Three firms sign timber estate deal

JAKARTA (JP): State-owned forestry firm PT Inhutani III, cigarette producer PT Gudang Garam and Finland-based Nordic Forest Development Holdings Pte. Ltd. (ENSO) agreed yesterday to start the development of a 100,000-hectare pulp timber estate.

The agreement was signed by Inhutani III's president, Kadar Slamet, Gudang Garam's vice president, Gunanto Tanoerahardja, and ENSO's managing director, Eero Palokangas.

Minister of Forestry Djamaludin Suryohadikusumo, who witnessed the signing, said the pulp timber estate will be developed by PT Finnantara Intiga, a joint venture established by the three companies in 1994.

Djamaludin acknowledged that the development of the timber estate will involve high financing, high risks, a large work force and long periods of waiting before harvesting.

For this reason, he continued, a professional and caring management team will be needed to guarantee the project's success.

He said 35 percent of the US$140-million project will be obtained from Finnantara's own sources.

From this amount -- totaling nearly $49 million -- 40 percent will be obtained from Inhutani, 30 percent from Gudang Garam and 30 percent from ENSO.

Djamaludin said Finnantara has been developing try-outs for the pulp timber estate since 1994.

So far it has planted 2,000 hectares of barren land in Sanggau and Sintang, West Kalimantan, with acacia mangium, a species which is ideal for the pulp and paper industry.

The timber estate will be expanded to 3,000 hectares next year, 8,000 hectares in 1998 and 12,000 hectares in the following year.

Timber from the estate will be used as the raw material supply for Finnantara's pulp mill, which will begin construction around 1998. The mill will have an annual production capacity of 500,000 cubic meters and is expected to require an investment of $1 billion.

However, company executives said they had not yet decided on the location of the pulp mill.

ENSO's shares are owned by the Finnish government (45 percent) and the private sector (55 percent).

The forest-based company is capable of processing 30 million cubic meters of timber a year, of which one-fifth comes from the firm's own forests.

The company has a production capacity of three million tons of pulp, 5.5 million tons of paper and two million cubic meters of sawn timber a year. (pwn)