Investigative report on APP's forest destruction in Yunnan｜Greenpeace by 綠色和平東亞分部 Greenpeace East Asia

Investigative Report on APP's Forest Destruction in Yunnan

2 0 0 4 . 1 1

PREFACE APP is one of the world's largest pulp and papermaking companies as well as the largest financial nightmare in Asia. Any company that knows about the background of APP will never dare to become involved lest that it be sucked into APP's financial black hole. From large-area illegal logging to incompetent and irresponsible financial management, scandals always follow this company. APP is one of the most notorious forest destroyers in the world. For a long time, vast Indonesian primeval rain forest has been exploited to the brink of extermination. It was not until October 28th, 2004 that APP decided to suspend the logging of Sumatran HCVF in Indonesia by the relentless efforts of local environmental protection organizations. However, from the 1990s on, they have turned their logging target to the natural forests in south China. During the short period of one year beginning from August 2002, Sinar Mas Group-APP China carried through its so-called "planting forests on barren lands" program, beginning with the enclosure of a huge forest-pulp base of 27,500,000 mu in Southern Yunnan province. However, according to statistics, of its 27,500, 000 mu base, only 5,183,000 mu, which is only 20% of its area, is suitable for planting forests. In July and September 2004, in two Greenpeace field surveys, it was discovered that the company was logging in natural forests. In this report, we have made an objective and meticulous analysis of the problems existing in the Yunnan eucalypt forest-pulp-paper integration project executed by Sinar Mas Group-APP China, which mainly include: The logging of large-area natural forests, which is against the Forest Law and "The National Natural Forest Protection Project"; Large-scale planting of eucalypts will bring about severe damage to biodiversity in Yunnan; The transportation procedures of woodland and timber are not in accordance with the relevant regulations, which lead to the loss of state-owned assets and damage to the legal interests of forest farmers. Beginning from 2002, because of the worsening reputation of Sinar Mas Group-APP China, the world has started to refuse the commercial intrusions of APP. Due to its previous foul financial records and contemporary circumstances, the expansion plan of APP China cannot be understood. Then what does this expansion mean for China? This report has unmasked the truth of Sinar Mas Group-APP China transgressing international institutions and seeking substantive profits at the cost of ecological calamity. Greenpeace hopes to use this to warn the concerned departments about the crisis that might occur in Yunnan. Please save the forests in Yunnan and prevent Sinar Mas Group from further enclosing woodland and destroying the forests in China!

Campaign Director of Greenpeace China Lo Sze ping November 2004 3

Contents 1. Preface 2. Who is APP?

History

A debt-ridden behemoth

APP and illegal logging

The world doesn't want APP products

The future of APP

3. Expansion in China

Background

Hainan

4. The forests in Yunnan are in danger

Biodiversity in Yunnan

The Yunnan eucalypt forest-pulp-paper integration project by Sinar Mas Group-APP China

27,500, 000 mu eucalypt plantation project of Sinar Mas APP in Yunnan

5. Conclusion and Requirements

Conclusion

Greenpeace calls to action

Appendix 1: Cases of Sinar Mas Group destroying Asian forests

Case 1 The destroyer of Indonesian tropical rainforests

Case 2 Illegal plantations in Cambodia

Eyeing the rest of Asia

Appendix 2: Case studies of plantations and eucalypts

Appendix 3: Other materials on APP, Sinar Mas Group

Special thanks: to Greg Higgs, Bing Liu, Sohan Ko, Patrick Anderson, Alex Ryan, Ginting Longgena, Jens Wieting, Takahiro Kohama, Liu Haiying, Yue Yihua, Li Moxuan, Bai Yunwen; the contribution of Global Witness, Robin Hood and other international environmental protection organizations on this report.

Who is APP?

History The origins of Asia Pulp & Paper (APP) can be traced back to 1984 when the Sinar Mas Group of Indonesia,

controlled by the Wijaya family, started operating Indah Kiat Pulp & Paper in Riau Province on Sumatra Island, Indonesia. Ten years later, in 1994, Sinar Mas founded APP to consolidate its pulp and paper assets, including Indah Kiat. APP was incorporates in Singapore, and listed on the New York Stock Exchange (NYSE) in 1995. By 2000, it was the largest paper producer in Asia outside of Japan.1

APP Structure as of September 2004

Indonesia

China

From its initial public offering (IPO) in April 1995 to American Depositary Receipts (ADRs) issued in 1997 and 1999, APP had raised US$1 billion. On top of this equity, APP frequently issued bonds, syndicated loans, and was pursued aggressively by investment banks. Meanwhile, analysts Salomon Smith Barney and Morgan Stanley Dean Witter gave highly optimistic recommendations for investment.2 Though the Sinar Mas Group lost its family-owned bank in the wake of the Asian Economic Crisis, APP remained as strong as ever. In fact, due to a guaranteed cheap tropical wood supply in Indonesia and plenty of deferred taxes (subsidiary Indah Kiat paid no taxes in the 1990s, totaling over $358 million by 2001)3, APP soon became one of the world's lowest-cost producer of pulp and paper.4 The company brazenly expanded in Indonesia, and moved into China in 1996. By the end of 1999, it had dozens of facilities in Indonesia and China, and it was selling its products to over 60 countries.5

A debt-ridden behemoth In the 1990s, APP looked like the most successful pulp and paper companies in Asia. But the dream was too good to last. The company started to lose money. Higher operating costs, major accounting errors, and an unmanageable debt drove its share price down. From August 2000 to February 2001, the ADRs on the New York Stock Exchange (NYSE) fell from $5.02 to $0.17 per share.6 APP was on the verge of bankruptcy. In March 2001, only two months after being threatened with delisting from the NYSE, APP stopped paying its global US$13.9 billion debt, considered to be the largest debt in the world's emerging markets.7 This includes $6.7 billion in Indonesian dept and $7.2 billion of Chinese debt. Overall, APP owes hundreds of creditors around the world, including in banks, export credit agencies, pension funds and individual bondholders. Half a year later, on October 25, 2001, APP was delisted from the NYSE. It is now trading on OTC8 under the symbol "APUUY" and at the time of writing of this report, it was hovering around USD$0.04 a share. APP's shares are currently so worthless that even the largest public shareholders own no more than a thousand dollars or so.9 Naturally, many lenders are not happy with the prospect of losing millions or billions of dollars while APP merrily continues its expansion. While some companies, such as Japanese Kanematsu Corporation, have essentially written off their debt10, most companies are fighting back. Two US hedge funds, Gramercy Advisors and Oaktree Capital Management, have taken legal measures in an attempt to seize some of APP's Indonesian assets.11 More recently, the US Export-Import Bank, along with other fund managers, have pursued legal action against APP12, complaining that the company is planning to expand its operations in China before it begins repaying its debt.13 In various lawsuits in the US, APP has been accused of false and misleading financial statements and press releases, as well as the group's failure to disclose currency swap contracts. At the same time, Singaporean police conducted a lengthy criminal investigation into APP, though the findings were never made public.14 The situation is very messy. APP Indonesian subsidiary PT Lontar Papyrus launched lawsuits of its own against APP's creditors; subsequently, the New York Supreme Court issued restraining orders against Lontar Papyrus. "APP's continued attempts to avoid its corporate obligations through the Indonesian courts have to stop," said Melissa Obegi, Associate General Counsel for APP Stocks Price chart for 5 years

[source: Reuters]

Oaktree Capital, "APP's filing suit after frivolous suit, but doesn't help the country attract much-needed investment capital." 15 In September, 2004, two Indonesian district courts separately invalidated a total of over $1 billion in bonds sold in 1994 and 1995 by APP subsidiaries Indah Kiat and Lontar Papyrus,16 a move which may appear to protect APP in the short term, but may very well discourage future foreign investment in Indonesia overall. The controversy was symbolized once again on September 20, 2004, when Oaktree Capital Management and Gramercy Advisors seized APP's booth at the international School, Home & Office Products Association (SHOPA) trade show in Orlando, Florida. 17 APP was narrowly able to reopen their booth due to a legal technicality,18 but the actions of Oaktree and Gramercy represent some of the bitter attitudes towards APP in the investment community.

APP and illegal logging Today, the forestry industry in Indonesia is out of control in regards to corruption and illegality. Up to ninety per cent of all industrial wood extraction is illegal.19 For 2003 the Forestry Department's annual allowable cut for the nation's forests was set at 6.9 million cubic meters. 20 This was dwarfed by an estimated 80 million cubic meters that were logged to feed the nation's ply, pulp and saw mills and for illegal export.21 More conservative estimates still show that over half of the wood supply in Indonesia is from illegal sources (50-70 percent in 2000). Overall, illegal logging is said to have destroyed around 10 million hectares of forest.22 With Indonesia having one of the highest rates of illegal logging in the world, and APP being its largest pulp producer, it would be hard to believe that APP is not also a partner in crime. APP of course denies all such allegations, stating that "all wood source that is used by APP retains legal documents."23 On the contrary, there is solid proof that APP is directly implicated in illegal logging. WWF Indonesia's Forest Crimes Unit has uncovered the following well-documented cases of illegal activity: Based on careful mapping, WWF has demonstrated that APP wood supplier Mapala Rabda logged illegally inside the Bukit Batu Nature Reserve.24 APP logged illegally in Mapala Rabda by logging three months past a permit had expired, and by logging 370 percent above the legal maximum volume. 25 APP purchased wood illegally from the proposed Tesso Nilo National Park as recently as in April 2004.26 Forest Rescue Alliance Riau, consisting of three local NGO networks - WALHI, JIKALAHARI and ORNOP Association Riau, found strong evidence that wood illegally harvested within Tesso Nilo was delivered to APP in July 2004. 27 More generally, APP has been clearing forests with more than 20 m3/hectare of commercially valuable wood, a process which is illegal under Indonesian law, and a minimum of 30% of APP's wood in general is of questionable origin. 28 WWF has amassed such a huge volume of evidence29 that it seems incredulous that APP would even try to dispute their clear involvement in illegal logging.

The world doesn't want APP products Companies that have stopped buying from or plan to boycott APP Ricoh:

(Japan)

Office Depot:

(USA)

Metro:

(Germany)

APP has a very bad reputation around the world. First, their investors complained. More recently, companies around the world - in England, Germany, Japan and the US - are refusing to buy their products because they don't want to be implicated in APP's destructive activities. In the UK, there has been a noticeable trend by importers to avoid purchasing from APP after the NGO Friends of the Earth released a report entitled "Paper Tiger, Hidden Dragons" in 2002. And in 2003, the most important Italian producer of graphic paper was receptive to Greenpeace Italy's request to stop importing pulp and paper from Indonesia. One of the first major companies to publicly shift was US-based Office Depot, the world's largest reseller of paper. The company stated "that as of Jan. 19, 2004, Office Depot would no longer source product from APP", citing concerns over APP's unsustainable logging in Sumatra, Indonesia.30 In August 2004, the large German paper merchant Metro agreed to stop buying copy paper from APP, due to a campaign by the NGO Robin Wood.31 Later in the same month, during the Asia Forest Partnership conference in Indonesia, Ricoh and other Japanese buyers announced their intention to boycott APP's products, after lobbying by WWF and other Japanese NGOs. Ricoh represents 20% of APP's $500 million exports to Japan.32 There is hope yet that APP can be stopped.

The future of APP Since defaulting on its loans in 2001, APP has made deals with some of its debtors. However, it has continuously put off a full restructuring plan, which would spin off some of its Indonesian assets into separate companies. At the time of writing of this report, there was still no restructuring plan in place.33 The situation in China is very different. In 2003, APP successfully spun off APP China through a debt-for-equity swap, giving former creditors 99.9% of the shares in APP's Chinese assets, leaving APP with officially only 0.1% ownership of APP China. APP still maintains some level of control, and the rumor is that the Indonesian Wijaya family (who control APP parent Sinar Mas) is currently buying back APP China's debt at a discount.34Worse yet, New York-based Bondholder Communications has accused APP of illegally manipulating the vote that led to the debt-for-equity swap.35 Uncertainty around the future of APP is enormous. The company has an unprecedented debt - billions of dollars of which may never be repaid - and unresolved legal cases, not to mention environmental issues, which are discussed later in this report. APP is Asia's biggest financial nightmare. It is an understatement to say that APP is risky company to invest in. Despite APP's horrendous financial record internationally only one bank, the China Bank of Communications, refuses to lend money to the company.36All other Chinese institutions seem to feel no sense of risk in supporting APP, giving the company essentially a green light to expand in China. APP China Group even plans to list on the Shanghai stock exchange within two years.37 This seems strange given the company's financial and environmental record. But even more atrocious is what this expansion means for the future of China's natural forests.

Expansion in China

Background Outside of Indonesia, APP's most intensive area of investment has been in China. It began when APP established a holding

company in China (APP China Holdings Ltd.) shortly after the company was founded. APP's expansion in China was very fast in 1990s with the help of about US$1.7 billion in loans from China's domestic banks. In February 1999, APP China Holding Ltd. Re-established itself in Shanghai as Sinar Mas Paper Investment (China) (SMPI), based on the name of APP's parent company, the Sinar Mas Group. SMPI's legal representative is Huang Zhiyuan, the CEO of APP. Though not called "Asia Pulp and Paper" anymore, for all intensive purposes it is the same company. The birth of SMPI in 1999 marks the beginning of APP's most aggressive expansion phase in China. By the end of 1999, APP was the largest producer of tissue paper in China. It also became one of the largest manufacturers of high quality paper and packaging products in China. By 2001, APP had five large mills in China, with an annual capacity of 1.2 million tons of printing and writing paper, 0.5 million tonnes of packaging paper, and about 100,000 tons of tissue. APP's Gold East Paper is today the second-largest paper mill in China. Despite being in enormous debt and delicately balancing on the verge of bankruptcy worldwide, APP has continued to expand in China in 2004. It is installing a new machine in Jiangsu (Gold East Paper), building a brand new carton board mill in Zhejiang (Ningbo APP Paper, 25% owned by APP38), constructing a massive 1 million tone/year pulp mill in Hainan (described below), and is leasing with plans to buy the Shanghai Xinlun Paper mill39 These investments total $3.1 billion, 70% of which has been financed by loans from Chinese banks. One has to wonder how Chinese banks are so willing to finance APP at a time when no other banks in the world would dream of doing so. Before APP's debt crisis, the company operated five large tree farms in Hainan, Guangxi and Guangdong. It had contracts on 18 million mu (just over 1 million hectares) of forestry land, and had planted a little under 10% of it.40 In the heat of its debt crisis in 2001, APP's plantation project in Hainan was suspended and APP's entire business in China faced possible restructuring or separation from APP. Ironically, however, in the same year APP suddenly began another wave of expansion in China. APP launched

APP plantation projects in China Hainan:

Investment of US$1.3 billion. Pulp mill capacity of 1,100,000 ADT. Land for plantations: 200,000 hectares.

Yunnan:

Land for plantations: almost 2 million hectares.

Guangxi:

Two projects with a total investment of 50 billion RMB (US$6.02 billion). Two paper mills with capacities of 1.8 million tons and 3.1 million tons. Land for plantations: 600,000 hectares.

numerous plantation investment projects in Hainan, Jiangxi, Henan, Hunan and Yunnan, all of which are important forestry provinces in China. APP's tactic is called "encircling land" in Chinese, meaning APP is trying to scramble for as much forestry and land resources as it can get in China with hopes of being able to retain as much as it can after potential restructuring.

Hainan APP has just finished construction of a brand new massive pulp mill in Hainan, called Hainan Gold Hai Pulp Co. Ltd., which it will

begin to operate in November 2004. With a capacity of over 1 million tonnes/year and its associated investment of US$ 1.3 billion, it will be the biggest pulp mill in China. Norwegian-based Aker Kvaerner as supplied the pulp line machine, which will be the largest single-line unit in the world.41 APP's interest in Hainan province originates in 1995 when it established Sinar Mas Hainan Pulp and Forestry Ltd (SMHP). In 1997, APP created a joint venture called Hainan Jinhua Forestry Ltd. (JFL) whose aim was to construct the tree farm with a plantation project of 3.5 million mu42 (about 200,000 hectares), approved by State Council. The intention was to plant enough eucalyptus to supply the planned pulp mill. Caijing Magazine conducted an investigation of APP's Hainan project in 2003 and came across some disturbing financial

Sinar Mar Group-APP China Hainan mill

Cossalter

information.43 In 1999, China's National Development Bank loaned 1.1 billion RMB to Jinhua Forestry. Soon after, when APP financial crisis began in 2001, NDR cancelled its loans, and the SMHP project was put on hold. The project restarted in 2002 without first paying off its debt, as required by different Chinese government agencies. SMHP claimed that the new investment funds to restart the project came from APP's profits from its 11 other factories in China. If this were true, then there will be no problem to receive proof from the State Administration of Foreign Exchange. However, proof was not forthcoming. In fact, Caijing Magazine's investigation showed that SMHP attempted to transfer 400 million abroad in 2003, which was suspended because of the lack of a required profit reinvestment certificate from the local foreign exchange bureau. Caijing Magazine also discovered that APP has fewer plantations available than they claim. SMHP had stated its plantation size is 4 million mus, but the official file of the National Development and Reform Commission records a figure of 3.5 million mu. Additionally, the bureau of forestry in Hainan and Jinhua suggested to the Province to decrease the plantation from 3.5 million to 2 million mus, citing the fact that some companies and farmers prefer to grow rubber and other plants, and the 700,000 mu of tree farm that planted by SMPI before the debt crisis did not grow well. Today, many farmers do not support the project as they feel taken advantage of by APP. The farmers thought they would be eligible for government subsidies available for natural forest regeneration program. In

2004 Plantation target

Total Planted in 97, 99,00 & 2003

APP's overall plantation target

Does China Have a Comparative Advantage for Growing Pulpwood? - The case of coastal Southern China .Presentation given by Christian Cossalter, CIFOR at the 2004 International Forum on Investment and Finance in China's Forestry Sector. Organizers: China National Forestry Economics and Development Research Center, State Forestry Administration, Forest Trends and CIFOR. Beijing, September 22-23, 2004

reality, the plantations are an economical as opposed to an ecological forest and as a result the farmers may not receive their benefits. A combination of financial insecurity and poor of forestations means that there will be insufficient fiber for the Hainan pulp mill. Caijing Magazine cites a 1998 report by the Chinese Light Industry Design School in Shanghai that state "the raw materials that are needed for the production will be extracted by the existing natural forest in Hainan and other areas." The term "reforestation" is used as an excuse to clear-cut the natural forest in Hainan. In fact, such forest destruction has already begun. Once again, Caijing Magazine reports the shocking truth: people witnessing over 50 truck-loads of logs being taken out of Wu Zhi Shan City, yet no single tree was planted until 2002. In Feng Shan Forestry Region, natural forests were logged. Jinhua's contractor even hired farmers to clear-cut and burn forests. Furthermore, between 2001 and 2003, Jinhua caused 57 forest fires that affected 3,658 mu (over 200 hectares) of forest. What much of this destruction comes down to is where this story began: Hainan Gold Hai Pulp Company. By its second year of operation, this 1.1 million tonne capacity mill will require over 2.5 million tonnes of chips per year - over 12 times the current export capacity of Hainan. In the best-case scenario, if APP is able to double its plantations in Hainan, Guangxi and Guangdong, and manage the entire 240,000 hectares estimate sustainable (which itself is unlikely given the evidence uncovered by Caijing Magazine), then it will still only be able to supply 72% of the fiber needs of the Hainan mill. 44 This fiber supply deficit is enormous, and may very well result in forest destruction in other parts of Asia and the Pacific Rim. In fact, APP China has already begun importing woodchips from Australia and Southeast Asia in order to fill a fiber supply gap at the Hainan mill.45 As WWF writes in a press release, "WWF is concerned that APP may yet again be opening a mill without first securing a sustainable pulp wood supply. How will APP fill this supply gap? Will illegally harvested logs again play a role in supplying the company's mills? Will APP again rely on clear-cutting natural forests?" 46

Biodiversity in Yunnan province As is known to all, Yunnan is the area in China that has the largest resource of wildlife varieties and the most abundant types

of ecosystem. It has preserved many rare, unusual or old species and has been recognized as one of the key areas which possess the most important groups of biodiversity and is of global significance for the distribution of biodiversity. British famous scholar on biodiversity and natural protection from Oxford University N. Myers, etc published an article called Biodiversity hotspots for conservation priorities

issued on Nature 2000.Vol. 403. In this article,

25 global hotspot areas of biodiversity are listed. southwest China is one of them, which has an area of wild vegetation of 80

104km2 and ranks

ninth in the world. The India-Burma hotspot area consisting of the whole Indo-China Peninsula, most parts of Yunnan, southeast of Tibet, Guangxi, southern Guangdong and Hainan, has an area of 206

104km2 and is

the biggest hotspot area of biodiversity in the world, among which, about 30

104km2 in Yunnan, about 3/4 of the total area in Yunnan, lies in

and accounts for about 14.6% of the India-Burma hotspot area protracted by Myers. (See the above chart) about 3/4 of the total area in Yunnan, lies in and accounts for about 14. 6% of the India-Burma hotspot area protracted by Myers. (See the above chart)

The special location, unique natural geographical environment, complex ecosystem and diversified living conditions of Yunnan support an abundant biological resource. Yunnan province covers an area of 394,000 km2, which accounts for 4.1% of the total area in China. Seen from the known biological groups, Yunnan has more than 16,411 kinds of higher plants, which accounts for 46. 8% of the total number in China. It also has over 14,760 kinds of vascular bundle vegetation. 171 of these are listed as rare or endangered plant species protected by the country, which accounts for 44.0% of the total number in China. The province has 1,836 kinds of vertebrate, which accounts for 55.35% of the total number in the country. Among the 335 kinds of high-risk protected wildlife publicized in China, Yunnan has 243, which accounts for 72.5% of the total number in the country. About 20% of the total species are unique to this region. The degree of richness and uniqueness of life forms in Yunnan ranks first 48 in China. Therefore, Yunnan is called the "Vegetation Kingdom" or the "Animal Kingdom".

Dense Forest in Simao,Yunan

Greenpeace 2004.7

APP' s Eucalypt plantation in Yunnan

July ,2004 Greenpeace Qianmai village in Lancang, Simao,Yunnan

Since Yunnan has an extremely special and complex environment, conditions and extremely abundant biodiversity, the biodiversity in Yunnan has formed a complete and interlinked system. In this system, the biodiversity in every region has an important and special function. This means that the loss or change of any part will bring about damage to the whole biodiversity system. Moreover, this impact may start from one species, one community or the ecosystem. Later on, a series of chain reactions will follow. In the future, the environmental change will become apparent. 49

The Yunnan eucalypt forest-pulp-paper integration project by Sinar Mas Group ---APP China Sinar Mas Group started to cooperate with Yunnan provincial government in August of 2002. During the short period of one year, Sinar Mas Group has enclosed a huge forest pulp paper manufacture base of 27,500,000 mu in Yunnan. An report from the Forestry Bureau in Yunnan has pointed out that Sinar Mas Group plans to plant 12,000,000 mu forests in Simao City, 5, 500,000 mu in Wenshan canton, 10,000,000 mu in Lincang City (in the table below) 50 The feasible research report and first draft report of the project in the forests-planting areas of Simao City and Wenshan canton have been finished and the forests planting activity has been started. Preparatory negotiation has been carried out in Lincang City and a few experimental demonstration forests have been planted.

Statistics about the Various Land Areas of the Drafted Woodland Planting in Yunnan by Sinar Mas Group Statistical Area

Total Area

Area of Afforestated Land Total

Forested Land

Thin Forest Land

Bush Land

Immature-forestLand

Total

2641*

2051.8

1108.1

316.4

518.3

589.2

77.7

1.5

2ÂŁÂŽ6

19.6

22.3

Simao Project Area

1091*

831.6

720.7

2.6

44.5

23.8

259.4

Wenshan Project Area

550

320.2

55.4

11.4

60.9

6.2

186.3

229.8

Lincang Project Area

1000

900

332

211

292

100

Unit: 10000 mu

Non-forestLand Land Usable for Afforestation

Note: * In June, 2003, when Sinar Mas Group entered into contract with the administrative office of Simao area, the forests base area has been increased to 12,000,000 mu. Thus the total area of eucalypt forest-pulp-paper integration project in Yunnan by Sinar Mas Group has reached to 27,500,000 mu. Resource: Report on The Situation of Forest-pulp-paper Integration Project in Simao City by Sinar Mas Group Appendix 2, the Forestry Bureau of Yunnan province, July 20th, 2004.

Sinar Mas Group has set up a fast-grown-trees company in the areas in the above plan to plant eucalypts. In 2003, Sinar Mas Group planted 100,000 mu of eucalypts in Lancang County, Simao City. In 2004, the preparatory work of planting eucalypt fastgrown tree of 3,260,000 mu in Lancang County, 30,300 mu in Ximeng and 64,600 mu in Menglian (all these counties belong to Simao City) were finished. The planting has been partly finished. In Wenshan canton, 203,300 mu of eucalypts has been planted. Up to the end of this year, Sinar Mas Group can plant a total of 724,200 mu of eucalypts.51

27,500, 000 mu eucalypt plantation project of Sinar Mas-APP in Yunnan "Put an end to large-scale logging in principle means that it is forbidden to change natural forests into artificial forests. New logging ways which have less negative impact such as cutting, planting and logging or ecological logging should be promoted in order to keep the area of natural forests and the stability of natural forests system." ----- the State Forestry Administration's suggestion on the restrict management of natural forests logging, the State Forestry Administration, forest asset issue number, 2003, 223

Facing the practice of "enclosing the land by riding a horse", 27,500,000 mu in Yunnan to build the eucalypt fast-grown-trees base, what Sinar Mas Group claimed was that the entire forest-pulp-paper integration base contracted by it in Yunnan was all "barren land (for planting forests); the whole of Yunnan is 100% barren land (for planting forests)".52 But in fact, as is shown in the following there was not so much barren land in the agreement signed by Sinar Mas Group and Yunnan province. The work report of the Yunnan Forestry Bureau to the Yunnan provincial government points out that in the Simao area "barren lands suitable for planting forests cannot satisfy the needs of the project. With the progress of the cooperation, Sinar Mas Group wants to increase the pulp timber base area from 6,000,000 mu to 12,000,000 mu and the project scale became larger and larger. According to the forest resources of Simao, there are only 2,800,000 mu of land without forests. In order to plant a 12,000,000 mu pulp forest, we have to log the existing forest and plant new fast-grown-trees".53

True lie: planting forests on barren land When Greenpeace did research in Baogudi Village, Qianmai, Lancang County, Simao City, Yunnan Province, it discovered that among the eucalypts planted in the eucalypt fast-grown-trees base by Jinlancang Co. affiliated to Sinar Mas Group, there were a large numbers of stumps left after logging and trunks that had not been transported in time. The diameters of most of those trees were over 5 centimeters. Unit: 10000 mu

Actual barren land area usable for afforestation Afforestation planning area of Sinar Mas Group

The stumps and trunks left after the logging of the eucalypt fast-grown-trees; article 32 of the State Forest Law of China states, "In order to fell, one must apply for a felling license and fell according to the provisions of the felling license". However, according to Newsweek's research and interview of Peng Qingzhi, who is in charge of Jinlanqiang Company, this company doesn't have a felling licence.54

The impact of large-scale planting eucalypts on the biodiversity in Yunnan Eucalypt belongs to the Myrtaceae group, which was originally found on the continent and neighboring islands of Australia in 1770. It was first introduced into China's Guangxi Province in 1890 and was

Food and Agricultural Organization of the United States concludes in file number 59 made in 1985:

"We reaffirm in particular that eucalypt

then spread to 17 provinces, cities and autonomous regions in southern

should not be planted in large scale

China. China has now become the second largest eucalypt planting

before a meticulous and accurate

country after to Brazil.

estimation of the social and economical

The large-area introduction and planting of eucalypts was once

situation and the balance of advantages and

good for forestation, vegetation cover and the supply of industrial raw

disadvantages. We'd better make a

materials to southern China. However, over time and due to the expand-

systematic examination and cognizance of

ing scale, especially the large-area planting of a single species of tree,

the local ecological environment and the

a series of problems arose, including numerous ecological problems

need of inhabitants".

such as soil retrogression caused by excessive use of soil fertility and

The stump and trunk of eucalypt tree left after been clear cut down

July, 2004 Greenpeace in Lancang, Simao, Yunnan

Article 39 of the State Forest Law of China, states:

Who secretly logs forests or other trees should compensate the loss according to the law; The

fine of two times to five times the value of the trees logged illegally.

administrative departments of forestry will order to replant ten times the number of trees logged

For those who refuse to replant the trees or don't replant trees according to related regulation, the

illegally, confiscate or sell off the trees logged illegally, and fine three times to ten times the value

administrative department of forestry will replant the trees for them and the illegal woodmen will have

of the trees logged illegally.

to pay the cost.

Who secretly logs forests or other trees should abide by the order of the administrative depart-

For those who secretly or illegally fell forests or other trees and whose conduct has become a crime,

ments of forestry to replant five times the number of the trees logged illegally and to hand in the

they should be punished under the criminal law.

water, decreasing productivity, falling underground water levels, decreasing biodiversity and a changing microclimate. The most serious of these is the decrease in biodiversity. The biodiversity of Yunnan is abundant. This kind of biodiversity in mainly mountainous regions is different from that on the plains, such as the Leizhou Peninsula and Hainan Island. Sinar Mas Group's plan to plant a large-scale 27,500,000mu eucalypt forest will obviously change the biodiversity in Yunnan. Ecological change will affect species and inherited genes that are considered as a national strategic resource. This will further put national ecological safety in danger.

"Agriculture, rural areas and farmers" issue brought to a head by 27,500,000 mu eucalypt bases The 27,500,000mus eucalypt fast-grown-trees base project has repeated the same problems during development in other regions. The local financial situation has improved; the economic safety and social stability of the whole country are in greater danger.

"At present, the situation of various policy put into effect about the country assisting farmers and imbursing the village communities should be put

The "Agriculture, rural areas and farmers" issue is considered the most impor-

into the content of opening up the

tant problem by the central government and is put in the first and foremost position

village affairs in time, such as the com-

by the Yunnan provincial government. However, while attracting merchants and

pensation and distribution of land

investment to this project, farmers have been deprived of some legal rights and

confiscation, the contracting of the

interests and they must bear the burden. Although planting eucalypts will benefit the farmers in the short term, it will probably bring the return of poverty for some

flexible land and "barren lands, slopes, chimbs and bottomlands" in villages, the right and debt of the village

farmers, the bankruptcy of some medium and small-scale enterprises, redundan-

community, tax and fee reform and

cies and social instability in the long term. All these will put various levels of govern-

the policy of reducing and relieving

ments in a difficult situation.

the agricultural tax, the "one affair, one

There are five major problems:

discussion" preparation of money and

Information is not open and the procedures are illegal

labor in the village, new-type village

The report of the Forestry Bureau of Yunnan province points out that because

cooperation medical care, the direct

the woodland and woods that are controlled by the government are changing and the forest resources of the government are not investigated by units that are able to

allowance of planting crops, the realization of the money and objects of quitting agriculture and backing to

carry out forestry investigation planning, the interests of the owners of forest rights

forestry,. Anything else that the farm-

cannot be assured. No common people participate in the project. The rights, duties

ers require to be made public should

and interests of the people are not clear. Whether they would like to be involved or

be made public".

not is not clear, either.

opinions about improving and perfecting the system of o p e n i n g u p t h e v i l l a g e a f f a i r s a n d d e mo c r a t i c m a n a g e -

The contracted rent is too low, which damages the interests of the farmers and causes disputes.

ment General Office General Office of the State Council (June 22ed, 2004)

According to the memorandum between Sinar Mas Group and the Yunnan provincial government, the contracted rent of the paper pulp forest bases of Sinar

Mas Group is RMB40 per mu over 50 years (equal to RMB0. 8 per mu each year). 55 All those participating in the project considered the rent excessively low and reacted violently. According to the Newsweek report, in Lancang County alone, this kind of dispute occurred 57 times. 56 Previous forestry is affected. The incomes of farmers has decreased and some farmers have even return to poverty. According to the calculation of the Forestry Bureau of Lincang County, Simao City in Yunnan province, the forestplanting task of the forest-pulp-paper integration project of Sinar Mas Group can increase by RMB100 per capita. However, along with the expansion of the local pulp and Paper Company, many local Simao pines will suffer the fate of being logged - Simao pines can bring continuing wealth to local farmers. One Simao pine can be tapped five to six times each month and farmers can continuously tap resin from it for 20 to 25 years. The income of the 5,500 farmers who tap resin is about RMB 7,000 per capita. When reminded of this,

Local Turpentine collecting

July, 2004 Greenpeace in Simao, Yunnan

some farmers cannot help crying. 57 Enterprise benefits and workers' interests are affected. A report of the Forestry Bureau of Yunnan province mentions that the forest area of Simao City is only 23,690,800 mu. According to the forest growth, the timber gathered recently in Simao is far from satisfying the demands of the forest-pulppaper integration project. Therefore, there will probably be insufficient work hours because of the shortage of raw materials. The result may be either to log the forests in existence to plant new fast-grown-trees or to cut work hours, resulting in redundancies and social instability. The double-track system of purchase price again results in the loss of interests. According to the Newsweek investigation, the protected purchase price of the government is nearly RMB300 per cubic meter and the market price is about RMB470. If the forest base project of Sinar Mas Group in Yunnan province can be carried out smoothly, only by on-selling timber, the company can make a profit of over RMB10 billion from the disparity between the contract price and the market price. Moreover, during this process, the legal rights of the owners of forestry rights are violated. In community forests, excepting the forestry centers that are part of the share-holding system, the logging index of commercial timber is not realized by the owners of the forestry rights. Actually, the forestry farmers can only conform to the regulation of the diameter of the trunks stipulated by the forestry industry and commercial enterprises and sell their indexes to the forestry industry and commercial enterprises at the price of RMB40, 60 or 80 per cubic meter. 58

Conclusion and Requirements

Conclusion Greenpeace is concerned that the mistakes of APP in Indonesia will be repeated in China: the building of large-scale paper pulp

companies before an assured continuous raw material supply. However, the Chinese APP companies are following the same disastrous road. This will surely lead to the result that APP depends on demolishing forests in China and other Asian regions to satisfy its shortage of raw materials. Greenpeace believes that necessary action must be taken immediately while the situation can still be controlled!

Greenpeace appeals to action To the Chinese government: Greenpeace calls on the governments of China and of the Province of Yunnan to immediately implement a moratorium on APP's plantation programme in Yunnan until it can be demonstrated that no more of the area's unique natural forests will be destroyed. Greenpeace calls on the governments of China and of the Province of Yunnan to: Immediately stop the 27,500,000 mu eucalypt quick-growing and abundant-yielding forest project of Sinar Mas Group of Yunnan province and reevaluate this project; Resolutely prevent this APP plantation project in Simao City Yunnan; punish the destroyers of natural forests during the execution of this project according to Article 39 of the State Forest Law.

TO ASIA PULP & PAPER (APP): Greenpeace calls on APP to end its destruction of endangered forests around the world. To this end, APP must immediately: Stop converting natural forests to plantations End clear-cutting End all illegal logging Fully respect the rights of indigenous peoples and local communities

NOTES 1

Christopher Barr, CIFOR, "The Financial Collapse of Asia Pulp & Paper: Moral Hazard and Implications for Indonesia's Forests", presented at the Asian Development Forum-3, Bankok, June 12, 2001

Fallon, R. "Asian Corporate Finance and Business Strategy: Asia Pulp and Paper Company, Ltd.

29 Also see WWF (July 13, 2004) "Analysis of APP Response to WWF Indonesia's Reports on the Company's Involvement in Illegal Logging"; and WWF (July 13, 2004) "To Whom It May Concern" 30 Paperloop (February 27, 2004) "Office Depot ends paper supplies from APP over Indonesia logging"; also WWF, Press Release (February 20, 2004) "World Wildlife Fund takes APP logging issue to U. S. paper retailers" 31 Robin Wood, Press Release (August 25, 2004) "Robin Wood ¨¹berzeugt Metro: Handelskonzern will auf Papier aus Regenwaldzerst?rung verzichten"

" New York: Columbia Business School. Chazen Web Journal of International Business. Spring 2003.

32 Paperloop (September 8, 2004) "Japanese firms may boycott APP products"

Christopher Barr, CIFOR, "The Financial Collapse of Asia Pulp & Paper: Moral Hazard and

33 Paperloop (July 28, 2004) "APP to postpone creditor vote on revised debt workout"

Implications for Indonesia's Forests", presented at the Asian Development Forum-3, Bankok, June 12, 2001

34 American Forest & Paper Association (July 2004) "China's Subsidization of its Forest Products

Dillon, Chip, and Normal Waite. 1998. Asia Pulp & Paper 1Q deceptive - Earnings power still strong. Salomon Smith Barney. 1 July. In Fallon, 2003.

APP 1999 Annual Report, Singapore, May 2000

Fallon, R. "Asian Corporate Finance and Business Strategy: Asia Pulp and Paper Company, Ltd. "New York: Columbia Business School. Chazen Web Journal of International Business. Spring 2003.

Industry", p.51. 35 Financial Times (June 18, 2004) "Votes of no confidence in APP saga: Mystery surrounds identity of creditors who supported debt move" 36 American Forest & Paper Association (July 2004) "China's Subsidization of its Forest Products Industry", p.42.

The Jakarta Post (July 12, 2004) "APP hopes to reach full debt restructuring agreement soon"

37 The Standard (February 18, 2004) "APP China unit eyes listing"

OTC ("over-the-counter") equity securities include equities that are not listed or traded on Nasdaq,

38 Paperloop (January 21, 2004) "APP China looks to snap up Shanghai mill"

NYSE, or other national securities exchange. See www.otcbb.com

39 Paperloop (February 26, 2004) "APP China targets Shanghai exchange listing"

The Bank of New York website, www.adrbny.com/dr_ownership.jsp?cusip=04516V100, viewed

40 APP (June 10, 2004) "

September 10, 2004.

" www.app.com.cn/

disp_news_single.php?num_id=166

10 Kanematsu Corporation (April 12, 2001) "New Medium-Term Management Plan"

41 Paperloop (September 9, 2004) "APP China postpones startup of Hainan pulp plant"

11 Channel NewsAsia (November 13, 2003) "APP to fight moves by US creditors to seize Indonesian

42 on hectare equals about 15 mu

assets" 12 Export-Import Bank of the United States, Press Release (October 29, 2003) "Ex-Im Bank Files Lawsuit Against Asia Pulp & Paper; Suit Seeks Recovery of $104 Million"

43 Caijing Magazine (October 23, 2003) "

" ("Investigation of

APP's involvement in Hainan Province") 44 "Does China Have a Comparative Advantage for Growing Pulpwood? The case of coastal

13 Channel NewsAsia (March 30, 2004) "Asia Pulp & Paper delays restructuring plan"

Southern China". Presentation given by Christian Cossalter, CIFOR at the 2004 International

14 Paperloop (July 9, 2003) "Singapore wraps up criminal probe into Asia Pulp & Paper"

Forum on Investment and Finance in China's Forestry Sector. Organizers: China National Forestry

15 PRNewswire (January 16, 2004) "Supreme Court of New York issues new temporary restraining

Economics and Development Research Center, State Forestry Administration, Forest Trends and

order against APP" 16 Paperloop (September 17, 2004) "Indonesian court invalidates APP bonds"; also Paperloop (September 29, 2004) "Indonesian court invalidates another series of APP bonds" 17 Paperloop (September 21, 2004) "APP creditors seize booth at US trade show" 18 Paperloop (September 22, 2004) "APP reopens trade show booth after seizure by creditors" 19 Greenpeace UK. 2003. Partners in Crime. www.saveordelete.com 20 Remarks by the Minister of Forestry of the Republic of Indonesia at the Twelfth CGI Meeting Denpasar, January 2003. http://mofrinet.cbn.net.id/informasi/CGI/CGI_03/remarks_12th.htm 21 Reuters (January 28, 2003). "Restructuring Forest-based Industries of Indonesia" 22 FWI / GFW. 2002. The State of the Forest: Indonesia. Bogor, Indonesia: Forest Watch Indonesia, and Washington DC: Global Forest Watch. 23 Asia Pulp & Paper (July 2004) "APP Responds to WWF Indonesia Reports on Illegal Logging" 24 WWF (June 8, 2004) "Legality of Timber Consumed by Asia Pulp and Paper's Mills in Indonesia:

CIFOR. Beijing, September 22-23, 2004. 45 Paperloop (March 25, 2004) "APP China sets startup date for massive Hainan pulp line" 46 WWF Indonesia, Press Release (October 12, 2004) "WWF welcomes APP's forest conservation measures but wants more" 47 N. Myers, R. A. Mittermeier, C. G. Mittermeier et al. "the hotpot areas of biodiversity that should be protected in preference", Nature, 2000, Vol 403: 853-857 48 World Wide Fund For Nature, Summary of Chinese Biodiversity Protection, Bejing Chinese Forestry Press, 1996. 199~213 49 Yang Yuming, Hao Jiming, Pei Shengji, The Biodiversity and Its Protection in Yunnan, ( See: edited by Qian Yi, Hao Jiming) Environmental Science and Engineering Research, Beijing: Tsinghua University Press, 2001.336-347 50 the Forestry Bureau of Yunnan Province, Report on The Situation of Forest-pulp-paper Integration Project in Simao City by Sinar Mas Group Appendix 2, July 20th, 2004.

January - October 2003" and WWF (July 13, 2004) "Analysis of APP Response to WWF Indonesia's

51 Same as the above

Reports on the Company's Involvement in Illegal Logging"

52 Newsweek (July 12th, 2004) "Yunnan Forests are in Danger"

25 WWF (July 13, 2004) "Analysis of APP Response to WWF Indonesia's Reports on the Company's Involvement in Illegal Logging" 26 WWF Indonesia Tesso Nilo Programme (June 16, 2004) "Monitoring of Illegal Logging Operations in Riau, Sumatra: Deliveries of Illegally Cut Wood from Proposed Tesso Nilo National Park to APP's Indah Kiat Pulp and Paper Mill in August 2003 and April 2004" 27 FRAR (September 2004) "Strong Evidence that PT Indah Kiat Pulp & Paper Received Illegal Wood from Tesso Nilo in July 2004. " 28 WWF (June 8, 2004) "Legality of Timber Consumed by Asia Pulp and Paper's Mills in Indonesia: January - October 2003"

53 The Forestry Bureau of Yunnan province, Report on The Situation of Forest-pulp-paper Integration Project in Simao City by Sinar Mas Group Appendix 2, July 20th, 2004) 54 Newsweek (July 12th, 2004) "Yunnan Forests are in Danger" 55 The Forestry :Bureau of Yunnan Province£¬Report on The Situation of Forest-pulp-paper Integration Project in Simao City by Sinar Mas Group Appendix 2, July 20th, 2004. 56 Newsweek

July 12th, 2004

"Yunnan Forests are in Danger"

57 Same as the above 58 The Forestry :Bureau of Yunnan Province, Report on The Situation of Forest-pulp-paper Integration Project in Simao City by Sinar Mas Group Appendix 2, July 20th, 2004.

Appendix 1: Cases of Sinar Mas Group destroying Asian forests

Case 1 The destroyer of Indonesian tropical rainforests Background Indonesia is an archipelago of 17,000 islands stretching from the waters off Malaysia to the island of New Guinea. Indonesia's forests are home to ten per cent of the planet's diversity of plants and animals. Orangutan, elephants, tigers, rhinoceros, a thousand species of birds, and thousands plant species are all part of the biological heritage of Indonesia. The archipelago is also home to hundreds of indigenous peoples who have lived from and managed Indonesia's forests for thousands of years. For the last 30 years, however, the Indonesian Government has handed out logging, plantation and mining concessions covering the majority of Indonesia's forests without regard for the rights of forest peoples or the environment. Indonesia's forests are also some of the most threatened, with nearly three quarters already destroyed according to Global Forest Watch. A few years ago, it was estimated that over 2 million hectares of forest are lost every year in Indonesia.1Current statistics for deforestation are even more shocking with forest loss in Indonesia doubling during the 1990's to 3.8 million hectares lost in 2000 alone.2 This is equivalent to six times the rate in the Brazilian Amazon.3 The remaining lowland forests of Indonesia will be destroyed in the coming decade unless the logging industry can be bought under control.4 The situation on the island of Sumatra is especially dire, in particular the central province of Riau where APP operates. According to WWF, 63 percent of Riau was forested in 1990. This plummeted to 39 percent by 2002.5 The World Bank, analyzing the rate of forest loss, predicted that essentially all of Sumatra's lowland forest would disappear by 2005.6 The driving force is huge overcapacity in the wood processing industry. APP subsidiary Indah Kiat alone, located in Riau, accounts for 40% of Indonesia's pulp production. Today, eight large forest blocks are remaining in Riau and they are considered high conservation value forests (HCVF). 7 APP and their joint ventures have concessions in four out of eight HCVFs (see the map). In response to this crisis, environmental and social groups across Indonesia are calling for a moratorium on industrial logging. WALHI, the Indonesian

Map of High Conservation Value Forests (green) in Riau province, Indonesia, with APP and their join venture partners' concessions overlaid in blue. Existing protected areas are shown in red (proposed Tesso Nilo National Park, where WWF has documented illegal logging, is area 6)

[Source: WWF Indonesia]

Forum for Environment, a coalition of 450 local environmental and social groups, has led the call for a moratorium. The Alliance of Indigenous Peoples of the Archipelago regards the current logging concession system as illegitimate and is calling on the Government of Indonesia to scrap the concession system and uphold indigenous peoples' rights to their customary lands.

APP destroys ancient rainforests to make room for plantations Indonesia's forests are in peril, and it is a well known fact that pulp mills in Indonesia rely on the clearcutting of natural forests for their fibre supply. 8 APP is no exception: despite its use of acacia and eucalyptus plantations, it still consumes vast quantities of mixed tropical hardwood (MTH).9 In fact, In 2002, three-quarters of APP's wood still came from natural forests.10 Ironically, APP and other companies claim that industrial timber plantations will help to take the pressure off of natural forests. The reality couldn't be any more different. Millions of hectares of natural forest in Indonesia have been destroyed in the name of plantations, mostly Acacia mangium. As if this wasn't damaging enough, in 75 percent of all cases, the plantations are never actually planted.11 The reality is that APP will only stop clear cutting natural forests once they have finished converting all their tenures to monoculture plantations. Even then, they may still continue to source wood from natural forests clearcut by outside

Illegal logging area in Tesso Nilo

APP's Excavator group in Indonesia tropical rainforest

WWF

WWF Indonesia

suppliers. One study estimates that in ten years between 1988 and 1999, pulp production caused the deforestation of 835,000 hectares. A third of this was deforested by APP subsidiary Indah Kiat Pulp and Paper.12 Indah Kiat accounts for most (80%) of APP's pulp production in Indonesia. Not only is it important to look at how much forests APP is destroying in Indonesia, it is also important to look at what kind of natural forests they have been converting. In Riau, APP has already clear-cut most of the lowland forest they owned. Now, much of the forests they clear are 20,000 year-old peat-swamp forests.13 Subsidiaries and affiliates of Indah Kiat are reported to have been granted logging permits by the forestry ministry covering tens of thousands of hectares of such swamp forest in Riau despite the fact that Regulation PP 47 (1997) concerning spatial planning, prohibits clearcutting of forests on peat depth of 3m or more. These ecosystems are critical for biodiversity, with up to 120 tree species being identified in a single hectare, some of them reaching a height of 50 meters. Peat forests are also a massive carbon sink, having built up carbon for thousands of years in layers of peat up to 18 meters thick. This carbon sink risks being lost when APP drains water from such areas to prepare for plantations, and is particularly released during forest fires. In fact, the 1997/98 forest fires in Indonesia originated for the most part from fires in disturbed moist forests such as these (as of June 28, the government of Riau was planning on suing four companies related to APP plus six others for having allegedly started these fires.14 As of October 13, Riau provincial court had still not made a decision.15). The resulting CO2 emissions from these fires were the equivalent to 13-40 percent of the world emissions from fossil fuels in the same period, and over 80% of it came from burning peat.16 WWF admits that APP has made some advances in late 2004, but it is quick to clarify that APP doesn't go nearly far enough. Nazir Foead, the director of WWF Indonesia's Species Programme states that "APP's operations would still be converting too much precious natural forest in Sumatra into paper. In essence, the promises APP made today are still too little for Sumatra." 17 WWF adds that over 250 hectares of natural forest in Sumatra are cleared by APP every day, and APP has also done nothing to solve the problem of illegal logging.18

APP logged illegally in Mapala Rabda by logging three months past a permit had expired, and by logging 370 percent above the legal maximum volume. 25 APP purchased wood illegally from the proposed Tesso Nilo National Park as recently as in April 2004.26Forest Rescue Alliance Riau, consisting of three local NGO networks - WALHI, JIKALAHARI and ORNOP Association Riau, found strong evidence that wood illegally harvested within Tesso Nilo was delivered to APP Indigenous inhabitants

in July 2004. 27

WWF

More generally, APP has been clearing forests with more than 20 m3/hectare of commercially valuable wood, a process that is illegal under Indonesian law, and a minimum of 30% of APP's wood in general is of questionable origin.28 WWF has amassed such a huge volume of evidence29 that it seems incredulous that APP would even try to dispute their clear involvement in illegal logging.

APP and human rights abuse Arara Abadi, owned by APP's parent Sinar Mas, is a major plantation developer in Indonesia. Like most plantation companies, it focuses on Acacia. Arara Abadi is also the subject of many well-documented cases of human rights abuse. Consider the situation of the indigenous Sakai people, for example. Arara Abadi established plantations on the land that they traditionally used for subsistence farming. Through the use of armed guards, the villagers were forced from their land by Arara Abadi, and beaten when they expressed their opposition.30 It is reported that Indah Kiat subsequently clearcut over 3,000 hectares of the Sakai peoples' forest gardens.31

Where to get further information in English www.wwf.or.id/tessonilo/Default.php?act=reports

(WWF Indonesia. Various reports on efforts to stop APP from destroying the Tesso Nilo forest)

www.wwf.or.id/attachments/WWF_Statement_on_APP_13Jul04_.pdf www.wwf.or.id/attachments/APP_buys_illegal_wood.pdf www.wwf.or.id/attachments/Legality_of_timber.pdf www.robinwood.de/sumatrarecherche

(Robin Wood. German NGO. Click on "Report with photos and maps" at the bottom to download)

www.foe.co.uk/resource/reports/paper_tiger_hidden_dragons.pdf

(Friends of the Earth. UK NGO)

www.hrw.org/reports/2003/indon0103

(Human Rights Watch. NGO. Report on human rights violations by APP and other companies. Click on "Printer-friendly version" to download)

Case 2 Illegal plantations in Cambodia Overview APP owns the Green Rich/Elite Group in Cambodia, via Indonesian subsidiary PT Arara Abadi and Indah Kiat Pulp and Paper.32 In early 2004 the Green Rich/Elite Group started operating tree plantations for pulp in Cambodia's protected areas. In clear violation of Cambodian laws, but with the complicity of high ranking government officials, the company has started establishing an acacia and eucalyptus plantation in the country's southwest Botum Sakor National Park, a peninsula off the Gulf of Thailand. This plantation represents the first phase of a larger plantation, which the company intends to establish on an area covering almost one third of Koh Kong Province and possibly many other areas in Cambodia.

Background Mere weeks after the bloody 1997 coup d'etat the head of the ruling party, the Cambodian People's Party (CPP) was approached by Green Rich Co. Ltd. requesting a 150,000 hectare plantation in Southern Cambodia, mainly in three protected areas: Botum Sakor National Park, Peam Kasop Wildlife Sanctuary and the Dong Peng Multiple Use Area.33 Days before a legitimate government was voted in by the National Assembly (December 1, 1998), the caretaker government awarded the company a 60,200 hectare area in the three above mentioned protected areas and the Phnom Samkos Wildlife Sanctuary on November 25, 1998.34 In subsequent years, the Green Rich Group was poorly managed. It had gone bankrupt and according to officials, it sold its concession to a new company.35 This appears to be substantiated by the fact that the company has changed names, currently referring to itself as the Green Elite Group.36 The scandal began in mid-March 2004 when the Green Rich/Elite Group brought logging equipment and workers to the northern part of Botum Sakor National Park and started clearing the rear-mangrove Melaleuca leucadendra forest. The company lacked all the legal required permits and had not conducted any of the environmental assessments mandated by law.37 Illegal activity continued. Throughout April and May 2004, workers were found holding in conditions of indentured labour.38 Workers also complained of deplorable living and working conditions, and in particular of lack of food.39 Despite clear violations of the Labour Law and possible violations of the provisions on human trafficking, no charges were brought against the company. In May 2004 police and human rights workers were rescuing workers from the concession area, as armed security forces hired by the company were preventing workers from leaving the concession. Because of the negative publicity generated by local news articles and in particular the King's reaction to the allocation of a National Park as a plantation "a scandal without name"40, on May 13, 2004 the Ministry of Environment ordered the suspension of the company activities pending the filing of an Environmental Impact Assessment (EIA)41, threatening legal action in case of noncompliance. Despite the suspension the company continued operations42. Even after receiving the suspension order the company signed contracts with subcontractors for expediting clearing and road construction43, thereby demonstrating that the intent was to ignore the suspension order. In clear contradiction with the suspension order, the Ministry of Environment authorized planting on August 18, 200444. Planting of acacia trees started in early September 2004. At the time of writing, the company had still not filed an EIA with the Ministry of Environment, but activities were still fully underway. Machinery for chipping wood is said to have arrived from Indonesia and is currently being installed at the plantation site45.

According to a company representative, the wood chips will be exported from the plantation site to China for pulp and paper manufacture46.

Expansion The allocation of land concessions in Cambodia has always been carried out in complete secrecy47, with reports of under the table payments and conflicts of interest48. Ministry of Environment officials have claimed that their bosses (Chief of Department level) have been paid as much as USD 100,000 by the company. Since March 2004 employees of the company have been alleging that the company intends to expand the plantation to the 60,000 hectares. Throughout 2004 the company has carried out survey work in Koh Kong and in neighbouring provinces, mainly Kampot, Kompong Speu and Sihanoukville municipality. Company representatives have said that the company is seeking a land area in Kampot province in addition to the 300,000 hectares of forestland it applied for in April 2004 in Koh Kong Province49.

Eyeing the rest of Asia For the most part, APP has been logging in the forests of Indonesia and China, and recent investigations have shown that they are also active in Cambodia. Not surprisingly, APP is attempting to export their destructive forest practices to other parts of Asia as well. Below is an introduction to some of the company's plans that have been made public.

Russia APP China recently announced that is it conducting a feasibility study for the construction of a 1 million tonne/year pulp and paper mill near the town of Lesosibirsk in Krasnoyarsk, Russia. A pulp plant would be operating by the end of 2006, with an integrated paper mill to follow. According to spokesperson Viatchslav Khomiakov, the government of Krasnoyarsk is prepared to sign a 49-year timber supply lease for the project.50 The Novosti Gazette in Vladivostok is critical of these plans, citing already rampant illegal logging in region which is almost impossible to stop. More importantly, at stake are vast areas of intact forests in the Russian Far East that environmental groups are trying to protect.51

Malaysia APP has been engaged in a joint venture, Borneo Pulp & Paper (BPP), together with Malaysian-owned Sarawak Timber Industry Development Corporation, with plans for a 750,000 tonnes /year pulp mill in Bintulu, Sarawak, and an associated 600,000 hectares of land. Like its counterparts in neighbouring Indonesia, this project would replace large tracts of natural forests with acacia plantations. It would also result in up to 20,000 Iban indigenous people being forcefully removed from their land.52 One Iban community has already won a court case against BPP. The High Court held that the Iban have rights to their land, and it stated that they were prevented from exercising their rights "by the total destruction of the trees by (BPP) for the purpose of planting pulp trees." 53 Like APP, BPP ran into financial trouble and many creditors demanded repayment of loans. In response, in May 2002, the Malaysian state government of Sarawak revoked 200,000 hectares of land. The entire project is now on hold.54 For the time being, the forests and the Iban people are safe from APP.

January - October 2003"

Notes

29 Also see WWF (July 13, 2004) "Analysis of APP Response to WWF Indonesia's Reports on the

30 Human Rights Watch. 2003. Without Remedy: Human Rights Abuse and Indonesia's Pulp and

Holmes, D. 2000. Deforestation in Indonesia: A view of the Situation in 1999. Jakarta, Indonesia: World Bank. Draft Report of July 3.

Pak Boen M. Purnama, 2003. Sustainable Forest Management as the Basis for Improving the Role of the Forestry Sector. Indonesian Department of Forestry.

The Brazilian Amazon is four times the size of Indonesia's forests. The annual deforestation rate in the Brazilian Amazon in 2001/2002 was 2.55 million hectares. (www.panda.org/news_facts/ newsroom/press_releases/news.cfm?uNewsID=7651)

Holmes, D. 2000. Deforestation in Indonesia: A view of the Situation in 1999. Jakarta, Indonesia: World Bank. Draft Report of July 3.

Japan Times (February 5, 2004) "Effort to curb Sumatra logging: WWF enlists importers, NGOs to fund preservation"

World bank. 2001. Indonesia: Environment and Natural Resource Management in a Time of

Industrial Tree Plantations in the World Paper Economy, Carrere, "A Race to the Bottom", 1999. 32 Luke Reynolds, "Forestry Giant Lobbying for Huge Plantation", Cambodia Daily, Issue 99/29, September 15, 2004. 33 Letter from the Cabinet of Samdech Chea Sim for the Chinfon Group requesting more than 150,000 hectares for establishing a tree plantation, dated September 15, 1997, reference 884/ 9 Khor Cho Sar 97. 34 Investment Agreement on Agricultural Development signed between the Minister of Agriculture, Forestry and Fisheries, Tao Seng Hour and the Green Rich Co. Ltd. director Shen Shang Pang, dated 25 November 1998. 35 Interview with Deputy Chief of Environment Department of Koh Kong Province, April 10, 2004.

www.wds.worldbank.org/default.jsp?site=wds

36 Request letter from Vincent Chan, Director of the Green Elite Group for armed security for the Green

Jarvie, J., Dedy, K. and Jennings, S. (February 2003) "A Preliminary Assessment of High FWI/GFW. 2002. The State of the Forest: Indonesia. Bogor, Indonesia: Forest Watch Indonesia, and Washington DC: Global Forest Watch.

Paper Industry. Washington, London, Brussels. Vol. 15, No.1. 31 Walhi & YLBHI, "Mistaking Plantations for Indonesia's Tropical Forests", 1982, Pulping the South:

Transition. Washington D.C. Report in PDF format available from the World Bank website,

Conservation Value Forests in Riau, Sumatra." 8

Company's Involvement in Illegal Logging"; and WWF (July 13, 2004) "To Whom It May Concern"

Paperloop (June 14, 2004) "APP upgrades Indonesian pulp mills"

10 Far East Economic Review (April 11, 2002) "APP's Ambitious Plan for Sustainable Plantations" 11 FWI/GFW. 2002. The State of the Forest: Indonesia. Bogor, Indonesia: Forest Watch Indonesia, and Washington DC: Global Forest Watch. 12 Barr, C. 2000. "Profits on Paper: The Political-Economy of Fiber, Finance, and Debt in Indonesia's Pulp and Paper Industries." In Christopher Barr, Banking on Sustainablility: A Cr itical Assessment of Structural Adjustment in Indonesia's Forest and Estate Crop Industries. Bogor, Indonesia: CIFOR and WWF. 13 Pers. comm. Longgena Ginting, WALHI, Indonesia. 14 Kompas (June 28, 2004), Kompas (June 29, 2004), Riau Pos (June 29, 2004). In WWF Indonesia,

Rich concession, reference 17 Kor Hor Hor Ro, dated May 10, 2004. 37 Solana Pyne and Luke Reynolds, "Minister Says Projects Won't Hurt Environment", Cambodia Daily, Issue 02/30, September 17, 2004. 38 Kuch Naren and Luke Reynolds, "Worker's Search for Good Jobs Led to Abuse", Cambodia Daily, Issue 11/29, May 13, 2004. 39 Yun Samean "Police Rescue Workers From Timber Company", Cambodia Daily, Issue 10/29, May 12, 2004. 40 Royal Messages 2004, "Mon 1er message pour le 9 mai 2004", www.norodomsihanouk.info 41 Letter signed Minister of Environment, Mok Mareth, dated May 13, 2004, reference #119. 42 Letter to Wildaid informing the NGO that the Green Rich land concession is approved by the government and that the confiscated chainsaws are legally registered, dated April 2004, reference 043 Bor S'thor Khor Kor Kor. 43 Road construction contract signed between Huot Roath Sady, sub-contractor and Vincent Chan of the Green Elite Group on May 19, 2004.

"Government Plans to Sue Asia Pulp and Paper Over Forest Fires: Maps and Media Reports", July

44 Letter from Director of the Botum Sakor National Park to the director of Wildaid informing the NGO

11, 2004; The companies include Arara Abadi and Mapala Rabda, part of the Sinar Mas Group,

of the Ministry of Environment's decision to authorize planting in the National Park, dated August

plus two other pulpwood suppliers to APP, Hamidah Hamidi and Sri Buana Damai.

21, 2004, reference 50/04 BSNP.

15 Paperloop (October 13, 2004) "Court ruling on Indonesian forest fires delayed"

45 October 22, 2004,interview with Green Elite sub-contractor.

16 Spektrum der Wissenschaft 2004 (February 2004) "Brennende Regenw?lder." In Jens Wieting.

46 Interview with financial officer Chin Vin Chhin, September 1, 2004.

2004. Clearcut Paper: APP, APRIL and the End of the Rainforest in Sumatra's Riau Province. Hamburg, Germany: Robin Wood. 17 WWF Indonesia, Press Release (October 12, 2004) "WWF welcomes APP's forest conservation measures but wants more" 18 Ibid. 19 Greenpeace UK. 2003. Partners in Crime. www.saveordelete.com

47 "We also recognize that without improved governance, including more transparency, an enforce able legal framework, and improved monitoring and oversight, we are not likely to overcome the obstacles posed by corruption and a lack of capacity. We see bringing effective transparency, enforcement, monitoring and accountability to forestry management as one of the toughest chal lenges in Cambodia." World Bank Group, Cambodia: Independent Forestry Sector Review, World Bank Comments and Proposals for Going Forward, October 18, 2004.

20 Remarks By the Minister of Forestry of the Republic of Indonesia at the Twelfth CGI Meeting

48 For example the deputy cantonment chief for Koh Kong provincial Forest Administration is the owner

Denpasar, January 2003. http://mofrinet.cbn.net.id/informasi/CGI/CGI_03/remarks_12th.htm

of the Pailin Hotel in Koh Kong Town which is rented by Green Rich as office space. According to

21 Reuters (January 28, 2003). "Restructuring Forest-based Industries of Indonesia"

hotel staff the premises are seldom used by the company. One Green Elite company representative

22 FWI/GFW. 2002. The State of the Forest: Indonesia. Bogor, Indonesia: Forest Watch Indonesia,

is Lieutenant Colonel Keo Vuthy who presents himself as the assistant to Major General Hing Bun

and Washington DC: Global Forest Watch. 23 Asia Pulp & Paper (July 2004) "APP Responds to WWF Indonesia Reports on Illegal Logging" 24 WWF (June 8, 2004) "Legality of Timber Consumed by Asia Pulp and Paper's Mills in Indonesia: January - October 2003" and WWF (July 13, 2004) "Analysis of APP Response to WWF Indonesia's Reports on the Company's Involvement in Illegal Logging" 25 WWF (July 13, 2004) "Analysis of APP Response to WWF Indonesia's Reports on the Company's Involvement in Illegal Logging"

Heang, acting commander of the B70 Bodyguard Brigade and deputy chief of Cabinet of the Prime Minister. The chief of cabinet being Lieutenant General Kun Kim, also deputy commander in chief of the Royal Cambodian Armed Forces. 49 Letter to the Minister of Agriculture, Forestry and Fisheries, signed Paul Yu, Director of Green Elite Group, dated 9 April 2004. 50 Paperloop (September 21, 2004) "APP China flirts with major investment in Russia" 51 Novosti Gazette,

July 15, 2004

26 WWF Indonesia Tesso Nilo Programme (June 16, 2004) "Monitoring of Illegal Logging Operations in Riau, Sumatra: Deliveries of Illegally Cut Wood from Proposed Tesso Nilo National Park to APP's Indah Kiat Pulp and Paper Mill in August 2003 and April 2004" 27 FRAR (September 2004) "Strong Evidence that PT Indah Kiat Pulp & Paper Received Illegal Wood from Tesso Nilo in July 2004. " 28 WWF (June 8, 2004) "Legality of Timber Consumed by Asia Pulp and Paper's Mills in Indonesia:

52 Friends of the Earth. 2001. "Paper Tiger, Hidden Dragons: The responsibility of international financial institutions for Indonesian forest destruction, social conflict and the financial crisis of Asia Pulp & Paper" London, UK. 53 Ibid. 54 Paperloop (June 21, 2002) "Sarawak reclaims forest licenses allocated to Borneo Pulp & Paper"

Appendix 2: Case studies about plantations and eucalypt

APP eucalypt plantation in Indonesia

Robin Hood

About plantations The first thing that should be noted is that plantations are not forests. As Carrere and Lohmann write, The two are radically different. A forest is a complex, self-regenerating system, encompassing soil, water, microclimate, energy, and a wide variety of plants and animals in mutual relations. A commercial plantation, on the other hand, is a cultivated area whose species and structure have been simplified dramatically to produce only a few goods, whether lumber, fuel, resin, oil, or fruit. A plantation's trees, unlike those of a forest, tend to be of a small range of species and ages, and to require extensive and continuing human intervention. 1 As the most common species used in plantations around the world in the past have been eucalyptus (38% of all plantations in the early 1990s2), it is not surprising that eucalyptus has become a symbol of large-scale tree crops. It would be wrong, however, to analyse the impacts of plantations by focusing only on eucalyptus. "The problem lies not in any particular species nor its unique biological features, but in how it is used."3 For example, APP's current preference in Indonesia is to plant acacia instead of eucalyptus. The resulting forest destruction, however, is almost identical. Likewise, pine plantations in Chile and South Africa have been known to be equally problematic. That said, the following chapter focuses on eucalyptus plantations simply because the majority of documented case involve this species. One company of great concern in China, Indonesia and other nearby countries is Asia Pulp & Paper (APP). It happens that APP is growing mostly eucalyptus to feed its Chinese pulp mills. What is important to note is that regardless of what species APP plants, the fact remains that large-scale plantations are often problematic. Of course, destroying ancient forests is also problematic. The worst-case scenario, known all-too well by opponents of APP, is to destroy vibrant self-sustaining natural forests forever, all in the name of plantation development.

About eucalyptus Eucalyptus is very thirsty, and it is widely said to dry up water tables, which can clearly effect local ecology and human populations. Even one of the biggest promoters of plantations, the United Nations Food and Agriculture Organization (FAO), is beginning to accept that "plantation of eucalyptus in any deforested water catchments area substantially reduces the water production of this source."4 Careful attention to how, where and in what volume eucalyptus is planted can mitigate such problems, but such careful attention is unlikely to happen when companies such as APP undergo such aggressive planting campaigns. Biodiversity is also a concern. On a broad scale, large plantations of a single (or few) exotic species are by their very nature counter-productive to conserving biodiversity. As well, for many local animals, "a plantation is a desert, lacking food, shelter and opportunities for reproduction."5 A more subtle effect of eucalyptus and certain other plantation species is called "allelopathy" which is a chemical process that a plant uses to keep other plants from growing too close to it. This results in a suppression of ground vegetation,6 thereby obviously affecting not only biodiversity, but the ability for villagers to grow subsistence crops near the tree plantations. Eucalyptus plantations are associated with many more negative side effects than can described here. There are volumes of scientific studies available. Sadly, humans have been slow to learn from past mistakes, and these problems seem to repeat themselves over and over across the globe. The following case studies (Brazil, India and Thailand) illustrate just how widespread the problems are:

BRAZIL Brazil-based Aracruz is the world's largest producer of bleached eucalyptus kraft market pulp. Unfortunately, its negative effect on the environment and local populations is proportional to its size. The problems began in the 1960s, when Aracruz bought an enormous area of land by employing violent actions to force thousands of indigenous people and subsistence farmers off their land,7 mostly with no compensation.8 Throughout its first phase of tree planting, Aracruz then cut and burned over 50,000 hectares of forest.9 Not surprisingly, the subsequent rapid eucalyptus planting dried up water sources: 156 streams disappeared during that period, along with numerous wells and even a river. Joao Pedro Stedile of the Landless Workers Movement said "50,000 people in the area used to eat fish every day. Now they eat fish no more; some fishermen have stopped fishing because there are so few fish to catch."10 Greenpeace took notice of the events and just before the Earth Summit in 1992, Greenpeace activists symbolically closed Aracruz' export port as a protest against the company's environmental and social record and its destruction of natural forests.

INDIA Eucalyptus has invoked strong criticism from environmentalists in India because it is both water and nutrient intensive. Author Vandana Shiva is particularly vocal, criticising the plantations for leading to water shortages in arid areas.11 Some critics dismiss Shiva's arguments, claiming that the problems are rather human-induced (e.g. plantations being too large or in the wrong places, rather than being a problem with the species itself),12 but such counter-arguments are meaningless because nearly all plantations are in the end controlled by either governments or large corporations (e.g. APP) where human-induced problems are unavoidable. Foresters in India claim, as do foresters elsewhere claim, that Eucalyptus reduces pressure on indigenous forests. However, even the critics admit that in practice, so-called "unproductive" natural forests in India have been clear cut to make room for "productive" monoculture plantations of Eucalyptus.13 Opposition to eucalyptus in India has been fierce. In this context, it is worth noting a positive outcome of this opposition. In 1985, in Karnataka, India, the Federation of Voluntary Organizations for Rural Development in Karnataka (FEBORD-K) worked to stop the World Bank-funded eucalyptus plantation projects in their area. The various agencies agreed with many of their requests (but not all) and changed the species from eucalyptus to other multi-purpose species, thereby avoiding the negative effects of eucalyptus and of monocultures in general.14

THAILAND As already described in many other places, companies in Thailand routinely destroyed natural forest in order to plant eucalyptus, often illegally selling the cleared timber in the process.15 Since its early days, however, plantation efforts have been met with much resistance in Thailand, and the government has repeatedly reversed its decision on whether or not to allow or promote eucalyptus plantations.16 Many communities suffered in the process. Villagers in Laemkowchan village, for example, are surrounded by eucalyptus plantations used in a nearby pulp mill belonging to the Soon Hua Seng Group. Villagers used to grow rice, cassava and pumpkin, but many sold parts of their land to the company. Soon, their rice was impacted. The eucalyptus dried up the land, and many farmers

eventually went into debt and eventually lost their land.17 Numerous other case are well documented in Thailand.18

Conclusion Perhaps the best way to conclude this chapter on eucalyptus is to cite the conclusions from the United Nations Food and Agriculture Organisation (FAO) Forestry Paper 59. Written in 1985, its conclusions are just as relevant today as they were then: We stress that eucalypt should not be planted, especially on a large scale, without a careful and intelligent assessment of the social and economic consequences, and an attempt to balance advantages against disadvantages. This can probably best be done by a systematic examination of the ecological circumstances and of the needs of local people.19

Notes 1

Carrere, R, Lohmann, L. 1996. Pulping the South: Industrial Tree Plantations & The World Paper Economy. London and New Jersey: Zed Books.

Evans, Julian (1992) Plantation Forestry in the Tropics: Tree Planting for Industrial, Social, Environmental and Agroforestry Purposes, Oxford: Clarendon Press.

Carrere (1996). Op. Cit.

Poore, D., Fries, C. (1985) Efectos ecol¨®gicos de los eucaliptos [The Ecological Effect of Eucalyptus], FAO Forestry Paper 59, FAO, Rome.

Carrere (1996). Op. Cit.

"An Assessment of the Allelopathic Potential of Eucalyptus" (May and Ash (1990): Austr. J. Bot, 38: 245-254)

Miranda, Moema (1993b) 'Nas pontas do extremo: outras historias, outros tempos', Rio de Janeiro: FASE/IBASE, April.

Federacao de Org?os para Asist¨¦ncia Social e Educacional (FASE) (1993) Inqu¨¦rito civil sobre fomento florestal, Vit¨®ria: FASE.

Ibid.

10 International Agricultural Development 7/8. 1992. In Carrere (1996). Op. Cit. 11 Shiva, V, Bandyopadhyay, J, (1983): Eucalyptus - a disastrous tree for India. Ecologist, Vol. 13, No. 5, pp184-187, and Shiva, V, Sharatchandra, HC, Bandyopadhyay, J, (1983): Social Forestry - No Solution Within the Market. Ecologist, Vol.12, No.4, pp158-168. 12 Lawbuary, J, "Eucalyptus Planting in 'Social Forestry' in India: Boon or Curse?" 13 Ibid. 14 Hiremath, S.R., Dandavatimath, P.G., Eucalypt Plantations and Social and Economic Aspects in India. 15 Carrere (1996). Op. Cit. 16 Kittisiri, A (1996) "Impacts of Monoculture: The Case of Eucalyptus Plantations in Thailand", a paper for the Monocultures: Environmental and Social Effects and Sustainable Alternatives Conference in Songkhla, Thailand. 17 World Rainforest Movement (WRM), Bulletin No. 70, May 2003. 18 Kittisiri (1996). Op. Cit. 19 Poore, D., Fries, C. (1985) Efectos ecol¨®gicos de los eucaliptos [The Ecological Effect of Eucalyptus], FAO Forestry Paper 59, FAO, Rome.

APP eucalypt plantation in Indonesia

Robin Hood

Appendix 3: Other materials about APP, Sinar Mas Group

Sinar Mar Group ------- APP President and CEO: Shareholders:

Asia Pulp & Paper Company Ltd.

Oei Tjie Goan(Teguh Ganda Wijaya) the Widjaya family are controlling shareholders (67% in 2001)

69 Loyang Drive, 118 Pioneer Road Singapore 508958, Singapore 639598

OTCBB: Surabaya Stock Exchange (SSX):

Sales in 1999* *

Company websites

Tel

+65-6477-6118

Fax

+65-6477-6116

Website

www.asiapulppaper.com

E-mail

investors@app.com.sg

APUUY (formerly listed as NYSE: PAP) subsidiaries listed under symbols TKIM, LPPI, INKP, PIDL

Region

Million US$

Percent

China (incl. Hong Kong)

1030

33%

Indonesia

521

17%

Rest of Asia

645

21%

European Union (EU)

377

12%

Rest of World (incl. USA)

562

18%

APP China

Other

www.asiapulppaper.com APP China

www.app.com.cn

Gold East Paper

www.goldeastpaper.com

Gold East Paper (USA)

www.goldeastpaperusa.com

Gold Hua Sheng Paper

www.goldhs.com.cn

Zhenjiang Dadong Pulp & Paper

www.app-dadong.com/

Ningbo Zhonghua Paper

www.zonghua-paper.com

Gold Hong Ye Paper

www.ghy.com.cn

Jin Yu (Qingyuan)

www.jti.com.cn

Yalong Paper Products

www.yalongpaper.net

OPexpress

www.opexpress.com

Jin Xin (Qingyuan)

www.appjpi.com

Shanghai Xinlun Paper (not purchased yet)

www.xinlun.com.cn

Paperline

www.paperline.co.id

Pak 2000

www.pak2000.com

5 33

Sinar Mar Group APP China and affiliated Inc. Logo

6 34

Greenpeace is an non-profit global organization campaigning to ensure a just, peaceful, sustainable environment for future generations. Greenpeace began in Canada in 1971 and today has a presence in more than 40 countries across Europe, America, Asia and the Pacific. Greenpeace China was founded in 1997, aiming to push the environmental protection, expose global environmental problems and force solutions, support the sustainable development in China. To maintain its independence, Greenpeace does not accept donations from governments or corporations but relies on contributions from individual supporters and foundation grants.