Govt gives assurances on pulp production

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)