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Research Report

The Revival of Industrial Forest Plantations in Indonesia’s Kalimantan Provinces: Will they help eliminate fiber shortfalls at Sumatran pulp mills or feed the China market?

Romain Pirard
Christian Cossalter
Copyright Date: Jan. 1, 2006
Pages: 75
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Table of Contents

  1. (pp. 1-4)

    In a context of rapid degradation and loss of commercially valuable forests, especially in the lowlands of Sumatra and Kalimantan, the international donor community has worked closely with the Indonesian Ministry of Forestry (MoF) since 2000 to downsize and restructure the country’s timber processing sector. The plywood industry, more than any other industry segment, bears the brunt of this effort. In contrast, the wood pulp industry still appears to be a top government priority, and it is clear that downsizing this industry is not on the Government of Indonesia’s current agenda. Indeed, the signal being sent by government agencies and...

  2. (pp. 5-12)

    The ITCI group has been involved in commercial wood production in Indonesia since the 1970s. Through the first two decades of its operations, the company mainly managed HPH (Hak Pengusahaan Hutan) timber concessions in East Kalimantan for plywood production.³ Initially the company was partially controlled by the US multinational Weyerhaeuser Corporation. Later ITCI ownership was shared between Nusamba (including the Indonesian entrepreneur Mohamed ‘Bob’ Hasan), Bambang Trihatmodjo (ex-President Suharto’s eldest son), and Yayasan Kartika Eka Paksi (an Indonesian army cooperative) (Barr 1998).

    During the 1980s, the group planted mosaics of sengon (Paraserianthes falcataria), eucalypts (mainly Eucalyptus deglupta), acacia (mainly Acacia...

  3. (pp. 13-21)

    Incorporated in 1992, Tanjung Redeb Hutani was controlled by Bob Hasan’s Kalimanis group, which managed multiple HPH timber concessions and had activities in the plywood and wood pulp industries. The company’s HTI pulpwood plantation was established through a 60/40 partnership between Kalimanis and the state forestry enterprise Inhutani I. Following the 1997/98 financial crisis, Tanjung Redeb Hutani and all other Kalimanis group companies were placed under the Indonesian Bank Restructuring Agency (IBRA) due to the heavy debts owed to the government by Bob Hasan (Barr and Setiono 2001).

    In 2003, IBRA sold the Kalimanis group’s stake in Tanjung Redeb Hutani...

  4. (pp. 22-29)

    Sumalindo is an Indonesian company that manages forest concessions and HTI plantation concessions in East Kalimantan. The company used to be controlled by the Astra group, but the Hasko group took over in 2002 with its subsidiary Sumber Graja Sejahtera holding 75% of the shares (Sumalindo financial reports, available Jakarta Stock Exchange). In 1990 Sumalindo established Surya Hutani Jaya as a joint venture with Inhutani, with shares held 60/40 respectively, to manage a HTI pulp plantation in East Kalimantan.

    The Surya Hutani Jaya concession is located approximately two hours from Samarinda, spreading to the north of the Mahakam River for...

  5. (pp. 30-37)

    Finnantara Intiga was established in 1993 as a joint venture between Stora Enso (through its subsidiary Nordic Forest), Gudang Garam, and the state-owned forestry company Inhutani III, with shares divided according to a 30/30/40 split, respectively (Company director,, May 2003). In 2000, Nordic Forest became the principal owner, with 67 percent of the company, and Inhutani III held the remaining shares.

    The first harvest occurred in December 2003 on a small scale. Less than 25,000 m³ of wood were sold. An important turning point came in 2004 when Stora Enso was to decide if it would expand the planted...

  6. (pp. 38-44)

    The Korindo group is a diversified conglomerate based in Indonesia with significant South Korean-interests and activities in various sectors: real estate, sport shoes, finance, oil palm, forestry and wood-based industries ( In 1979, the group started producing plywood, and it now operates four plywood mills in Sumatra, Kalimantan and Irian Jaya. It also owns PT Aspex Kumbong, a paper mill in West Java with newsprint capacity of 440,000 ADT yr¹, which began production in 1985. The HPH timber concession the group had in Central Kalimantan, for supplying its plywood mills, reportedly reached a stage close to depletion in native timber...

  7. (pp. 45-47)

    The management of Adindo Hutani Lestari did not wish to participate in the present study. However, local authorities were able to arrange a field visit, and the authors gathered data from a variety of sources, especially from the company’s RKT annual workplans, interviews with officials from the East Kalimantan Provincial Forestry Bureau (Dinas Kehutanan Propinsi), and a confidential informant. It is noted that CIFOR has not been able to confirm the data in the following sections with company officials for Adindo Hutani Lestari.

    The company was created in 1993, as a joint venture HTI pulp concession between Adindo Foresta Indonesia...

  8. (pp. 48-49)

    The management of Hutan Rindang Banua did not allow the authors to visit their plantation site and declined to provide recent data on plantation development. Most of the information contained in this section is based on Jurgens et al (2005) and Jaakko Pöyry (2001).

    Initially, Hutan Rindang Banua was controlled by Probosutedjo, half-brother of former President Suharto. Its development benefited from the Reforestation Fund subsidies.34 In 2002 United Fiber System Ltd. (UFS), a publicly listed Singaporean company, became the new holder of the concession license (Jurgens et al 2005). UFS also obtained a license to develop a pulp mill (Marga...

  9. (pp. 50-59)

    In the course of our study, several persons, among all those we have met in industry and government circles, have argued that (i) wood transport costs from Kalimantan to Sumatra are too high, and therefore Sumatran pulp mills cannot afford to buy wood from remote concessions in Kalimantan if they want to remain competitive in the international pulp and paper market; and (ii) most plantations in Kalimantan have failed and therefore have a rather low capacity to procure significant volumes of wood.

    Our study provides a basis for discussing these points.

    We first evaluate how much MTH the three large...

  10. (pp. 60-61)

    Our study arose from our concern that largescale natural forest conversion of Sumatran forests will continue in order to feed APP and APRIL pulp mills in Riau and Jambi Provinces. The paradox is that Indonesia has an aggregate area of close to 250,000 ha of medium-sized pulpwood plantations which are currently under-utilized and, in some cases, under low-intensity management, in part because they are not linked to stable markets.

    Our survey of key pulpwood plantations in Kalimantan has allowed us to document a wide range of situations. Most of the plantations we visited were established between 1990 and 1995, when...