Gowa paper plant: A tug of war over scrap

Gowa paper plant: A tug of war over scrap

Arifuddin Saeni, The Jakarta Post, Makassar

Scrapped 15 years ago, the defunct PKG paper plant in Gowa,
the first factory of its kind in eastern Indonesia, has been
plagued by seemingly endless woes, climaxing in Gowa regency's
strong opposition to what it describes as an unfair sale of the
forlorn company.

The long neglected PKG, the country's third paper producer
after Padalarang in West Java and East Java's Leces plants, has
been sold to state-owned PT Wijaya Karya (Wika) under
presidential decree. But Gowa regency and South Sulawesi
provincial authorities have been seeking central government
approval for a local takeover of the plant.

"The people of Gowa can afford to pay the price of the plant,
valued at just Rp 1.5 billion under the unfair deal," Gowa regent
Syahrul Yasin Limpo said when Home Affairs Minister Hari Sabarno
visited Makassar recently.

Syahrul's objection to the sale of PKG won support from
provincial Governor H.Z.B. Palaguna and regional council chief
Mallingkai Maknum, as well as non-governmental organizations.

"We will back whatever resistance is put up by Gowa's regency
administration, including its refusal to give up the plant's
assets to PT Wika or any other state corporation," said
Mallingkai.

In its previous proposal submitted to the central government,
Gowa regency maintained that since the paper plant had been in a
poor state of repair and had failed to function for a long time,
and its land leasehold contract had also expired, the local
administration should take control of the facility.

Rusli Kadir, chairman of Makassar Mandiri, a non-governmental
organization, said the government action was a reflection of the
unfair approach taken toward development in eastern Indonesia.
The regency administration should have been given the opportunity
to muster its regional management capability.

An economic observer at Makassar's Hasanuddin University,
Taslim Arifin, saw the government decision to sell PKG as an
action that confused the implementation of regional autonomy,
which unsurprisingly had enraged the local administration.

In his response, Interior Minister Hari Sabarno suggested that
the Gowa administration make another proposal to the central
government by offering alternative approaches to the issue.

PKG started production in 1970 and after expansions in 1975
and 1983 managed to raise its output from 11,000 tons to 30,000
tons a year for non-coated paper and to 22,500 tons a year for
coated paper. It was also equipped with pulp machines operating
at an annual installed capacity of 16,000 tons.

Located 18 kilometers from the provincial capital of Makassar,
the plant was a public corporation from 1971 to 1982, before
changing its status to a state limited liability company in 1983,
which enabled it to control significant assets.

With its raw materials partly supplied by two nearby
districts, Bentomarannu and Parangloe, PKG failed to maintain its
record output rates reached in the mid-1980s, as shown by its
production slump in the 1990s that reached as low as 7,205 tons
and led to its operational standstill and shutdown as income
dried up.

In spite of the company's efforts in 1992 to encourage
investors to participate in the reconstruction of PKG, which was
built with Japanese war compensation funds, none of them was
interested in the rebuilding venture, leading to large-scale
labor dismissals and the plant's eventual collapse.

Meanwhile, the Gowa regency administration is seeking other
investors by, among other things, lobbying the First Asia
Financial Service, which will send an expert team to study the
feasibility of investing in PKG.