The government will have to revoke a freeze on operating permits for more than 900,000 hectares of industrial forest or the local pulp and paper industry will lose its competitiveness due to a disruption in the suply of raw materials, business groups and analysts have said.
Executive director of the Indonesian Forest Concessionaries Association (APHI), Purwadi Suprihanto, recently demanded that the government lift its ban, arguing that it would hamper the supply of raw materials to the local pulp and paper industry.
“We’re very much concerned about the government’s actions. The pulp and paper industry is one of the country’s most prominent industries and instead of supporting it the government has created an obstacle,” he said.
According to Purwadi, the Environment and Forestry Ministry has suspended the operating permits of 23 companies alleged to have had a hand in causing recent forest fires. The total area of forest with frozen permits has reached 901,189 hectares despite the fact that not all of the area had been burnt, he said.
Purwadi said that, of the total area prohibited for operation, some 550,000 hectares had supplied raw materials for local pulp and industry. The suspension of operating licenses in the area would potentially reduce the raw material supply next year by 3 million tons, he went on.
Voicing a similar view, the Indonesian Pulp and Paper Industry Association (APKI) executive director Liana Bratasida said that the uncertainty surrounding the timeline for the freeze on the operating permits had created an unfavorable business climate for the country’s pulp and paper industry.
“It will also harm the country’s reputation in the eyes of investors,” she said.
A new trade minister regulation requiring that foreign exporters of long fibers — raw materials for paper — bobtain environmental certificates and approval documents from both central and local administration every time such products are exported to Indonesia is yet another obstacle that has been created by the government, according to Liana.
The new regulation was due to be implemented at the beginning of next year, she added.
Liana argued that while the new import regulation was aimed at protecting both the environment and local industry, due to the suspension of operating permits in some concession areas, it would lengthen the time-period for imports amid a surging need for raw materials.
Such counterproductive measures will, according to Liana, hinder the growth of the local pulp and paper industry.
With pulp and paper exports reaching US$4.01 billion in the January-September period of this year, with Malaysia, China and Taiwan having become the largest markets, the country’s pulp and paper industry currently holds the top industry position within the ASEAN region, according to data from the Trade Ministry.
Meanwhile, the pulp and paper industry remains very competitive in comparison to Scandinavian countries due to tropical climate and better access to international markets, Liana said.
The pulp and paper industry has been included as one of the government’s priority industries for the period between 2015 to 2035, along with the food, pharmaceutical and textile industries.
The Institute for Development of Economics and Finance (Indef) executive director Enny Sri Hartati said that the country’s pulp and paper industry could provide a competitive advantage for the country within the ASEAN single market.
The Industry Ministry agriculture and plantation products director, Pranata, said that his ministry would coordinate with the Forestry and Environment Ministry to discuss the matter and find a solution that is supportive of the industry.
Forestry and Environment Minsitry, meanwhile, have yet to comment.