ASIAN PAPER AND PULP/SINAR MAS: TOO BIG, TIME TO BREAK IT UP?

by Muhklas Setiabudi

Indonesia’s haze issue has been the buzz word in news and political circuits ever since the black smog from the country’s blazing forest fires, which have, as science has proven, been further fanned by the monster El Nino.

Add to this the fact that these fires are mostly smoldering on land that is peat and is meant for palm oil and / or paper plantations, and the big Indonesian conglomerates have a heated economic and environmental issue at hand.

Asia Pulp and Paper (APP), the mammoth paper and pulp producer, has been at the receiving end of this haze from the green warriors of Greenpeace and family. The NGOs have been repeatedly claiming that a comprehensive map is needed. Specifically, that a ‘One Map’ kind of solution is what Indonesia needs to tackle all its ills; a possibility that is rather unlikely. APP has come under pressure because of the large number of fires on land both it and its supplier companies own. NGO data says 39 per cent of all high-confidence hot spots in Sumatra and 53 per cent of all high-confidence hot spots on Sumatra's peatlands were on APP concessions.  

What has brought further embarrassment to APP is the shocking comment from one of its executives claiming that the company does not know which land belongs to whom. In Indonesia, land conflict is a longstanding and recurring problem, one that just adds to the misery of the deforestation and haze pollution. This conflict stems from rapid expansion of agriculture, forestry and mining, on the back of a rising demand for commodities. 

At the same time, APP’s managing director of sustainability went on record to speak about the land conflict issue and said, “For example in Indonesia, we recently called upon the Government to extend and enhance the Indonesian Forest Moratorium to give more time to finalize the development of Indonesia’s One Map program to provide legal clarity on ownership.”

A classic case of too many cooks spoil the broth? Or, in the parlance of the corporate sector, APP needs to rein in its too many spokespersons who speak off the record and cause the company to red faced every time something appalling like this happens.

The fact is that APP has become so big that one side of the brain doesn’t know what the other is thinking, or worse, planning to implement.

This presents a couple of problems. First, does this mean APP has lost control over its businesses and is no longer able to differentiate what part of the kingdom belongs to its family?

Or, worse, does it mean it APP continues playing stupid again, but actually sounds like Greenpeace – and the rest of the NGOs – by chanting the same green slogans to avoid being hammered by Greenpeace again?

Ironically, even though it seems that Greenpeace is anti-APP, it remains amazingly mum about the fires on APP concessions. The frustrations about the hypocritical stance caused on the grande dames of Greenpeace in Asia to call on APP to discontinueconstructive engagement and change the strategic direction of Greenpeace cancelling the corporate relationship with APP, Wilmar and others. 

But, the mutual symbiotic relationship with APP serves Greenpeace's political strategy. Therefore, it seems Greenpeace accepts the evil in order to gain political mileage.

After all, it seems APP was calling for a stronger moratorium. But, it hasn’t done so because of its bleeding heart. According to Greenpeace, APP lost 75% of its U.S. market share and APP has agreed to change legislation as a result of targeting campaign . The blackmail worked, Greenpeace is running the show, which is bizarre, but kudos to them. Greenpeace and the rest of the green lot has managed what many others were unable to complete. Put the fear of the Green Devil into the largest paper and pulp and palm oil company on the planet. Seemingly, APP executives have not figured it out that social radical experiments often flop. At great cost to society, one must add. 

Paradoxically, Greenpeace is mum with the public identifying the APP contractors as the cause of the haze. The reason for this selective amnesia is that Greenpeace is actually aiming for the main prize of the evening:  A radical policy change by Jokowi to expand the existing forest moratorium to include peat land. And, it worked; Jokowi buckled under Greenpeace’s pressure and issued ministerial instructions  to halt the industry dead in its track. The letter and instructions require not only the central and local governments to no longer issue new licenses on peatlands except for public interest, but also companies to no longer conduct land clearing in peatlands for forestry and plantation business, even in already licensed areas.

Applause for the green warriors, but it still leaves one question unanswered: is APP too large? Even the biggest conglomerates from the financial industry, the “Too Big to Fail” eventually did collapse when the going got really tough. 

Like AT&T, the solution for APP being too large for its own good is: It is about time APP breaks up to make itself much leaner, more effective and more profitable company to avoid haze in the future, and avoid being brought down all together.

More importantly, if the Jokowi administration fails to deliver on the haze next year, it could eventually threaten his already weakened presidency further. Which translates into the cruel fact that the administration will do everything in its power to tackle that issue and if that means the downfall of APP, then who knows?

The president’s weak knees on his reactions during times of panic comes at a price. The Indonesian economy is tanking primarily because jungle goods, herbs and insect eating and guys in loincloths are not sustainable economy. Debt continues to increase, the property market is stagnant, the middle class will feel the pinch and Indonesia will revert to remain irrelevant and emerge as the new socialist utopia making the now dead Hugo Chavez proud. Greenpeace and other NGOs started the proverbial fires, but Jokowi’s forestry ministry burned down the economic wealth. Critically examined, the question who started the fires remains unanswered, but the answer to who will burn in its blazing heat is quite apparent.

Oddly enough, Jokowi’s knee-jerking befits the foreign NGO movement dubbed by a conservative think-tank as the new fundamentalism. Claims made by others lack credible economic data. For now, for APP, the fires could prove costly and affect supplies of pulpwood to its mills, particularly a US$2.6 billion (S$3.7 billion) pulp mill under construction in South Sumatra.

For now, APP might just be able to keep the losses under check. For now, but given the mammoth size of the company, it is difficult to say how APP will trim its losses going further. Maybe, it is about time to break up APP. Maybe, APP is too big for our collective good.