CONTENTS

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SUMMARY

The PT TEL scheme is backed by foreign investment and supplied with equipment and services by foreign companies, backed by export credits from their governments - i.e. Northern taxpayers. These investors - such as the Bank of Scotland - who represent British, North American, Scandinavian and Japanese business interests, should immediately withdraw from the PT TEL development for the following reasons:

• Financial grounds – PT TEL is a risky investment given Indonesia’s economic situation, the Japanese recession (the major market for Indonesian paper and pulp) and the financial situation of the Indonesian parent company and its Japanese partners. The paper pulp market is unstable and other producers are cheaper and more reliable than Indonesia.
• Moral grounds – PT TEL has obtained project approval, land and financing though corruption, military oppression and the violation of local people’s rights. The daughter of the deposed dictator Suharto controlled one of the companies involved. Local communities face destitution as their sustainable livelihoods have been destroyed.
• Environmental grounds – PT TEL and its associated plantations have contributed to forest destruction through the replacement of natural forests with plantations and burning land. There is potential threat of serious air and water pollution from the pulp mill which is not committed to chlorine-free technology. The Environmental Impact Assessment was fundamentally flawed and not independent.
• Political grounds - Indonesia is in a state of turmoil. The interim Habibie government has no legitimacy. A general election is planned for June 1999, but it is likely that none of the new parties will have overall control. Demonstrations, riots and social unrest are prevalent. The military still has political as well as security roles.

NOTE: Translations of some Indonesian documents about the PT TEL development, including Down to Earth’s summary and comments on the Environmental Impact Assessment; the Indonesian environmental NGO WALHI’s critique of the EIA; and some press clippings are available from Down to Earth.

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BUSINESS AS USUAL?

In addition, Indonesia has been particularly hard hit by the Asian economic crisis. Major banks have been shut down and many Indonesian companies are going bankrupt. Most foreign investors are staying away until there are signs of greater political and economic stability. Despite enormous public expectations, the new Indonesian government is only paying lip service to reform. It is desperate to increase exports, including paper pulp, in return for a US$43 billion economic rescue loan from the IMF and other international donors. Also, Habibie needs the support of powerful elites who have their own financial and political interests.

The largest Indonesian environmental NGO, WALHI, called for the cancellation of the PT TEL paper and pulp development in the week that B.J. Habibie took over as President from Suharto. This was part of WALHI’s May 1998 statement which called on the new president to introduce sweeping reforms on the environment and control of natural resources in Indonesia, including the cancellation of all logging and plantation concessions and prestigious projects which were awards to members to Suharto’s family and its business cronies.

Nevertheless, the PT TEL development is still going ahead. The agreement was signed by the head of the Barito Pacific Group Prayogo Pangestu; its Chief Director Joso Abdullah; its President Jusuf Anwar; ex-President Suharto’s daughter Hardijanti Rukmana (Tutut); Executive Vice President Nippon Paper Industries, Shigeo Nakajima; General Manager Marubeni Co, Tetsuo Nischizaka; and Lt Gen.Ramli Hasan Basri, Provincial Governor of South Sumatra 1988-1998.

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LOCAL LANDOWNERS FORCED TO GIVE UP

Traditionally, the people of the Muara Enim district have made a living from small-scale rubber plantations, fishing and subsistence agriculture. Around 4,500 people from six villages affected by the mill construction, plus many more ousted to make way for feeder plantations, are now landless and face destitution. The EIA made no mention of local opposition to the project or the thriving local economy which existed.

The local and central governments have ignored villagers’ protests that the mill and plantation have taken their land, cleared mature rainforest and destroyed their livelihoods. Local people have sent letters to the authorities; demonstrated locally, in the provincial capital Palembang and in the capital Jakarta. The early protests were sometimes violent and dramatic. The Benakat community tried to defend their land armed with knives and staves. Women from Dalam village stood naked in front of the bulldozers in order to protect their own small-scale rubber plantations. Gradually, open protests have diminished due to intimidation by local officials who work closely with the police and military authorities to maintain control. In October 1998, military exercises were held in the Muara Enim district, quashing any hopes amongst remaining protestors the new government would bring a change in attitude.

The Japanese MP, Shinichi Koizumi, and representatives of Japanese and international NGOs have visited the PT TEL/MHP locations and members of the local community have been to Japan to press the Japanese Overseas Economic Co-operation Fund (OECF) and investors, including Marubeni, to pull out of the scheme. So far, the Japanese show no signs of withdrawing their US$100 million stake.

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THE FLAWED ENVIRONMENTAL IMPACT ASSESSMENT

• An Environmental Impact Assessment (EIA) was carried out for PT TEL in early 1997, eighteen months after the company started to take land from local people. Under Indonesian law, an EIA report and Management Plan must be approved before such developments take place.

• The EIA was not independent: it was commissioned by PT TEL. The Indonesian company (PT Beakindo Pacific) which did the study is a subsidiary of Beak Pacific, formerly owned by Sandwell – the original Canadian consultants for the project.

• The EIA report was examined by a commission dominated by state employees of the Suharto regime, now denounced for corruption and cronyism. The national environmental NGO WALHI was allowed to present its case, but was not an EIA team member.

• The EIA was only for the PT TEL pulp plant. It did not examine the impacts of the PT MHP plantation set up to supply it, although both are Barito Pacific subsidiaries. It is not certain whether an EIA was ever performed for the feeder plantations.

• The EIA report makes no mention of the local community’s opposition to the pulp plant and plantation, ignoring their many delegations and letters to the local and central authorities.

• The Muara Enim community could not take part in the EIA process, as neither the company nor local government had publicly released any information about the nature or impacts of PT TEL (other than the promise of possible employment). Local communities have the right to contribute to an EIA under the 1997 Environment Law.

• The EIA report is superficial, particularly in its social studies of the area. Information on occupations, incomes and land ownership patterns in the PT TEL location is lacking and there was no health study to provide baseline data in order to assess any future effects of pollution. The environmental data on the pH and temperature of the river water is incomplete and no soil studies have been done.

• Even on this limited data, the EIA report still rated the PT TEL development as negative or neutral on almost all the environmental criteria used. It also reported that the pulp factory would have a harmful effect on community health and could generate social conflict between locals and newcomers. All other socio-economic effects were considered potentially beneficial, but only to newcomers. Despite this, the development was still approved.

• The EIA’s final recommendations are very weak, consisting of broad suggestions with no specific targets, time limits, monitoring schedules, controls or sanctions. These are also largely missing from the Management Plan. Monitoring, action and evaluation are treated as completely separate activities with no mechanism for feedback between the staff and government agencies responsible. There is also no indication of measures to be taken by the company if environmental or social targets are not met or if pollution levels exceed legal limits. Neither is there any mention of emergency planning for serious environmental or social incidents.

THE CANADIAN CONNECTION

Montreal-based engineering company Klockner Stadler Hurter Ltd. (KSH) is responsible for overall technical leadership in the construction of the pulp plant and is involved in project management, engineering, supply of major equipment, supervision of installations and start-up plus training of mill operators. A German subsidiary may also be involved.

Sandwell Inc. of Vancouver is also providing engineering consulting. An academic study reveals that "in 1967, the FAO contracted with Sandwell International, a Canadian forest industry consulting firm, to conduct a study of 'tropical forest problems in Asia and the Far East'...Sandwell recommended that 'some big, well-established company..clear cut the jungle and plant tree species adapted to pulp requirements; in other words, follow the example of New Zealand.' " Furthermore, Sandwell worked with Finnish consultants Jaakko Poyry on initial studies for the notorious Indorayon pulp plant in North Sumatra in 1983-4.

The Canadian companies were helped to win these contracts by a US$205 million loan from Canada’s Export Development Corporation (EDC). This crown corporation exists to promote the sale of Canadian goods and services overseas. The PT TEL deal is expected to generate nearly 6,800 person-years of employment in Canada and will benefit over 150 Canadian small- and medium-sized sub-contractors and suppliers, according to KSH Executive Vice President Alan R. Curleigh.

In answer to Canadian activists who question why their government is supporting a deal which damages the livelihoods and environment of Indonesian communities, Minister for International Trade, Sergio Marchi, stated that:

"an environmental impact assessment of this project was undertaken by an independent environmental consultant, namely Beak Pacific Consultants Ltd. The consultant's overall conclusion was that the project would generate a net positive impact on the economic, social and physical environment. In particular, the report asserted that the project would be consistent with national development programs, including job creation, infrastructure development, and improved forest protection."

He also said that the project was "subject to the approvals and permits process of the Indonesian authorities, including those of the Ministries of Forestry, Environment, Industry, Transmigration, Public Works, BAPEDAL (The Environmental Impact Control Agency) and the Provincial Governor of South Sumatra." The approval of this scheme by officials from a government riddled with corruption after a flawed EIA means nothing.

BEAK PACIFIC INTERNATIONAL

The EIA was actually done by PT Beakindo Pacific: a Indonesian company associated with the Canadian consultants Beak Pacific International. Beak’s presence in Indonesia dates back to the early 1980s. Interestingly, the company was owned by Sandwell – the Vancouver consultants working on the PT TEL project – from 1973 to 1982. Beak is no longer owned by Sandwell, but the link is obviously close.

PT Beakindo Pacific has a close relationship with Indonesian government ministries and the professional associations which dominate the major sectors of the Indonesian economy. It has operating licenses with the Indonesian Ministries of Mines and Energy, Forestry, Industry and the Environment and describes itself as an active member of the Indonesian Pulp & Paper Association (APKI) as well as the Indonesian Mining Association (IMA), Indonesian Petroleum Association (IPA), Association of Indonesian Consultants (INKINDO) and Indonesian Consultants Association (HMPI). The independence of such a company’s investigations is questionable, especially given statements in its own publicity about its role in helping Indonesian operators to obtain financing and government permits.

“ P.T. Beakindo Pacific, our affiliate company in Indonesia, employs a team of Indonesian environmental specialists. The local expertise augments the internationally based capability of Beak. The combined talents offer services familiar with Indonesian environmental regulatory systems; socio-economic issues, and Indonesian business culture… The diverse range of projects undertaken by PT Beakindo Pacific includes:…Bankable environmental impact studies for development of a pulp and paper mill and associated forest plantation for Barito Pacific Group. Assisted client in securing international financing for the project. Liaised with authorities to obtain environmental approvals…” Beak Pacific International homepage

PT Beakindo Pacific has assisted at least one other major Canadian company in a controversial Indonesian project in the recent past. It performed the Environmental Impact Assessment study for the massive extension of a nickel mine in Sulawesi owned by PT INCO – the Indonesian subsidiary of Canadian mining giant INCO whose mining and smelting operations in Sudbury are a case study in environmental pollution. Here again Beak describes its contribution as:
"guiding the clients through AMDAL, the Indonesian environmental approval process."

Hardly an independent assessment!

FINLAND/SWEDEN

There is a close connection between engineering companies in the Nordic countries, and between these companies, development aid and forestry consultants. In the late 1980s, Finland’s development aid budget was expanded very rapidly. Consultancy companies were quick to propose projects and forestry was a top priority. One of those to benefit was Jaakko Poyry – engineering and forestry consultants – who have since been involved in almost every pulp mill and feeder plantation scheme in Indonesia. It is hardly surprising that Finnish and Swedish machinery manufacturers and contractors win contracts to supply the plants, thus making a significant contribution to Scandinavian exports.

Finnish companies are supplying machinery worth 650 million FIM (US$130 million) for the PT TEL pulp mill. Sunds Defibrator will provide engineering services, main machinery and training. The equipment will be manufactured at the company's manufacturing facilities in Sweden and Finland. This will include a $64 million fibre line consisting of woodhandling, washing, delignification, bleaching and baling systems. Ahlstrom Machinery will supply equipment for cooking, washing, oxidising the pulp and the evaporation and lime kiln units worth $60 million. Kvaerner Pulping has announced the supply of $48 million soda and power boilers, which will be built in Finland.

The Finnish suppliers will be financed by multi-million project credit arranged by Finnish Export Credit, Merita Bank and SE-Banken. A major part of the financing is being guaranteed by the Finnish Guarantee Board. In answer to questioning by Finnish NGOs in 1997, a senior official from the Export Credit department said that it does not and will not apply any environmental or social criteria for their financing.

Sunds Defibrator claims that “the most environmentally sound technology has been chosen for the Musi Pulp Project”. Trade journals say the equipment for wood handling will result in a high yield and high chip quality; fibre presses will reduce energy and water consumption; and oxygen delignification will reduce chlorine bleaching. These technical details neglect to mention that far more ‘environmentally friendly’ technology is in use in the North. Pulp mills can use a whitening process which does not use any chlorine (TCF). At best, the PT TEL plant will use the more polluting ECF technology.

The links between Scandinavian companies and the project form an intricate network. Sunds Defibrator is part of the Finnish Rauma Group. The main owner of Rauma Group is UPM-Kymmene, which in 1998 became the focus of international attention after a share-swop deal with APRIL – the holding company which owns the controversial Riau Andalan Pulp and Paper development also in Indonesia. The Finnish company Tampella Power, formerly listed as a participant in PT TEL, now belongs to the Kvaerner Group which is partly Norwegian-owned. The Swedish company Cellmark will buy and sell the pulp internationally.

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FOREIGN FINANCING

		US$
Indonesian Cos.	PT Tridan Satriaputra + PT Barito Pacific	200 million
Japanese investment	Sumatra Paper Corp (OECF + Marubeni + Nippon)	100 million
Export credits	N. America and Europe	650 million
Commercial lenders	Including AT&T+ Bank of Scotland	341 million
TOTAL	US$	1,291million

The commercial bank financing is being provided by a syndicate set up by financiers Morgan Grenfell, owned by Deutsche Bank. Members of the syndicate include the Bank of Scotland, AT&T Capital Corporation, the Bank of Tokyo-Mitsubishi Ltd., the Fuji Bank, Korea First Bank, Merita Bank Ltd. and Sakura Finance Asia Limited. The Bank Austria was listed as a syndicate member in news reports of the deal, but has denied any involvement. See p8-10 for debt financing through export credits from Canada, Germany, Finland and Sweden.

According to a spokesman from Deutsche Bank, the financial agreement included stringent environmental conditions. One of these was that no rainforest should be cleared for the production of paper pulp by PT TEL – a condition broken when the feeder plantation for the development was established in the early 1990s. Deutsche Bank have refused to provide a copy of this agreement or any other conditions “for reasons of commercial confidentiality.”

The Bank of Scotland has replied to the many account holders who have written to express their concern about its investment with a photocopied statement which says:

"Given the nature of this project, particular care has been taken by all parties to ensure that the project is environmentally friendly. … Comprehensive environmental audits of the Mill and Plantation have been made. The report concluded, based on existing data and engineering design information, that the Mill and Plantation would actually have net positive impacts on the physical, biological and socio-economic environment. …The analysis of potential environmental impacts is a key consideration in all the projects which we propose funding."

Bank of Scotland’s management have clearly not read the official EIA: a five volume work in Indonesian (see p5-7). As a result of the EIA report and additional evidence, the EIA commission can make a company modify its Environmental Management Plan. Some final conditions were imposed on PT TEL several months after the June 1997 EIA hearing, but these have not been released to NGOs. Its Public Relations Department states that it will only review its involvement “if fresh evidence is produced from substantiated sources”. When questioned about what sources may be credible, a senior bank official said that Indonesian government reports would be acceptable. Given the Indonesian government’s support for the PT TEL development and the substantial involvement of the (then) president’s eldest daughter in the scheme, such evidence is unlikely to be forthcoming!

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PT TEL FEEDER PLANTATION COMPANY GUILTY OF FOREST FIRES

Choking smoke enveloped South Sumatra for several months. The fires were particularly bad due to the expansion of plantations for the paper pulp and palm oil industries in the province. Daily life was completely disrupted by the smoke. Visibility was down to a few metres. Traffic crept through the provincial capital Palembang with full headlights in the day time. Supplies of face masks and medicines were totally inadequate. The thousands of children who still had to attend school wore cloths round their faces even indoors. Hospitals were crowded with people suffering respiratory ailments. The effects have been compared to every man, woman and child smoking a couple of packets of cigarettes a days for several months. The long-term damage to people’s health is inestimable.

The plantation company set up to supply the PT TEL mill was found guilty of illegally using fire to clear forest lands by a court in Palembang, South Sumatra in October 1998. PT Musi Hutan Persada (PT MHP) - like PT TEL, a subsidiary of the giant timber conglomerate Barito Pacific – was one of 176 companies ‘named and shamed’ by Indonesia’s Minister of Forestry in September 1997 for their part in the devastating forest fires of 1997/8. However, the government has not prosecuted any plantation or logging companies for starting fires on their concessions. The court action against PT MHP was brought by the environmental NGO WALHI (Indonesia’s Friends of the Earth) as one of eleven plantation companies in the province which deliberately contributed to the 1997/8 fires. WALHI won the case after satellite image evidence, analysed by WWF-Indonesia experts, was supported by local witnesses who saw PT MHP employees burning land.

The Indonesian authorities and foreign investors have made much of PT TEL’s claims that its pulp plantations would supply all the wood for the mill, but it is far from certain that the MHP plantation can meet this demand. The company estimates that nearly 2 million cubic metres of wood are needed for an annual pulp production of 450,000 tonnes: 4.3m3 of timber for every tonne of pulp produced. Around 155,000 hectares of plantation have been established, according to company figures. The EIA estimates plantation production at 180m3/ha, so each year 10,750ha of plantation will have to be cleared to feed the pulp mill. On this basis, only 96,750ha of plantation could supply the plant on a continuous of 8 years growth and 1 year replanting. Disease, drought and forest fires can seriously affect plantation productivity. PT TEL/MHP have not revealed the extent to which the 1997 fires affected their plantations, but field reports from environmental groups indicate extensive damage. Until the plantations are sufficiently mature, PT MHP will have to rely on timber felled from natural forests to meet existing production targets, quite apart from the increased demand if the company goes ahead with expansion plans for 1 million tonnes annual production early next decade.

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SOCIAL IMPACTS

• The EIA report clearly shows that the purpose of this and other paper pulp plants in Indonesia is to increase export revenues, rather than to benefit the local community. These pressures have increased since Indonesia’s economic crisis and the IMF conditions for a financial ‘rescue package’. The PT TEL scheme is destroying a community and its sustainable livelihoods at a time when 60% of Indonesia’s population is below the poverty line and the figures are rising monthly.

• Local people are able to make a reasonable living from their traditional rubber plantations. Each hectare of mature plantation produces an average of 10kg. In 1995, when the PT TEL project began, local rubber sold for Rp 1,200-1,500 per kilo. This generated a monthly income of Rp 3 million – nearly US $1,000 per month at a time when the average national income was only just over $1,000 per year. At today’s prices their real income would be considerably greater. Also, the livelihoods of people who make a living from fishing in the river or rearing fish in ponds is threatened by the serious risk of water and air pollution from PT TEL.

• Hundreds of workers employed by subcontractors constructing the PT TEL plant demanded a pay rise in October ‘98. Some of the installation was damaged in the protests. They complained that they could not survive on their wages and had no land to grow food. There was 90% inflation in Indonesia in 1998 and the rupiah devalued by half. The contractors (PT Klockner and Holland Ballast Theis) are subsidiaries of foreign companies which are generally paid in dollars, but pay wages in rupiah.

• Once the contractors have finished clearing the site and installing equipment, most labourers will be dismissed. The plant is intended to employ 15,000 people, but few of the local population will have the educational qualifications or skills required. Local people who are now landless have no alternative source of income. They are forced to compete for any manual work with more experienced outsiders.

• Riots, ethnic conflicts, vandalism and violence have erupted in many Indonesian villages, towns and cities in Indonesia over the past year. PT TEL is generating social conflict: between people who have given up their land under pressure, those who are still holding onto their land and migrant workers attracted to the area by the prospect of employment. Locals are already worried by the growth in prostitution which has accompanied the influx of migrant workers and foreign staff.

• Many measures in the Management Plan to counteract PT TEL’s negative social and environmental impacts or to enhance potential positive effects identified in the EIA are vague and inappropriate. Much emphasis is placed on ”increasing public awareness” – a meaningless response to the serious problems caused by landlessness, unemployment and pollution.

• The company acknowledges in the EIA that there is a serious health risk to the community from air and water pollution, but does not address how this can be reduced. PT TEL plans to establish a clinic once the plant is operational. According to the Management Plan, this is primarily intended for PT TEL workers and their families, but the surrounding community may also use it.

• Pulp and paper developments have generated serious conflicts between local communities and companies elsewhere in Sumatra. In North Sumatra, local people have protested for ten years about the destruction of forests and air and water pollution caused by Indorayon’s plant at Porsea (PT IIU). The pulp mill was shut down for three months in 1998 after thousands of demonstrators blockaded it. Protestors have been arrested, beaten and shot by security forces in recent incidents. Further south, Riau Andalan Paper and Pulp has caused land rights disputes in which one local man was killed in 1998.

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CORRUPTION, COLLUSION AND NEPOTISM

Suharto’s eldest daughter Tutut (Siti Hardiyanti Rukmana) controlled PT Tridan Satriputra, nominally Barito Pacific’s business partner in PT TEL and PT MPH. It was common practice during the Suharto era for private firms to form joint ventures with companies owned by the President and his family in order to obtain the necessary permits and to attract foreign investment. In many cases, the Suharto companies received shares for free while using their ‘investment’ to extract lucrative fees. Tutut ‘gave up’ her shares in PT TEL and PT MHP when she was briefly appointed Minister of Social Affairs in March 1998. Indonesia’s highest legislative body, the MPR, voted in November 1998 to investigate the wealth of the Suharto family and to prosecute cases of corruption. Several new contracts to companies owned by Tutut have been cancelled and further investigations are pending.

Pangestu Prayogo, head of the giant Barito Pacific Group which owns both PT TEL and PT MHP, was summoned by the Regional Public Prosecutor in late 1998 about possible corruption in PT TEL, but there have been no public statements about the outcome.

The Governor of South Sumatra, Lt Gen Ramli Hasan Basri, was always a strong supporter of the PT TEL development. An official document signed by him on October 28th 1994 reveals that the local government claimed 5,000 hectares of local people’s land as the local government’s stake in ‘industrial development’. During his ten-year term of office as governor, this military officer pressurised the local press to take a pro-government stance. The Sriwijaya Post which criticised the PT TEL development was closed down for a time.

The former mayor of Muara Enim, Hasan Zen, has long been accused of corruption in handling PT TEL compensation cases. Hasan Zen is one of the local officials thought to have creamed off the equivalent of thousands of dollars from compensation due to villagers for their crops and homes. He has had to report to the Public Prosecutor’s office. Such is the cosy relationship between officials in South Sumatra that Zen was interviewed in the evening, since he was ‘too busy’ to attend during the day. Other officials including the head of the local Land Agency and district administrators for Gunung Megang and Rambang Dangku have also been summoned, but no further action has been taken.

PT TEL handed over Rp1.6 billion (then less than US$500,000) in 1995 to the local government of Muara Enim to settle all compensation claims. Rubber farmers were only paid Rp5,000 compensation per rubber tree, (although they were worth more than double that) and more than half their trees were not counted.

In February 1999, thousands of farmers from the six villages immediately affected by PT TEL, held a non-violent protest for eight hours outside the site gates. They claimed that the inadequate payment they had received for their land was the result of corruption and intimidation by the local authorities and demanded re-negotiation of compensation. Althought this was the biggest PT TEL protest to date, no local newspapers reported it.

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ADDITIONAL BACKGROUND

• The PT TEL pulp mill site is one of the biggest in SE Asia covering 1,250ha. It directly affects five villages - Desa Dalam in Gunung Megang district; and Banuayu, Muara Niru, Tebat Agung and Grinam in Rambang Dangku district of South Sumatra – where some 12,000 people live. Many of these families are now landless and depend on casual work.

• Another 30 villages along the River Lematang, with a total population of around 30,000 people, are threatened by pollution from the PT TEL plant which will use the river for its water supply and waste disposal. Seven giant waste pipes have been constructed. The local people depend on this river for all their daily needs including drinking water, cooking and washing. Many live by fishing and river transport.

• Ministry of Forestry maps show this part of the province of South Sumatra as covered by scrub, swamp forest and grassland. However, some is mature rainforest; other parts are settlements or used by local people for their traditional rubber and fruit tree plantations. The Indonesian government’s policy of creating ‘Industrial Plantations’ (HTI) was originally intended to reforest ‘critical land’ and forest which has been heavily overlogged by commercial companies. Here, the first areas to be used were those covered with forest, as the plantation company (PT MHP) can sell the timber before re-planting with introduced species.

• The PT TEL plant is to be fed by a 300,000 hectare plantation concession established by PT Musi Hutan Persada (another subsidiary of Barito Pacific). In addition to being found guilty in 1998 of illegally burning to clear land for plantation with fast-growing exotic species of Acacia, PT MHP has illegally cleared at least 1,000 hectares of mature rainforest. One third of the Benakat community’s ancestral forest – Rimba Sekampung – was clear felled for plantation by PT MHP. The remaining 2,000 hectares were only saved from destruction after the intervention of local people, environmental activists and legal representatives. This clearly violates one condition of the agreement signed by international parties to the financial syndicate - that no rainforest should be destroyed for the PT TEL project.

• Unconfirmed reports from Indonesia in March 1999 relate that PT MHP is felling vilagers’ ancestral forests around the village of Pangrelo.

• Transmigrants have also taken legal action against PT MHP for breaking an agreement to provide them with jobs, rubber trees and homes. Up to two thousand migrants from Java and other parts of Sumatra at SP1 Muara Enim, were left with no source of food or income for three years from 1992.

• The Japanese company Marubeni Co. has negotiated a monopoly to import 20% of Japan’s paper pulp needs from PT TEL. The Swedish company CellMark has the monopoly for European exports. Japan, South Korea and China have been the most important export markets for Indonesia’s burgeoning pulp industry. The pattern may shift towards more European purchasers since the recent down turn in the economies of Asian countries. Indonesia exported 1,127,000 tonnes of pulp in 1996, worth US$431 million.

Further information is contained in the DtE Briefing Document ‘Pulping the People’, June 1997 available from dtecampaign@gn.apc.org