[Kabar-indonesia] 3 of 3: A Study of UFS Wood Chip & Paper Pulp Mills in Kalimantan

[Joyo at aol.com]

-3 of 3-

Along with the threat of forest destruction, there were issues of potential 
human rights abuses such as the violation of the indigenous peoples' land 
rights, forest-dependent people's loss of livelihoods and environmental pollution.

The Sub-Commission had sent letters, on behalf of the national human rights 
commission, asking South Kalimantan's administration, the provincial assembly 
and the relevant private companies to explain what was going on.This approach 
did not bring results and was not considered worth pursuing further. Instead, 
the consultation process was set up to take a closer look at the issues .

The consultations did not put a stop to plans to build paper pulp and chip 
mills in South Kalimantan, but they did make the companies take a slightly more 
open attitude towards the NGOs.

Company representatives said they were prepared to discuss the preparatory 
process for setting up the mills.However,the information they provided did not 
match the situation on the ground.

There was no news for about a year until, in February 2004, a local newspaper 
reported on plans to establish a wood chip mill in the village of Alle-Alle 
in Kotabaru district .

It turned out that the chip mill company, PT MAL,had been holding public 
meetings since 2003 in the villages ofTanjung Seloka andAlle-Alle .

These meetings only involved local government officials at sub-district and 
village levels,and the owners of the land where PT MAL planned to build its 
factory.The company explained how the mill would be set up. Its public relations 
staff stated that no dangerous waste would be produced by the chip mill - only 
sawdust which can be used to generate electricity.

Local people say the company told them that the mill's noise would be just 
like the general noise level in a village. In other words, there would be no 
noise pollution.The problems of noisy transport supplying the mill and dusty air 
caused by the trucks and the sawdust were not even mentioned.

Kotabaru district's state-owned electricity provider ( ) only supplies 
electricity to the southern part of Pulau Laut from 6 pm to 6 am.This means people 
cannot use any electric appliances during the day.So the villagers of Alle-Alle 
and Tanjung Seloka were naturally delighted that the wood chip mill would 
mean electricity all day long.

PT MAL also committed itself to providing jobs, especially for those who were 
prepared to sell their land to the company.

The local authorities created a 'team' to 53 54 55 PLN promote the release of 
land for the the PT MAL site around November 2004. This represented all 
levels of local government - district (Kotabaru), sub-district (Pulau Laut Selatan) 
and village (Alle-Alle andTanjung) - and the two communities. Its 173 members 
consisted of all the people who owned the 84,352 ha of land in Alle- Alle 
andTanjung Sekola which the company acquired . It was this group which was to 
negotiate with the company.

In a process of bargaining and (enforced) compromise widely used in 
Indonesia, the final price agreed between the community members, district government 
and PT MAL for all land deals was Rp5,500 per square metre (approx US$0.61).This 
was 75% less than the price per square metre the landowners initially asked 
for (Rp20,000/US$2) and slightly above company's opening offer (Rp3,000/US$0.3).

According to some community members involved in the team,PT MAL did not want 
to pay more than Rp5,250/m², while the landowners asked for Rp10,000/m². The 
head of Kotabaru district, Syahrani Mataja,then proposed that both parties 
compromised.

The result was not, of course, an acceptable price for the landowners who 
felt they had lost out.This is significantly lower than current market rates for 
land in Alle-Alle and Desa Tanjung Seloka. For instance, landowners got 
Rp40,000/m² when a local clinic was built. Prices may reach Rp100,000/m² if the land 
is close to the market place or in other commercially attractive areas.

Many landownerswere not happy with the deal and only consented because they 
feared they might lose the opportunity to get some financial benefit from the 
company's presence in their village. After all, many peoplewere eager to sell 
their land and PT MAL was not interested in land plots further from the coast 
for its port development.

Most people in Alle-Alle and Tanjung Seloka welcomed the company's 
presence,hoping that it would make their villages prosper.The villagers dreamed that 
roads would be repaired; electricity would be available 24 hours a 
day;unemployment would fall as people were given jobs by the company; land line and mobile 
telephone networks would come to the village - and more besides.

Local people also hoped that, with the coming of PT MAL, they could revive 
the Karya Bersama village cooperative ( ) inTanjung Seloka.The cooperative's 
activities had dwindled to nothing, but a new management was appointed in 
December 2004. They saw potential opportunities to do a deal with PT MAL, for 
instance over the provision of basic food products such as rice,sugar and cooking oil.

A significant number of villagers sold all their land to the company.They 
sacrificed their fruit trees and coconut palms in the hope that they would 
eventually benefit from the establishment of the mill in their area and kiss goodbye 
to poverty. Will their dreams come true? By late 2005 some 50 families 
inTanjung Seloka who owned a total of around 45 ha of land had yet to receive any 
payment because they were demanding a higher compensation rate of between 
Rp15,000/m² and Rp 25,000/m².Their reasons for claiming more money were: 1. Back in 
November 2004, PT MAL had promised to disburse all payments to the various 
landowners at the same time.The villagers had requested this to avoid any 
jealousy, but PT MAL paid out bit by bit.

Payments were made without any transparency - people were visited by the 
company's public relations staff and told to turn up at a certain time in a 
certain place.

This was when the majority of the villagers of Alle- Alle and Desa Tanjung 
Seloka started to feel wronged. Had PT MAL paid all landowners at the same time, 
they might not have demanded more money.

2. PT MAL had committed itself to make a 'down payment' of Rp1 million to 
each landowner before the end of the Muslim fasting month in November 
2004.However,the company only made payments of Rp750,000 to Rp1 million and only to 
around 15 families.

3. Landowners were led to believe that they would receive the full amount of 
the compensation payments negotiated. In fact, each landowner was charged 
'transportation costs' from Tanjung Seloka to Batulicin on the mainland where the 
payments were made. No-one knows whether these individuals represented the 
company or the local authorities. The amount charged was Rp80,000 - twice the 
usual fare at the time.For the villagers, this made a significant difference.

4. Landowners thought that the company would handle the processing of land 
certificates ( ).

Instead, they had to do it themselves through the village head, costing each 
family Rp200,000-250,000 (US$20-25).

When one of the team members reported this problem to the head of Kotabaru 
district, Sjachrani Mataja, he was told to deal with it himself.The villagers 
were very offended by this remark. As the local government representative, they 
felt the should protect and take care of his constituents' interests.

Instead,he chose to ignore the issue.

The latest information from Tanjung Seloka is that the 50 families who 
demanded more money eventually got nothing. PT MAL decided it only need to use the 
land it acquired back in 2004 .

There are other issues of concern. For example, those who hoped that they 
would be first in the queue for jobs at the wood chip mill have found out that 
this is not the case.The signs of conflict among the villagers are starting to 
show.

Tensions between villagers who feel they have benefited from or lost out in 
their interactions with the company are a serious potential problem - not only 
for the communities ofAlle-Alle andTanjung Seloka,but also for the local 
authorities and the company itself.

As a traditional Indonesian saying goes: fooled by the hope of making a small 
profit,we sometimes lose something much more valuable ( ). In the same way, 
the chip mill development which purported to bring the people of Alle-Alle 
andTanjung Seloka prosperity,could cost them dearly through the loss of their 
livelihoods and conflict in their community.

56 KUD 53 54 55 56 Komnas HAM Indonesia, 2003 Radar Banjar, 27 February 2004 
Walhi South Kalimantan, 2005 Tim Pemilik Lahan Desa Alle-Alle, 2005

SKT bupati Kalah mata hilang uang, kalah urus hilang kerbau 57 A domestic 
industry in Tanjung Seloka DTE 17 57 Information via telephone fromTanjung 
Seloka, 19 January 2006

THE PEOPLEWHO PAYTHE PRICE

Plans to develop a pulp mill and wood chip mill in South Kalimantan will 
disadvantage communities living around the mill sites in Satui,Alle- Alle 
andTanjung Seloka villages in Kotabaru district.

A field visit by the Banjarmasin-basedNGO, LPMA Borneo Selatan, in 2003, 
found that few people in Sungai Cuka village,Satui sub-district,knew about the 
plan to build the pulp mill in their village.

The villagers' 'involvement' in planning the pulp development was through the 
village head. A meeting to provide public information about the plan,held on 
25 July 2003,was attended by 63 leading community members, representing the 
village-level administration, Village Council ( ) and religious leaders. The 
community leaders declared their approval of the Sungai Cuka pulp mill proposal 
and a list of their names was sent to PT HRB and PT MBBM.

What about the rest of the community? The LPMA field researchers were told 
that some local people knew nothing at all about plans to set up a pulp plant in 
their village.The same applies to the wood chip mill development in Alle-Alle 
village.

Information about these plans was only provided to villagers whose land was 
needed for the mill site.

The rest of the community only heard by word of mouth that a company was 
developing a project in their village.They didn't really understand either the 
potential positive or negative impacts.The company had not involved them in the 
planning for theAlle-Alle chip mill because these villagers were of no direct 
concern. However, the whole community will suffer the impacts of this company's 
operations, especially those living closest to the mill.

BPD The majority of Sungai Cuka villagers belong to the Banjar ethnic group. 
Fishing is their main source of livelihood, in addition to growing rice and 
other crops.Their way of life is the same as the Alle-Alle andTanjung Seloka 
villagers,the majority of whom are ethnic Mandar and Bugis.

The forests, rivers, sea and beaches are their lifeblood. If these resources 
are destroyed by the pulp and woodchip industry, where will they go? They have 
no experience of employment as mill workers (i.e.labourers),and theywould 
need time to adjust. Despite this, the company claims that the mill will be a 
newsource of income for the community.

Does the company want to give technical training to villagers who are used to 
casting fishing nets so that they can operate modern machinery they had never 
previously seen? If not, where is this newsource of income for the community? 
In its public information campaign, UFS has said the chip and pulp mill 
projects would be environmentally friendly and would not constitute a threat to 
local people's livelihoods in the future. In reality, the company did not provide 
enough information about their plan to dispose of waste into the sea and the 
impacts of this. Marine pollution is bound to threaten the fisheries on which 
the villagers depend.

Sources:

  LPMA Borneo Selatan,2003

-------------------

While the start-up date of the Satui pulp project remained uncertain, UFS 
unexpectedly announced its intention to take over PT Kiani Kertas (KK) in East 
Kalimantan .

This emerged after UFS successfully took over PT Succsani SmartWork (SSW) on 
27 July 2005.Two 61 PT Kiani Kertas (KK) is a paper pulp company set up by 
timber tycoon Muhammad 'Bob' Hasan, a close friend of former president Soeharto, 
in 1990. It owns a 525,000 tonne paper pulp plant at Mangkajang in Berau 
District, East Kalimantan.

Construction began in 1994 with first production in 1997.

Prabowo Subianto, former commander of the notorious Indonesian Special Forces 
( ) and Soeharto's son-in-law, now acts as president director of Kiani Kertas.

The pulp plant, located far from any major towns, has its own air strip, deep 
water harbour, water and waste treatment plants and a town site which can 
accommodate 800 workers. The site covers 3,400 ha.

Even before Prabowo's company took over PT KK, there were reports of land 
rights violations, Kopassus inadequate compensation, intimidation of plaintiffs 
and environmental pollution. Security around the plant is said to be tight due 
to close links between PT KK and the military.

Until 2001, Kiani Kertas' main supplier of timber was the PT Tanjung Redeb 
Hutani HTI concession, also part of Hasan's group. Later suppliers included PT 
Sumalindo Lestari Jaya, PT Karya Lestari and the state-owned enterprise PT 
Inhutani. The company was also reported to be importing timber as wood chips from 
Australia, but timber from illegal logging was a more likely source.

Sources: Watch!Indonesia,August 2005 StraitsTimes,17 October 2005     KIANI 
KERTAS

BOX 7

PT Kiani Kertas (KK) is a paper pulp company set up by timber tycoon Muhammad 
'Bob' Hasan, a close friend of former president Soeharto, in 1990. It owns a 
525,000 tonne paper pulp plant at Mangkajang in Berau District, East 
Kalimantan.

Construction began in 1994 with first production in 1997.

Prabowo Subianto, former commander of the notorious Indonesian Special Forces 
( ) and Soeharto's son-in-law, now acts as president director of Kiani Kertas.

The pulp plant, located far from any major towns, has its own air strip, deep 
water harbour, water and waste treatment plants and a town site which can 
accommodate 800 workers. The site covers 3,400 ha.

Even before Prabowo's company took over PT KK, there were reports of land 
rights violations, Kopassus inadequate compensation, intimidation of plaintiffs 
and environmental pollution. Security around the plant is said to be tight due 
to close links between PT KK and the military.

Until 2001, Kiani Kertas' main supplier of timber was the PT Tanjung Redeb 
Hutani HTI concession, also part of Hasan's group. Later suppliers included PT 
Sumalindo Lestari Jaya, PT Karya Lestari and the state-owned enterprise PT 
Inhutani. The company was also reported to be importing timber as wood chips from 
Australia, but timber from illegal logging was a more likely source.

Sources: Watch!Indonesia,August 2005 StraitsTimes,17 October 2005

------------------

61 62 63 64 UFS, press release 27 July 2005 Kompas, 16 August 2005, UFS press 
release, 28 September 2005 Straits Times, 17 October 2005

 days before, UFS signed a joint operational management agreement with SSW 
.Nothing is known about PT Succsani's background, track record or previous 
relationship with PT KK.

Under this deal,PT SSW manages the factory's operations and receives proceeds 
from the pulp sales.

The mill resumed production with its first batch of pulp appearing in late 
September 2005 . Production had ground to a halt in May that year when the 
company was, in effect, bankrupt .

A number of Kiani subsidiary companies - part of Bob Hasan's former forestry 
empire - were sold as part of this transaction: PT Kiani Lestari, PTWenang 
Sakti,

62 63 64 The Kiani Kertas pulp factory www.kiani.com

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Joyo note:

Report above is truncated...

FOR FULL REPORT IN PDF, GO TO: 

English:
http://dte.gn.apc.org/cskal06.pdf

Bahasa: 
http://dte.gn.apc.org/ciskal06.pdf

Down-to-Earth - International Campaign for Ecological Justice
in Indonesia

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London SE15 3EN,
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Tel/fax: +44 (0)16977 46266 Email: dte at gn.apc.org

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