Govt gives assurances on pulp production

JAKARTA (JP): Several Golkar legislators say the Ministry of Forestry would try to boost pulp production, to help solve the current shortage of newsprint paper.

"The Minister of Forestry has instructed his staff, especially those related to forestry development, to monitor and fulfill the supply of raw materials for pulp production," Abdurrachman Rangkuti, chairman of the paper task force, made up of Golkar legislators, told reporters last week after a meeting with Minister of Forestry Djamaludin Suryohadikusumo.

Rangkuti did not say exactly when and how the Ministry will boost pulp production in Indonesia.

"The minister said that he expects all pulp mills to follow all existing forestry and environmental regulations in trying to increase their production," the legislator said.

Minister Djamaludin declined to give any comments.

The meeting between the legislators and the minister was conducted as part of the ruling party's attempt to deal with the recent controversy of what appeared to be a sudden shortage of newsprint.

The shortage has reportedly threatened several newspaper publishers to temporarily suspend publication.

At the same time, both newspaper publishers and paper producers are faced with the rapidly increasing price of pulp, which currently reaches about US$1,000 per ton, as compared to $350 in 1993.

Available data shows that out of its total installed annual production capacity of about two million tons, Indonesia produces about 800,000 tons of pulp every year.

Redeem

Despite Golkar's lobbying to the Forestry Ministry, it is not clear whether an increased production of pulp can substantially redeem the newsprint shortage.

Industry sources told The Jakarta Post recently that pulp is not a significant factor in newsprint production since 80 percent of raw material input, in the manufacturing process, comes from imported waste paper.

"Newsprint producers can increase the usage of pulp in newspaper production by only up to approximately 35 percent of all input," the source, an executive of a domestic paper mill, said.

Some analysts said that waste paper now sells for about $410 per ton, indicating a steep rise from being virtually free of charge, except for transportation and collection costs, several years ago.

Moreover, the Golkar team does not seem to address the complicated structure in the newsprint trade, which was heavily protected by import-tariffs in the past.

The tariff protection for newsprint is now only five percent, down from about 40 percent in the 1980s.

Out of all the paper mills in Indonesia, only two companies make newsprint, the state-owned PT Kertas Leces and PT Aspex paper, which is partially controlled by influential industrialist Mohammad (Bob) Hasan.

According to official figures, Leces and Aspex have a combined annual production capacity of 300,000 tons.

Out of that, about 150,000 tons are sold directly to the domestic media industry every year, while about 70,000 tons are supplied to school text-book producers. The balance of the output is usually exported.

Appeal

Minister of Industry Tunky Ariwibowo said last week that he would "appeal" to the two newsprint firms to suspend exports this year and maintain current selling prices.

The government also decided recently to revoke the regulation requiring the use of containers in the importation of waste papers.

This strict policy increased shipment costs to as high as 110 percent of production cost, industry sources said.

The policy, passed by the Attorney General's Office, was enforced to safeguard the country from communism and pornography and other vices to the state-ideology Pancasila.

Prior to its revocation, no one, including trade and industry officials and industry players, knew which government agency passed this regulation.

Despite the breakthrough in the import regulation of waste paper, it is still not clear why there have not been any newcomers in the potentially lucrative newsprint industry.

Various analysts, including the World Bank, have said that entry barriers are created by the cartel in the paper industry, especially in the pricing mechanism of the products.

The Association of Pulp and Paper Producers hinted recently that despite the relaxation of import rules, rising prices of waste paper might force the price of newsprint higher still. (hdj/rid)