East Kalimantan Environmentally Sustainable Development Strategy

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Downstream manufacturing would increase economic value of the forestry
sector, however wood supply needs to come from sustainable resources
Pulp
1 and
paper
Wood
2
pellets
High value
3
furniture
Description
▪ A total of 300,000 ha of plantations required to produce 2 million tons of
hardwood market pulp
▪ Demand for pulp is expected to increase steadily in China and India
▪ 2 millions t of pulp are worth USD 1.5 billion at current market prices and
would result in approx. 100,000 jobs
▪ Wood pellets can be produced from wood residues of the pulp and plywood
industry
▪ Excess steam and electricity from nearby pulp mills will make pellet
production extremely cost competitive
▪ Steady demand in Europe and potentially china and Japan
▪ FSC certified furniture could provide high value export opportunities from
East Kalimantan’s HPHs
▪ However, price premiums for certified products are still uncertain
Downstream manufacturing investment cannot run ahead of
investment in sustainable and certified sources of timber,
whether from new plantations on degraded land or as a
result of better productivity from existing plantations
• Pulp and paper: In the pulp and paper sector, Indonesia has a proven track record of being
world class in terms of production. The pulp mills in Sumatra are amongst the world’s largest
and lowest cost production sites.,They are extremely controversial from an environmental
perspective as insufficient supply from plantations being heavily supplemented by timber
cleared from natural forests. Sustainable pulp production in East Kalimantan would be
competitive globally given its low costs and advantages of its location relative to the India and
China markets for pulp.
DRAFT
As described above, the area of East Kalimantan’s industrial timber plantations is large enough
to supply more than 20 million cubic meters of pulpwood if managed with best international
practices. This volume would meet the full production requirements for the existing Kertas
Nusantara pulp mill in Berau, approximately 6 million cubic meters per year, as well as provide
another 2 million tons of market pulp.
The production of market pulp would result in a significant contribution to East
Kalimantan’s GDP and also provide significant working opportunities for our people
(EXHIBIT 34). Prices for market pulp recovered quickly from the dip during the economic
crisis in 2009 and have reached levels of nearly USD 800 per ton delivered to Europe or North
America. At this price level, the production of 2 million tons of market pulp could result in
revenues of USD 1.6 billion p.a. The number of employees required to run a pulp mill and the
adjacent plantations is significant as well. Pulp mills in Sumatra employ between 30,000 and
50,000 people for the production of 1 million tons of pulp.
Exhibit 33
Significant safeguards would need to be put in place before the expansion of the pulp
and paper production capacity. Increasing the demand for timber without first ensuring a
sustainable supply will only lead to increased overlogging and deforestation. There are several
options to ensure the pulp and paper mills use only timber from sustainable plantations.