Soeharto launches Kiani Kertas pulp mill
JAKARTA (JP): President Soeharto yesterday inaugurated PT Kiani Kertas' US$1.3 billion pulp plant in Berau regency, East Kalimantan, praising it as an environmentally sustainable industry.
Soeharto said Kiani Kertas' pulp mill would strengthen the country's domestic paper industry and non-oil exports as most of its production would be destined for export markets.
The President said demand for pulp and paper was increasing from year to year while the existing pulp and paper producing countries could no longer expand their production capacity.
"Therefore, Indonesia has a great chance to meet world demand," Soeharto said.
The plant, dubbed the largest single-line pulp mill in Southeast Asia, will start commercial production next week and reach its full capacity of 500,000 tons of air-dried pulp per annum within three months.
The President said Indonesia had comparative advantages in the pulp business as it had a large acreage of tropical industrial forests.
In tropical forests, Soeharto noted, trees grow more rapidly than those in other kinds of forests (in the temperate zone).
"Investors chose Kalimantan as the site of their pulp and paper business because this island is one of the largest timber producers," Soeharto said.
East Kalimantan is set to have the world's largest concentration of pulp and paper production in the next five years with the establishment of three more pulp and paper plants in the province, excluding that owned by Kiani Kertas.
The three pulp plants were being developed separately by PT Adindo, PT Sumalindo and PT ITCI Hutan Manunggal, a senior provincial forestry official said.
Kiani Kertas' pulp plant occupies 3,400 hectares.
Kiani president Machnan R. Kamaluddin said recently that raw materials for the plant would be supplied by a timber estate owned by PT Tanjung Redeb Hutani, a joint venture between Bob Hasan and state-owned PT Inhutani I.
Since Tanjung Redeb will not be able to feed the pulp plant until 2001, the mill will initially use mixed local hardwood as a raw material.
Kiani Kertas is almost completely owned by timber baron Muhammad "Bob" Hasan through his Kalimanis group which owns almost 500,000 hectares of forest concessions in East Kalimantan.
Hasan, a close associate of Soeharto, said that some of the equity in Kiani Kertas was held by two charitable foundations headed by the President.
Kiani Kertas drew public criticism earlier this year when it secured a Rp 250 billion (US$98 million) loan from the government-administered reforestation funds. The loan to Kiani Kertas was based on a Presidential instruction.
But Hasan said $700 million of financing for the project was derived from equity and $600 million from bank loans.
He said the company would consider floating part of its equity after production was up and running.
Machnan said earlier that Kiani Kertas planned to float its shares on the U.S. Nasdaq stock exchange in 1998.
Machnan said his company chose Nasdaq because the stock exchange allowed new companies with strong potential to float shares without tough requirements such as those on profitability for at least two consecutive years, as imposed by the Jakarta Stock Exchange. (rid)