Indonesian paper exports total 4.4m tons this year

JAKARTA (JP): Indonesia's paper exports are expected to jump to 4.4 million metric tons this year from 1.5 million tons in 1997, according to a top executive at a local paper operation.

Chief executive operating officer of publicly-listed PT Tjiwi Kimia Suresh Kilam said on Friday that the surge in exports would help compensate for this year's 1.6 million ton drop in domestic demands due to the economic crisis.

"The Indonesian crisis has affected domestic consumption but increased export drive," he told participants at the Indonesia Forum business conference.

He explained that although the depreciation of the rupiah has reduced wood and labor costs, the high U.S. dollar-denominated capital costs diminished the net impact on production cost to a mere 10 percent.

"Drop in domestic demand due to the crisis means companies whose primary focus is in the domestic market are hit hard," he said.

He projected that this year the total production capacity of the country's paper industry would reach 10.3 million tons coming from 73 mills.

Tjiwi Kimia is a unit of Indonesia's widely-diversified conglomerate the Sinar Mas Group, which operates the country's largest integrated pulp and paper operation.

"We plan to employ an additional 37,000 employees at Tjiwi Kimia if the shopping bag division expansion goes ahead," Kilam said, adding that Sinar Mas pulp and paper currently employed about 45,000 out of the total 100,000 people employed in the industry.

He projected that the country's pulp and paper industry would have a turnover of US$5.2 billion in 1998, which represents 5.7 percent of the total gross domestic product.

He added that the total export value of the pulp and paper industry would reach $3 billion, or 7 percent of the country's $43 billion non-oil and gas export revenue.

He explained that although the international prices for pulp and paper commodities were currently weak, with no visible signs of strengthening, the Indonesian industry was cushioned by natural advantages.

He pointed to the vast forests covering 141 million hectares, with nine million hectares under industrial usage, and the fact that the tropical climate allows fast growing plantations that result in a lower pulp production cost.

He said that the harvesting cycle in Indonesia was 7-8 years versus the 25-50 years in South American and Scandinavian countries.

"We're also within the fastest growing region, despite the current Asian crisis," he said, adding that Asia was a net importer with a total deficit of 11.1 million tons.

"The Indonesian pulp and paper operations that have access to low cost domestic raw materials will survive," he said.

However, he said that due to the crisis there would be consolidation in the industry.

"Foreign companies are seeking to acquire or enter into joint ventures with local companies," he said, adding that the end result would be a stronger pulp and paper industry in Indonesia, with a more international character. (rei)