives's Commission V on
communications, transportation, public works, tourism, and public
housing.
"They are also waiting for the government's decision about PT
Indorayon," Mansur said, referring to the publicly listed pulp
and paper producer with massive operations in North Sumatra.
"If Indorayon's case is not resolved through the court, they
fear that their companies will also be forced to close. But if it
is done through the court, they can accept the decision," Mansur
said.
The government has come under strong public pressure to close
the operation in North Sumatra as a result of claims that it has
caused environmental destruction in the area.
The company, which manages a massive forestry concession
spanning the regencies of Dairi, Simalungun, North Tapanuli and
South Tapanul, has been out of operation since July 1998 pending
an independent environmental audit of its activities.
Pressure grew further in January after State Minister of
Environment Sonny Keraf recommended Indorayon's closure. Economic
ministers in the Cabinet however quickly explained that the
government would obtain a court ruling first.
A unit of Raja Garuda Mas Group, Indorayon's shares are listed
in New York, hence the keen interest of foreign investors.
Mansur also painted a brighter picture for the industry this
year, saying that exports should increase to 5 million tons from
4 million in 1999.
Exports thrived, especially in the Asia region, he said.
"We are ahead of other producing countries, like Brazil,
because we are closer to Asian markets," he said, adding that
Indonesia competed against Thailand, Korea and Japan for paper
exports, while holding a monopoly in the pulp market.
Mansur predicted increased production capacity for pulp to 6.6
million tons from 4.9 million tons in 1999, and for paper, 10.3
million tons from 8.3 million in 1999.
He did not explain the sources of the additional capacity.
Mansur said domestic demand for paper had returned to normal
after a sharp decline during the economic crisis in 1998.
He said domestic consumption of paper rose to 16.5 kilograms
per capita this year from 5.5 kilograms in 1998. (10)