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Indonesia:

US, Others Played A Role In Indonesian Pulp And Paper Collapse
From Environmental Defense
Tuesday, February 13, 2001

WASHINGTON - The financial collapse of Indonesia's pulp and paper sector was in large part made possible by the publicly held Export Credit Agencies
(ECAs) of Europe, Japan, and the United States, Environmental Defense and other non-government groups charged today. During the 1990's, ECAs competed with each other to push more and more pulp and paper manufacturing into what is now an industrial sector characterized by excess capacity, massive deforestation, human rights violations, extreme debt and consequent financial collapse.

According to a recent study by Environmental Defense and the Indonesian organization Bioforum, ECAs played a crucial role in the debt-driven expansion and overcapacity of the Indonesian pulp and paper sector, which has harmed Indonesian forests and the local communities that depend on them. The report is available from Environmental Defense here.

The Center for International Forestry Research (CIFOR) recently found that the ECA-backed Asia Pulp and Paper deforested an area the size of Luxembourg. The CIFOR report can be found at www.cifor.cgiar.org. "This is financial and environmental folly," said Environmental Defense attorney Bruce Rich. "For five years the major ECAs have been under pressure to adopt strong environmental standards. Last week they met and failed again to reach an agreement before the heads of state of the eight leading industrialized nations meet in Italy this July. ECAs must begin to correct their shameful record of environmental and social negligence."

The rapid expansion of Indonesia's paper and pulp production was complicated by a lack of sufficient pulpwood plantations, which led to the clearcutting of hundreds of thousands of hectares of the nation's remaining forests -- the traditional home of indigenous and other forest farming peoples. "ECAs failed to maintain even minimal environmental and social standards," said Environmental Defense scientist Stephanie Fried. "As a result, massive public protests occurred against the forced seizures and clearcutting of community forests, against air pollution, and against the pollution of major waterways by paper and pulp mills and factories."

"ECAs should have known that the words 'economy' and 'ecology' come from the same root. In the case of Indonesia's pulp and paper sector, they have contributed to the ruination of both," said Doug Norlen of Pacific Environment.