Concerns regarding the United Fiber System pulpmill and wood chip mill in Indonesian Borneo (South Kalimantan)

common NGO letter, 21 November 2005

Raiffeisen Zentralbank
z.H. Gen.Dir. Dr. Walter Rothensteiner
Am Stadtpark 9
A-1030 Wien

Andritz AG
z.H. CEO Dr. Wolfgang Leitner
Stattegger Straße 18
A-8045 Graz

Re: Concerns regarding the United Fiber System pulpmill and wood chip mill in Indonesian Borneo (South Kalimantan)

Dear Mr. Leitner and Mr. Rothensteiner,

We, the undersigned, are deeply concerned about the involvement of your respective companies in the proposed construction of a huge pulp mill and of a wood chip mill by the company „United Fiber System (UFS)” in South Kalimantan, Indonesia. Andritz AG has signed a contract with UFS to supply the main machinery with a value of more than US$ 250 million and RZB is financing US$ 21 million or 53% of the wood chip mill.

A new pulp mill and wood chip mill must be viewed in the context of the forest situation in Indonesia. Currently, there is tremendous overcapacity in the pulp industry and rampant illegal logging. Government policies specify that timber for the pulp industry should be produced in plantations, and should not originate from natural forest cover. For the most part, this has not been the case, as the pulp companies have expanded their capacities and focused on wood procurement from natural forests instead. Approximately 75-80% of wood used in pulp industry in Indonesia originates in natural forests, and recent reports by international research agencies and international donors have indicated that the majority of timber harvested from Indonesia’s forests – up to 73% — is illegally logged.

As long as the rate of deforestation and associated illegal logging caused by the pulp industry due to rampant overcapacity in the sector has not been eliminated, any investment in a new pulp mill would only compound the structural problems of overcapacity and deforestation.

united_fiber_systemEvery major pulp mill in Indonesia has caused either major social problems, pollution or deforestation — in most cases all of these. Research indicates that the proposed pulp mill in South Kalimantan will be no exception:

Independent research institutions — CIFOR [2005], Jaakko Pöyry [2004], GLOBAL 2000 [2005] – have found that there is insufficient plantation land available in South Kalimantan to sustainably supply the pulp mill and the wood chip mill with fiber wood. The latest analyses indicate that UFS lacks at least 133.000 hectares of plantation land needed to produce the volume of fiber wood required to feed the two mills. Within the concession area of UFS alone there are 73.000 hectares of highly endangered natural forest , and the wood chip mill threatens another 40.000 hectares of precious lowland forests. As UFS frankly admits, an expansion of the facility’s capacity to 1,2 million tonnes of pulp production per year is projected for the near future. A sustainable fiberwood supply of 6 millon cubic meters of plantation wood per year would be needed for such a capacity. There is no way to provide such a supply without destroying additional natural forest.

Furthermore UFS states in their Environmental Impact Analysis (EIA) recently leaked to the public, despite efforts by UFS to keep the report secret, that a complete loss of aquatic sea life in the area of the pulp mill is to be expected, resulting in the loss of hundreds of livelihoods in traditional fishery. Also a massive regional increase in acute respiratory diseases as well as skin diseases and malaria is forecasted in the company’s EIA. The construction of the deep sea port for the wood chip mill will destroy rare and precious mangrove forests and will significantly harm the aquatic sea life in the area.

We, the undersigned, are of the opinion that European companies with a reputation of being environmentally aware and of acting in a responsible manner should not get involved in industrial projects like this one. As a signatory of the „UN Environmental Programme Finance Initiative” Raiffeisen Zentralbank has a commitment to prevent environmental damage and to apply the precautionary approach. We therefore urge the bank to act according to its international commitment. Andritz AG is a global leader in pulp and paper technology and has in the past supplied machinery to several controversial and destructive pulp mills in Indonesia and in other parts of the world. This time, Andritz should take the long term effects of the project concerned into consideration and refrain from supplying equipment to United Fiber System. The proposed UFS pulp mill and wood chip mill do not contribute to the sustainable development of Indonesian Borneo, but, on the contrary, contribute to widespread deforestation, and to a further degradation of nature and human living conditions in the region.

Currently, your two companies are set to play a leading role in the massive, and potentially illegal, destruction of Indonesia’s remaining forests. We therefore urge you to carry out appropriate due diligence and withdraw from the projects concerned .


Watch Indonesia!

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