Local diversified conglomerate Sinar Mas is set to commence the operation of one of the world’s largest pulp mills, expected to help boost Indonesia’s economy and push up the country’s position in the sector.
The company’s two new pulp and paper mills will occupy 1,700 hectares of land in a downtown area of Ogan Komering Ilir (OKI), which is a two-hour speedboat ride from South Sumatra’s capital city of Palembang.
Sinar Mas managing director G. Sulistiyanto said on Tuesday that the new mills, which will be operated by its pulp and paper unit PT OKI Pulp and Paper, would provide jobs for some 3,500 people.
“They are also expected to provide foreign exchange reserves for the country as most of the products will be exported,” he said during a visit from Industry Minister Saleh Husin to the project site.
Saleh told reporters that the government aimed to up its ranking as the ninth biggest paper producer to the sixth biggest, and from the sixth largest pulp producer to the third.
“I hope we can achieve the target sometime next year with OKI’s operations this year,” the minister said at the pulp mill, which is situated near an industrial plantation.
OKI director Suhendra Wiriadinata said his firm would begin operating the pulp mill in October and would later start constructing the paper mill and a seaport.
“We’ll operate a 700-ha pulp mill in the first phase. We’ll then develop a 1,000-ha tissue plant and the port, which will be close to the Bangka Strait,” he said.
Suhendra said total investment from the project was estimated to hit around Rp 40 trillion (US$3 billion), with investments for the paper mill and port estimated to stand at $600 million and $200 million, respectively.
The pulp mill is set to produce 2 million tons of pulp annually, 80 percent of which is to be exported. The paper mill is expected to produce 500,000 tons of tissue a year, with 95 percent intended for export. Exports of both products are forecast to hit $1.5 billion a year.
Suhendra said his firm would increase the pulp mill’s capacity to 2.8 million tons when everything was on track.
Once both mills are operational and the port is established, OKI will be able to transport its products globally through international ports such as in Singapore or Malaysia.
OKI itself has been granted a tax holiday by the government, allowing the company an exemption from paying taxes for eight years once it commercially operates its pulp mill.
Indonesia’s pulp and paper industry is currently under the international spotlight as environmental activists have claimed that some of the country’s pulp and paper conglomerates were responsible for recent forest fires that affected not only Indonesia but also neighboring Singapore and Malaysia.
A number of Singapore’s retail chains have stopped selling products of another Sinar Mas subsidiary, Singapore-based Asia Pulp and Paper (APP), after some environmental groups claimed that the company was involved in the forest fires.
Saleh and Sulistiyanto said, meanwhile, that APP was a scapegoat as other global paper giants were worried about stiff competition with the company.
APP is currently the world’s third largest pulp and paper firm and it competes fiercely with Singapore-based Asia Pacific Resources International Holdings.