2006 Eka Tjipta Widjaja APP Report (Cifor)

8/10/2019 2006 Eka Tjipta Widjaja APP Report (Cifor)

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Asia Pulp & Paper Indonesia:The business rationale that led toforest degradation and nancial collapse

Romain PirardRo koh Rokhim

Working Paper No.33


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Asia Pulp & Paper Indonesia:The business rationale that led toforest degradation and nancial collapse

The authors compiled nancial data about the Widjaja Family using Bisnis Indonesias data collection and Jakartaand Surabaya Stock Exchange resources. We interviewed nancial analysts from banking institutions and securitieshouses, former IBRA staff and NGOs.The authors wish to thank Christian Cossalter, Alain Karsenty and Chris Barr for their review of the paper and usefuladvice, and Sally Wellesley for language editing.

Romain Pirard PhD economics student, Ecole des Hautes Etudes en Sciences Sociales (EHESS), France. hosted byCIFOR. Email: [email protected] koh Rokhim, Editorial & Research Division, Bisnis Indonesia Daily and PhD economics student from UniversitParis 1 Panthon-Sorbonne. Email: ro [email protected]

Romain PirardRo koh Rokhim


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2006Published in 2006Printed by Subur Printing, JakartaCover photo by Romain Pirard

Published byCenter for International Forestry ResearchJl. CIFOR, Situ Gede, Sindang Barang,Bogor Barat 16680, IndonesiaTel.: +62 (251) 622622; Fax: +62 (251) 622100

E-mail: [email protected] site: http://www.cifor.cgiar.org

Disclaimer:

The views expressed in this publication are those of the author(s)and do not necessarily represent the of cial position or policy of CIFOR.


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Table of Contents

Introduction 1

The Widjaja familys control through a complex structure 2

The key role of commercial transactions with related parties 3

Investors have their share of responsibility in the APP trajectory 4

APPs default and restructuring process 5

Short-term pro ts: a recapitulation of nancial gures from the 1990s 7

Legal issues 9

Conclusions 11

References 14

Annex 1: The story of the Sinar Mas group 16

Annex 2: Pulp and paper and forestry entities related to APP and the Widjaja family 17

Annex 3: Commercial relations between Indonesian P&P mills and companies relatedto the Widjaja family 18

Annex 4: APP Indonesia nancial gures 21


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1 Asia Pulp & Paper Indonesia: The business rationale that led to forest degradation and nancial collapse

CIFOR has been involved in research on thePulp and Paper (P&P) sector in Indonesia andChina since the end of the 1990s. The Barrreport, Banking on Sustainability: structuraladjustment and forestry reform in post-SuhartoIndonesia (2001), was a major step becauseit stressed the overcapacity problems of thesector at a time when the major groups werefacing debt repayment failures. Friends of theEarth has also published reports dating from

2001, that focused on the nancial aspects ofthe sector, with case studies on two groups:Asia Pulp & Paper (APP, Matthew and Gelder2001a) and Asia Paci c Resources InternationalHoldings Ltd (APRIL, Matthew and Gelder2001b), and showed that the nancing strategyof the owners of these groups was a majorreason why the past expansion appeared tobe fragile.

Since 2001, many things have changed butthe nancial problems remain. The objectiveof this report is therefore to use new datasources to get a better understanding. Wedecided to study APP, as it highlights many ofthe faults inherent in the Pulp & Paper sectorin Indonesia: excessively rapid expansion, lackof investment in plantation estates, a focuson forest conversion, major use of af liateddomestic banks and foreign investors to nancethe expansion, a controversial negotiatingprocess with the Indonesian institution incharge of government-related debts (IBRAthe Indonesian Bank Restructuring Agency),connections to a conglomerate that favours

the use of transactions with related partiesand potential transfer pricing, and an enormousdebt of $13 billion that is still to be repaid.All these facts have encouraged us to focuson one group only, which is the largest inIndonesia and with the highest default on debtrepayment in an emerging country for a privategroup. More important to us, its trajectory hadsigni cant negative impacts on the naturalforests in Indonesia, a country hosting some ofthe richest forests in the world. It is assumedthat its pulp production has resulted in almost

one million hectares of natural forests beinglost since the beginning of its operations inthe mid-1980s (Cossalter 2004), and thegroup announced it would clear-cut 180,000hectares of natural forests in 2004/05, mainlyon peatlands (Asia Pulp & Paper 2004). Thusit is of the utmost importance to identify thereasons why such a scenario happened, and toresearch the rationale behind this apparentlyharmful strategy for the country, its taxpayers

and the environment at large. As the paperwill illustrate and argue, the links betweenthe three spheres nance-governance-forestshave been very strong and their analysis helpsto understand some of the underlying causes ofloss of natural forests in Indonesia.

The APP group is supposedly owned ultimatelyby the Widjaja family, who controls theIndonesian conglomerate Sinar Mas, which isactive in many sectors including agribusiness,property and nance. This report provides newinformation on how the Widjaja family was ableto manipulate the numerous entities under itscontrol to generate pro ts at the expense ofminority shareholders and creditors interests.We were able to access nancial documentsdating from the 1990s, and we synthesizedthe related party transactions in a matrix.Bond prospectuses dating from the 1990s alsogave us very useful information on past pro tsand cost structures, which we synthesized intables too. Using our knowledge of the forestryoperations, we also put into perspective theplausible pro ts generated by the wood supply

from Widjaja-owned companies to the APP-owned pulp mills.

The large and rapid expansion of the groupscapacity in Indonesia was made possible byinvestors 1 failure to correctly assess theweaknesses and loopholes associated with thesustainability of the pulp and paper mills, thescope for transfer pricing within the Sinar MasGroup, the impossibility of guaranteeing thatdata in the companies accounts are true, andthe lack of legal enforcement to seize corporate

Introduction

1 By investors we also mean banks, Export Credit Agencies and other nancial institutions involved.


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2 Romain Pirard and Ro koh RokhimWorking Paper 33

or personal assets in case of bankruptcy. Weinterviewed some of the actors involved for ananalysis of the reasons behind these. Af liatedbanks were also a typical tool for cheap andeasy nancing, and APP made wide use of thischannel. Therefore we investigate this aspectand provide insights.

Finally, as the restructuring process of APPstarted in 2002 and has now been agreedupon by the vast majority of creditors, weinterviewed stakeholders (including the personin charge of the case at IBRA) in order to betterunderstand the ins and outs of the restructuringagreements.

The Widjaja familys controlthrough a complex structure

The Widjaja family is well known as a majorplayer in the Indonesian economy through theSinar Mas Group, which was founded by EkaTjipta Widjaja (see the groups history in Annex1). This family is also considered as the ultimateowner of APP (Fallon 2003). We use the termWidjaja family as we feel it is more correctand appropriate than Sinar Mas or APP. Indeedthese groups are not strongly connected in legalterms, through cross-shareholdings, but theyare all controlled by the same family.

WirakaryaSakti

AraraAbadi

CHPInter.Corp

IndahKiat

YFYHKCorp

YFYGlobalInv.Corp

SupraVeritas

Sinar MasTunggal APP Inv. Ltd

PurinusaEkapersada

APP Co.Ltd

Tjiwi Kimia

APP Globalandsubsidiaries

LontarPapyrus

PindoDeli

SatriaPerkasaAgung

WIDJAJA FAMILY :Eka Tjipta Widjaja, Djafar Widjaja, Franky Oesman Widjaja

Indra Widjaja, Muktar Widjaja, Sukmawati Widjaja, Teguh Ganda Widjaja

1.09%

0.06%

57.38%

100%

0.52%

66.33%*

36.63%

63.35%

97.57%

80%

19.75%99.972%

4.20%

52.72%

2.56%

0.05%

2.84%

Figure 1: Structure of the Widjaja familys ownership in Indonesian pulp and paper companies

Source: Financial reports 2003 for Indah Kiat-Lontar Papyrus-Pindo Deli-Tjiwi Kimia, Jakarta Stock Exchange, SurabayaStock Exchange and JSX Watch 2003* Matthew and Gelder 2001a


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APP is the largest pulp and paper producerin Asia outside Japan, and one of the topten producers in the world. According to APPAnnual Report 1999, the capacity of the groupis 8.0 million tonnes, comprising 2.3 milliontonnes of pulp and 5.7 million tonnes of paperand packaging. APP has 15 production andconverting facilities in Indonesia, 12 in China,four in Singapore, two in the United States andone each in India, Mexico and Malaysia (seeFigure 2 in Annex 2). APP markets its products inmore than 65 countries on six continents. APPspaper products include various types of printingand writing papers, coated and uncoated freesheets, as well as converted and value-addedproducts, such as cut-sized photocopier paper,

stationery, carbonless paper, and tissue paperproducts.

APP was incorporated in Singapore in order tohave better access to international nancialmarkets, and is not formally linked to the SinarMas Group. But as Figure 1 shows, the realcontrol is actually similar to that of Sinar Mas,as the Widjaja family uses nominee companiesestablished in scal paradise countries inorder to enjoy various bene ts.

The key role of commercialtransactions with related parties

As nancial analysts were aware, before thegreat expansion of APP, the Widjaja familywas very keen on using related parties forcommercial transactions. This way of doingbusiness is known for allowing and encouragingcommercial contracts driven by the interests ofthe ultimate owners, rather than resulting froma normal market process.

Hundreds of companies have been created withinthe Sinar Mas conglomerate, both to enhanceef ciency and to control sales prices betweenrelated companies. As a consequence, theultimate owners were and still are in position toprioritize their own interests and even capturepro ts for themselves 2. This would be done tothe detriment of investors in the major listedcompanies when the share value decreases; andto the detriment of creditors when loans are notrepaid. As companies controlled by the Widjaja

family are in perpetual business relations witheach other, accumulating transactions withrelated parties, outside investors are not in aposition to interfere, either because they haveonly minority rights, or are creditors.

From a theoretical point of view, thisphenomenon is clearly shown in Bunkanwanichaet al. (2003) or Claessens and Fan (2003),where ultimate owners minimize their nancialimplication but maximize their control throughthe creation of numerous subsidiaries. Thereis a voluntary gap between the ownershiprights (also called cash- ow rights) and thecontrol rights (also called voting rights), theformer being equal to the money invested by

the ultimate owner in a company through thepurchase of shares, and the latter being equalto his power to vote. If we take the example ofIndah Kiat (see gure 1), we see that ownershiprights by the ultimate owner are diluted alonga chain comprising APP Global and subsidiaries,then APP Co. Ltd (with 66.33%), then APP Inv.Ltd and Purinusa Ekapersada (with 57.38%),and nally Indah Kiat (with 52.72%). Anotherchain comprises APP Global and subsidiaries,then APP Co. Ltd (with 66.33%), then PurinusaEkapersada (with 36.6%), and finally IndahKiat (with 52.72%). And a third chain goesdirectly from APP Co. Ltd to Indah Kiat (4,2%).As a result, the money directly invested bythe ultimate owner would be around 35% buthis control rights would remain at more than50% (table 1 gives the gures for the othercompanies). The effect of which was clearlydemonstrated by Lemmon and Lins (2003:

2 Lemieux and Wixted (1998) say it clearly: Financial conglomerates provide opportunities for individuals in controlto use the resources of the company for their own personal bene t.

Table 1: Ownership rights and control rightsof Widjaja Family for APP Indonesianmills

Ownershiprights (O)

Control

rights (C)Ratio O/C

Indah Kiat 35.65% 56.92% 0.63

Tjiwi Kimia 39.49% 57.38% 0.69

Pindo Deli 60.82% 97.57% 0.62

LontarPapyrus 60.97% 99.75% 0.61

Source: Estimated from various sources


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1466), who used a sample of 800 rms in eightEast Asian countries, and found that

cumulative stock returns of rms inwhich managers and their familiesseparate their control and cash-flowrights through pyramid ownershipstructures are lower by 12% during thecrisis period compared to those of otherrms. Further, we nd that the stockreturn underperformance associated withpyramid ownership structures is presentonly in rms where the managementgroup also has a high level of control. Theunderperformance increases to about20% points for these rms.

We recapitulate the relations betweencompanies controlled by the Widjaja family ina matrix (presented in Annex 3), categorizedaccording to the nature of the transactions. Thematrix proves that these transactions concernthe wood supply, energy supply, chemicalssupply, the marketing of the pulp and paperproducts both to domestic and internationalmarkets, insurance, the construction ofinfrastructure, nance, etc.

For example, in 1995 Lontar Papyrus mill signedan agreement with Wirakarya Sakti plantation,which states that the pulp mill has theobligation to nance the plantation companyas needed and without any limit (ostensiblyfor establishing, maintaining and harvestingthe plantation), and through the provision ofinterest-free loans. The agreement also statesthat the pulp mill is the plantations priorityclient for wood sales, at a price to be decidedand with payment in advance. Through thelate-1990s, APP mills presumably used theseagreements to purchase wood at very lowcosts, amounting to little more than the cost

of harvest and transport to the mill. However,this agreement was amended in early 2001and is valid for another 30 years. All advancespaid to Wirakarya Sakti are presented as non-current assets.

The same type of agreement has been signedbetween Indah Kiat mill and Arara Abadiplantation. Both parties also agreed that theloans provided by Indah Kiat shall not be offsetagainst the companys payment obligation fromthe purchase of pulpwood from Arara. In the

nancial reports, it is presented as non currentadvances to related parties.

It is important to stress the consequences ofsuch agreements, as the plantation companiesare believed to be owned exclusively bythe Widjaja family members. As currentlystructured, the agreement is totally in favour ofthe plantation company, and very unusual in thesector. It permits these plantation companiesto operate at very low costs (all the more soif the loans are not actually repaid), and tosell their production at very high prices as themills are af liated. These transactions lacktransparency, presumably on purpose, and thepro ts generated from these are impossibleto calculate precisely. However, we will usesome assumptions to estimate these gains inthe following sections.

Investors have their share ofresponsibility in the APP trajectory

History, Nehru famously observed, is writtenby the victors 3. Financial history, it seems, iswritten by the creditors. When a nancial crisisarises, it is the debtors who are called uponto take the blame. This is odd, since a loanagreement invariably has two parties. When aloan fails, it usually represents miscalculationson both sides of the transaction, or distortionsin the lending process itself (Radelet andSachs 1998: 1).

Since the beginning, companies related to theWidjaja family have used both banks and capitalmarkets to nance their projects. Locally, theWidjaja family used credits from state-ownedor private af liated banks. Internationally theywere also capable of raising substantial fundsthrough bank syndicates from all over the worldor the issuance of bonds.

The former director of corporate nance of adominant player in the international bankingsector told us, during a con dential interviewheld in Jakarta on 21 December 2004, thatbankers in the 1990s considered the nameof Widjaja as a guarantee in itself, due tohis reputation as a successful and reliablebusiness partner: When we approved thecredit for millions of US dollars, we justsigned and never asked in detail about therisks of the business. The director said thatat that time, international banking was very

liquid and bankers were very optimistic about

3 History is almost written by the victors and conquerors and gives their viewpoint, in Jawaharlal Nehru, TheDiscovery of India , 1946.


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the Widjaja family had to sign a ShareholderLiability Settlement (PKPS Agreement) withIBRA, which implied that a company with badloans from a bank that was recapitalized byIBRA had to pledge assets. As a consequence,the Widjaja family pledged 145% of their debtto IBRA (equivalent to US$1.9 billion), usingAPPs corporate assets (Musa and Suta 2004).The new deadline was 15 April 2003.

When, in March 2001, APP called a debtmoratorium, the total debt was US$13.9 billion.Negotiations were then initiated with more than200 creditors, mostly from the United States,Europe and Japan. During the 1990s, APPsIndonesian operations reported substantial

pro ts, but when APP ran into problems, ittold creditors the cash had been fully used.Since the debt moratorium, restructuringnegotiations have been coloured by controversyand countless legal challenges.

On 7 November 2001, the Widjaja family agreedwith IBRA to give personal guarantees againstAPP and Sinar Mas debts, and signed a formaldocument. According to the information weobtained from IBRA staff, the Widjaja familychose to do so in order to gain time. If theyhad not, they would have had to hand overtheir assets (pulp and paper mills located inIndonesia) to IBRA. This means that at thattime, the restructuring process was based notonly on corporate liabilities but on personalliabilities too.

Soon after that, in 2002, I Putu Gede Ary Sutyawas replaced as Chairman of IBRA by SyafrudinTumenggung. This change of management,in uenced by Megawati Sukarnoputris recentelection as President of Indonesia, resulted ina change of strategy for APP Indonesias debt

resolution, and the personal guarantees of theWidjaja family disappeared in the process.Indeed, IBRA decided to enter into a globaldebt restructuring negotiation and to abandonthe guarantees it was holding from the Widjajafamily and the Sinar Mas Group. Subowo Musa,a former senior manager at IBRA under I PutuGede Ary Sutya, told us that this happened atthe behest of the international creditors. Indeedthe IMF, on behalf of these creditors, pressuredIBRA to engage in a restructuring involving allcreditors at the same level. It seemed that

international creditors were jealous of IBRAbecause it had these guarantees from theWidjaja (Subowo Musa pers. com.).

In 2001, APP announced that a $220 millionloss on two currency swap contracts had notbeen included in the financial statements,although they had previously been auditedby Arthur Andersen. In 2002, the audit reportby KPMG revealed that one of its Indonesiansubsidiaries, Pindo Deli, had spent US$170million in cash to buy a huge piece of landthrough a Widjaja family-related company.Creditors were upset, as the deal made noeconomic sense, particularly for a companythat was supposedly facing such a nancialcrisis (FEER 14/02/2002). These two exampleswere the rst of several cases of suspectoperations that made investors lose con dencein the management and the reliability of the

nancial statements between 1997 and 1999.This is very much in line with the words by Fanand Wong (2002):It is important for policymakers and regulatorsto understand how the concentrated shareownership structure in East Asia is associatedwith incentives for rms to reduce accountinginformation quality.

On 15 June 2002, IBRA and Export CreditAgencies (ECAs) signed the agreement toarrange the restructuring as soon as possibleand also to increase the control of APPcompanies by the ECAs. Then, on 15 September2002, there was an agreement that creditorsparticipating in the Master RestructuringAgreement (MRA) could put nancial controllersin APP companies. Even IBRA acknowledgedthat this was ineffective. We should be awaretoo, that the same year the Deutsche Bankfiled a lawsuit in Singapore to appoint ajudicial manager, and APP managed to avoid it. Negotiations continued, with several agreementssigned during the process, but IBRA was nallyconsidered as too lenient in its approach,

contrary to other creditors who were tryingto bring the case to court. It resulted in anof cial protest by 11 ambassadors to IndonesianPresident Megawati Soekarnoputri, statingthat IBRA was apparently influencing thenegotiations in favour of the Widjaja familyand to the detriment of the creditors. Finally,the Master Restructuring Agreement (MRA) wassigned on 30 October 2003, concerning $6.7billion of APP Indonesias debts. Increasingly,the creditors agreed with the document (mainlythe ECAs at the beginning, but 93% by the end of

2004), as further legal action seems hopeless.Not entering into the nancial details of theMRA, one has to be aware that several core


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elements of the MRA clearly favored theWidjajas: i) the payment of the debts wasplanned during a period longer than fteenyears, ii) until the beginning of the repaymentthe accrued interests were not included andtherefore represent a new nancial subsidy tothe group, iii) the control of operations was notaltered and the ultimate shareholders are stillin position to decide of the groups strategy.In short, the MRA did not make a substantialmodification to the core reasons why thegroup followed a rationale that already badlyimpacted on Indonesian natural forests, onIndonesian taxpayers, and on investors fromall around the world.

Some creditors did not enter into the MRA withAPP, and in at least one case, they pursued legalaction. In early 2005, litigation commencedin New York by GE Capital, Oaktree andGramercy Adviser was still ongoing (GE Capitalnally signed the MRA in 2004). The litigationcould eventually lead to the seizure of APPscorporate assets, namely the Indah Kiat andLontar Papyrus pulp mills, and this is the reasonwhy APP countered with a legal action throughthe local courts in Sumatra (where the pulpmills are located). Yan Partawijaya, directorof the Sinar Mas Group, said that APP will notcooperate with any creditor that decides tokeep ling lawsuits because a majority of thecreditors have already signed the restructuringagreement (Bisnis Indonesia, 24 January 2005).At the same time, APP asked the creditors todelay the effective date of the agreement untilApril this year (2005), because of the ongoinglitigation. The latest decision in New York, on7 February 2005, was in favour of APP.

Short-term pro ts: a recapitulationof nancial gures from the 1990s

Access to early financial reports and bondprospectuses from the 1990s allowed us toverify some assumptions about the assumedWidjaja familys real strategy: securing short-term pro ts with rapid and large expansion ofcapacity, and delaying costs with longer termdebts (bank loans or bonds).

It is striking to see that the shift from pro ts to

losses happened very suddenly, after many yearsof high pro ts, as shown in Table 6. From 1993 to1999, the pro ts generated by Indah Kiat, Tjiwi

Kimia, Pindo Deli and Lontar Papyrus amountedto, respectively, $735,974,000, $487,838,000,$123,015,000 and $168,760, coming to a totalof $1,515,587,000.

These pro ts are realized and registered atthe mill level, but they do not include thoserealized from the domestic sales of the pulp andpaper products though companies controlledby the Widjaja family (like Cakrawala MegaIndah), or when the products are marketed toAPP-owned mills in China, or even through thewood supply from Widjaja-related plantationcompanies.

This latter aspect, namely the complete control

of the wood supply to the mills, is both veryimportant and controversial. Due to the lack oftransparency, there was no of cial informationon the plantation companies ownership, butpast investigations have shown direct links tothe Widjaja family. We accessed the companiesregistration board in Jakarta, and found thatArara Abadi and Wirakarya Sakti are ownedfully by the children of Eka Tjipta Widjaja, thefounder of Sinar Mas.

From the nancial reports of the mills it is

not possible to know precisely the price paidfor the wood, as the transactions are dividedin several categories, and the exact volumesof wood are not speci ed. However, the millsfrom the start have mainly purchased woodfrom the conversion of natural forests insidethe plantations concessions, or of palmoil concessions af liated to the group. Theproduction costs have been very low, but mayincrease dramatically from 2005 onwards as thevolume of wood from plantations will increaserapidly due to the scarcity of remaining naturalforests to convert.

We tried to estimate the price paid for the woodby Lontar Papyrus and Indah Kiat for severalyears. For this, the Bond Prospectus gave usthe percentage of wood purchased by IndahKiat to af liated suppliers from 1996 to 1999,and the nancial amounts paid by Indah Kiatand Lontar Papyrus to af liated suppliers. Forthe years 2002 and 2003, we could only guessthat most of the wood was coming from theaf liated companies, as huge deforestation istaking place in af liated concessions, and as

trees planted in these concessions were startingto be logged at a higher scale than ever before.Moreover, a report by WWF Indonesia (2004)


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on the timber consumed by APP shows that amajor source of wood is from locally obtainedclearcut permits, with some of these permitsheld by af liated entities. Where non-relatedcompanies or cooperatives hold these permits,our own investigations in the eld show thataf liated suppliers can buy the wood beforeselling it back to the mills. Sometimes they caneven carry out the logging operations.Our estimations of the price paid by the mills for

the wood do not pretend to be precise, as thepublic information is not complete. However,they show a trend to an increase of this price,and this can not be entirely justi ed by ashift from Mixed Tropical Hardwood to Acacia.Indeed, natural forests still represent the bulkof the ber supply in 2002 and 2003. They alsoshow that this price is unusually high comparedto the costs of wood production (Pirard 2004).

Table 3 : Wood consumption by Indah Kiat and Lontar Papyrus, and corresponding rent* for woodsupply companies between 1993 and 2003

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

IndahKiat

Woodpurchasedfromaf liatedsuppliers(000 m 3)

1,090 2,815 3,142 4,338 5,558 1,364 6,393 6,480 6,523 6,534

Rent (000US$) 5,454 14,076 15,714 21,690 27,792 6,822 31,968 32,400 32,616 32,670

LontarPapyrus

Woodpurchasedfromaf liatedsuppliers

(000 m3

)

86 1,555 1,703 1,901 1,948 1,364 1,897 2,142 2,268 2,358

Rent (000US$) 432 7,776 8,514 9,504 9,738 6,822 9,486 10,710 11,340 11,790

Total

Woodpurchasedfromaf liatedsuppliers(000 m 3)

1,177 4,370 4,846 6,239 7,506 2,728 8,291 8,622 8,791 8,892

Rent (000US$) 5,886 21,852 24,228 31,194 37,530 13,644 41,454 43,110 43,956 44,460

Source: adapted from Indah Kiats 1999 Bond Prospectus, Lontar Papyruss 2000 Bond Prospectus, APKI for woodconsumption, a conversion factor 4.5 m 3/ton of pulp produced, assuming wood purchase from af liated suppliersat 80% of the bre used, and $5/m 3 rent for the wood supply from af liated companies.* We use the term rent because the supply companies are nanced by APP though interest-free loans.

Table 2 : Estimated price for wood bought from af liated suppliers

1996 1997 1998 1999* 2002 2003

IndahKiat

($/m 3) 24.4 19.9 8.8 15.4 33.5 50

(Rp/m 3) 58,145 92,535 70,620 109,340 299,825 445,100

Lontar

Papyrus

($/m 3) 16 10.3 5.4 17 38.7 45

(Rp/m 3) 38,128 47,895 43,335 120,700 346,365 400,590

Source: adapted from Indah Kiats 1999 Bond Prospectus, Lontar Papyruss 2000 Bond Prospectus, the nancialreports of Indah Kiat and Lontar Papyrus from 2002 and 2003, APKI for wood consumption, and a conversion factorof 4.5 m 3/ton of pulp produced. Amounts in Rupiah were converted into US dollars according to the exchange rateon 31 December, and vice versa.*Respectively the rst three and nine months of 1999 for Indah Kiat and Lontar Papyrus.


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The very clear breakdown in the prices paidby the mills for the wood purchased fromthe af liated suppliers, before and after thenancial default, may have another explanationthan the one of cially expressed by Asia Pulp &Paper. The group says that the shift from naturalforest to tree plantations for the wood supplylogically increases the costs. But the nancialreports clearly state that the plantationoperations are nanced by the mills, and thesame reports show cash transfers of severaltens of millions of dollars to the wood suppliersthat took place in recent years. This contradictsthe of cial explanation because the pricesshould not include these costs already paidby the mills. A more convincing reason for the

apparent price increase lies in the fact that APPhad to attract investors during the expansionin the 1990s, and consequently announcedthat it could access very cheap ber from theconversion of natural forests. This has resultedin the huge pro ts recapitulated in Table 6.After the default in 2001, the agreements werechanged presumably in order that the pro ts gettransferred from the mills to the af liated woodsuppliers controlled by the ultimate ownersof APP. This is for us the core reason why theprices increased in such a spectacular way from2001 onwards.

For recent years, according to our owninvestigations in the eld, and assuming sharesof wood coming from forest conversion andplantations at 70% and 30% respectively, theproduction costs range between $20 and $25/m 3 at most. The resulting pro t captured by thewood supplier may then also be in the range of$15 to $30/m 3.

For our estimates of the pro ts (a rent, in fact)captured at the wood supply level, we use a

very conservative gure of $5/m 3. In reality, itcould be several times higher.

Over the years, the total rent captured amountsto more than $300 million with our conservative

assumptions. It is plausible that, in reality, thisrent is over $1 billion.

It is also interesting to calculate the rent thatIndonesian pulp mills have captured throughthe conversion of natural forests. If we assumethat until 1998 the bre used by Indah Kiat andLontar Papyrus came from the clearcuttingof Sumatran forests (a few percent at mostmay have come from plantations), and thatthe productivity of these forests for chipwoodproduction was approximately 100 m 3/ha(Christian Cossalter pers. com.), then we canderive the gures presented in Table 4.

We have already stressed the crucial role of

debts in APPs expansion in the 1990s. Table 7in the Annex 4 recapitulates the evolution ofthe debt burden for the principal Indonesianmills, and shows the regular increase of thesedebts, not only generally but also for each ofthe mills. Some years show a rapid increase,and correspond to the construction of newproduction lines: 1994, 1995, 1998, 2000.

This increase in the debts has to be comparedwith the evolution of the capital, as theassets increased generally with the repeatedinvestments. As shown in Graph 1 in the Annex4, from 1993 to 1997 the debt to equity ratioincreased steadily from 1.4 to 1.8. In 2003, thisratio reached 3.7.

In the tables 8 and 9 in the Annex 4 we giverecapitulative tables with the evolution of salesand operating costs.

Legal issues

Our understanding and description of the APP

strategy needs to include legal issues for atleast two reasons: the group has announceda debt standstill in 2001 but has been able toavoid any seizure of its assets or replacementof the group controllers; legal actions initiated

Table 4 : Estimated rent at mill level per hectare of natural forest converted (US$/ha)

1994 1995 1996 1997 1998Indah Kiat 6,127 7,268 3,534 1,946 5,850Lontar Papyrus - 4,958 1,148 4,822 2,841

Area of natural forests converted (hectares)Indah Kiat 10,900 28,150 31,417 43,372 55,577Lontar Papyrus 15,548 17,029 19,010 19,482


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by creditors have generally failed and thedebt restructuring has been an out-of-courtnegotiation.

APP is a multinational with a holding, subsidiaries,and nancial companies located in numerouscountries, in Singapore, Indonesia, China,Europe or countries known for their lax scalregulations, such as Cayman Islands. An ef cientmove by the creditors to put the group back onits feet, means that all its entities have to beinvolved as a whole. Unfortunately, Countriesacross Asia, whether they are developed oremerging economies, have at least one thingin common: they do not have adequate lawsto deal with the insolvency of multinational

corporate collapse (Asian Development Bank2004: 1). The consequences of this lack ofadequate laws to deal with multinationals, suchas APP, are at least three:

First, the risk stands that the transferof pro ts among the group entities is infavour of some stakeholders only, and tothe detriment of the others. This risk isreal according to our analysis of the groupmanagement, and the multiplicity oftransactions between af liated (formallyor not) companies. It has been minimized,however, through the decision to includethe holding and the principal Indonesianoperating companies (PIOCs) in the samedebt restructuring process that led to theMaster Restructuring Agreement (MRA) inlate 2003.

Second, when the indebted holdingcompany is located in a country with areliable legal system in order to attractinvestments (APP holding company isincorporated in Singapore), but its assets

are owned by subsidiaries located incountries with poor law enforcement,then the lack of cross-border insolvencyregime does not allow the holding companycreditors to seize its assets. In a report bythe World Bank in 2001, the problem forcreditors to enforce their rights was statedas follows: The bankruptcy process inIndonesia does not pose a credible threatto recalcitrant debtors (Drum 2001:iii). Actually, Indonesias Bankruptcy Lawwas amended in 1998, as a result of the

economic crisis and in order to address theplethora of corporate failures. It createdthe Commercial Courts, the rst being in

Jakarta, responsible of dealing with thelawsuits led by creditors. But the rstcases were handled improperly, and thereliability of the courts has been widelyquestioned because of the lack of expertiseand rampant corruption. Moreover, a reportobserves that the number of suits led inthese courts was in regression in 2002 (APEC2003).

Third, the lack of possible coordinationbetween legal systems and courts locatedin different jurisdictions is a reason initself to refuse any law enforcementagainst debtors. This point is crucial andwas perfectly illustrated by the judgment

against the complaint by the Deutsche Bankin Singapore in 2003. As the creditor wascalling for the appointment of a judicialmanager in APP, the Judge agreed with sucha claim but rejected it with the followingwords:I am not at all optimistic that the taskcan be so easily achieved by such aroute. That may well be the case underour system of law but may not be underChinese or Indonesian law, given theanticipated opposition from creditorsof those subsidiaries to the judicialmanagement order in the rst place, aswell as the con ict in opinions from theparties Indonesian and Chinese legaladvisers [as to whether the Singaporeancourt judgment would be recognized](quoted in ADB 2004).

The complex nancial structure of APP, thediversity of creditors and minority shareholders,the enormous quantity of debts (includingbonds), have led lawyers to conclude thatPerhaps no restructuring in Asia today better

illustrates the challenges of completing acomplex, out-of-court, multi-jurisdictionalworkout than APP (Cooper and Brown 2003:11). Concretely, creditors have organizedthemselves in two Committees but this provedto be ineffective: Export Credit Agencies andcommercial banks eventually became aware oftheir divergent nancial interests, and securedbondholders were in con ict with the unsecuredones. Negotiations were thus delayed for along time, and different strategies emergedwith some creditors going to the courts, others

accepting the terms designed by APP, or someeven separating the Chinese debt from theIndonesian one.


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5 The group enjoyed great windfall bene ts from 1997 to 1999 during the crisis.6 A con dential source told us that the creditors adviser KPMG Singapore had made a study showing that the

registered costs were in ated. As quoted in Cooper (2003), creditors have criticized the restructuring plan forsome reasons including the lack of protections preventing cash leakages.

Delays were in favour of APP of course, and couldbe anticipated before the con icts emergedbetween creditors during the restructuringnegotiations. Indeed, judgments in manycountrys Commercial Courts can be appealed atthe Supreme Court, and the nal decision couldbe rendered several years after (APEC 2003). Ifthe short-term strategy of the ultimate ownersis the right hypothesis, then this capability toinde nitely postpone the enforcement of legaldecisions, through sanctions such as the seizureof assets or the real control of the operations bycreditors, clearly works in favor of the ownersinterests.

Conclusions

Asia Pulp & Paper was studied in this paperas a main factor of deforestation in Indonesiaduring the two last decades, with an increasein 2004/05 as the group announced its plan toconvert 180,000 hectares mainly on peatlands.Curiously, the group defaulted on its debts in2001 for $13.9 billion, but no substantial changewas observed in both the control of operationsand the management. Thus we researched thefactors leading to APPs default, in an analysisthat links the spheres of nance, governance,and forests.

APPs trajectory since the early 1990s has beenvery impressive for several reasons. Focusing atrst on Indonesia to develop a pulp and paperempire in order to become one of the top tenproducers in the world, the group achievedits objective owing to very lax attitudes onthe part of investors both from Indonesia andabroad. The context of the early and mid1990s, with the so-called Asian miracle and

the Indonesian governments of cial policy ofpushing industries with a clear export-orientedstance, and the availability of huge forest areasfor conversion, permitted the extraordinarilyfast expansion of APPs capacity. This expansionhas been mainly based on debts, either throughbond issuance or bank loans. The nancialreports and prospectuses show clearly that long-term debts are the major nancing vehicle, and

that self- nancing through bene t reinvestmentor share issuance has been relatively small.

The combination of such a nancing structure,huge capacity and cheap raw materials resultedin very significant benefits until 2000. Ourresearch estimates these at more than $1.5billion for the four principal APP companieslocated in Indonesia from 1993 to 1999.

The turning point occurred in 2000, eventhough 2001 is the well-known year when APPannounced a debt standstill. This is clearly notrelated to the Asian crisis 5, contrary to whatsome analysts have declared, but rather to adecline in international pulp and paper prices.

The argument that the dollar-denominateddebts contracted by the group to nance itsexpansion explain the de cits does not hold upfor us either. Its production costs are mainly inlocal currency, and, as it is export oriented,its sales are mainly in dollars. We also foundout that local sales were priced according tointernational prices in dollars. And nancialanalysts were still rating the group well atthe end of the 1990s, conscious of the groupsformal comparative advantages. Then whathappened?

In fact, the losses were related more to theglobal oversupply of pulp and paper productson the international market, an increase inproduction costs (for unclear reasons), lossesdue to foreign exchange rates (registered inthe nancial reports but not always realized),and other unspeci ed reasons (the nancialreports specify other costs without being anymore precise) 6.

The analysis of the nancial reports and bondprospectuses of the principal Indonesian

companies under APP gave us the elements forthe construction of a matrix, recapitulating thedifferent types of transactions with relatedparties. These transactions concern the woodsupply, energy supply, chemicals supply, themarketing of the pulp and paper productsboth to domestic and international markets,insurance, the construction of infrastructure,finance, etc. The impressive list of these


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The major lawsuit initiated in New York by GECapital, Oaktree and Gramercy Advisers, whotogether hold $319 million in debts at LontarPapyrus, has been rejected. Two major reasonsexplain why no legal ways can be used to solvethe case. First, the absence of a cross-borderinsolvency regime does not allow courts to actef ciently in this direction. Second, the realweakness of bankruptcy laws and enforcementin Indonesia acts as a shield for APP to keepcontrol of its assets.

We are not very optimistic about the future,because all the above conclusions lead usto a final point: the success or failure ofthe restructuring process may not impact

signi cantly on the viability of APPs operations.In other words, as APP may be a tool in thehands of the Widjaja family to generatepro ts for themselves, rather than for thegroup and its subsidiaries as companies, andas the context does not allow the creditors toin uence strategic decisions nor to access theaccounts, then we hardly see that the group

would radically change its practices. Moreover,the restructuring process has been postponedso far for one reason or another. The mostrecent example of that is APPs declaration thatimplementation of the Master RestructuringAgreement will be delayed until at least April2005 (the agreement was for before 31 January2004), because the legal documentation was notcompleted yet (Bisnis Indonesia 24/01/2005).

The major changes we expect are connectedto the wood supply side, for two reasons: theincreasing scarcity of natural forests is forcingthe group to invest massively in large-scaleplantation establishment; and the internationalNGO campaign and APP clients requirements

are forcing the group to be more careful aboutits wood supply strategy. But the current pulpcapacity increase for APP, that is taking placein China and might happen in Indonesia aswell in the years to come, should be closelymonitored because it leads to more pressureon the natural forests of the region (Pirard andCossalter 2006).


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Radelet, Steven and Jeffrey Sachs, 1998a, TheEast Asian Financial Crisis : Diagnosis,Remedies, Prospects , Brooking Papers ,Washington D.C.

Spencer, C. et al , 1999, Asia Pulp & Paper: Well- positioned for Asias recovery , MorganStanley Dean Witter, 28 June.

Wibisono, C., Wibisono, J. and L. Gani, 1997,Conglomeration Indonesia: Regeneration

and Transformation into World ClassCorporation Entities , Pusat Data BisnisIndonesia, Jakarta, Indonesia.

World Wide Fund Indonesia, 2004, Legalityof timber consumed by Asia Pulp andPapers mills in Indonesia , January-October 2003, Jakarta.


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Annex 1: The story of the Sinar Mas group

Some of the important milestones in the groupshistory are as follows:

Started by selling cakes and candies door-to-door, and then cooking oil, in Ujung Pandang(Sulawesi).

In the 1950s Eka was appointed to supply thedaily needs of troops coming in from Java.

In 1966 he moved to Jakarta and started anexport-import business in various sectorssuch as oil, plantations, ceramics, metal,

steel, textiles and foods. In 1972, he moved into the pulp and papersector with the PT Pabrik Kertas Tjiwi Kimiamill in East Java, with a capacity of 12,000tonnes of paper.

Starting in 1980, he developed agribusinessactivities such as PT Bimoli and PT KunciMas in the palm oil industry, a coconut palmplantation through PT Sadang Las, and tea,coffee and rubber. He eventually groupedthese agribusinesses together under the PTSmart Corporation.

The Widjaja Family initiated investmentsin the finance sector in 1971 throughshareholdings in PT Maskapai AsuransiDjakarta 1945, which operates in shippingand fire insurance. In 1982 they movedinto the nancial business more seriouslyby taking over PT Bank InternasionalIndonesia (BII) from Iskandar Widjajadi,and establishing PT Internas Arta FinanceCompany (now PT Sinar Mas Multiartha).

Two years later Widjaja entered theinsurance sector with PT Asuransi JiwaPurnamala Indonesia (now PT Asuransi Jiwa

Eka Life) and PT Asuransi Sinar Mas, andlater, PT Sinar Mas Multi nance.

The property business was started at the sametime, with PT Duta Pertiwi Nusantara, PTSinar Mas Griya, PT Sinarwijaya Ekapratistaand PT Bumi Serpong Damai, to developresidences, shopping centres, apartmentsand of ce buildings.

Based on Wibisono et al (1997) the Widjajafamilys Sinar Mas Group had three holdingcompanies: PT Sinar Mas, PT Sinar Mas Tunggaland PT Supra Veritas. The group is dividedinto the Trade Division (31 companies),Plantations (25 companies), Livestock (onecompany), Forestry (two companies), Mining(two companies), Food and Beverages (ninecompanies), Paper (eight companies), Chemical(14 companies), Non Metallic Minerals (twocompanies), Basic Metals (two companies),

Construction (three companies), Property (eightcompanies), Tourism ( ve companies), IndustrialEstates (17 companies), Transportation (threecompanies), Services (seven companies), andFinance (19 companies).

By 1996, the Sinar Mas Group had acquired45 companies, divested four companies andliquidated one company. At this time, the grouphad 28 foreign subsidiaries and af liates, totalsales amounting to almost Rp. 12 trillion (thethird biggest of 300 conglomerates) with totalassets of approximately Rp. 26 trillion (thesecond largest of 300 conglomerates).


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Annex 2: Pulp and paper and forestry entities related to APPand the Widjaja family

Figure 2: APP and Widjaja-related companies in the P&P sector

Source: adapted from the APP Annual Report 1999

APP Widjaja-related

Pulp Mill Paper Mill Packaging Mill Forestry

Indonesia:Indah KiatLontarPapyrus

China:Hainan GoldHai Pulp

China:DadongGold River Gold

East Gold Hong YeGold Hua Sheng

Indonesia:

Indah KiatTjiwi KimiaPindo DeliLontar Papyrus

Indonesia:Ekamas FortunaIndah KiatPindo DeliTjiwi Kimia

India:India Paper Mill

China:GuangdongGuangxiHainan

Indonesia:JambiRiauSouth Sumatra

Malaysia:Bintulu

China:Ningbo


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Annex 3: Commercial relations between Indonesian Pulp & Paper mills andcompanies related to the Widjaja family

Table 5: Matrix of relations between Indonesian P&P mills and companies related to the Widjaja family

Company NameIndah Kiat Tjiwi Kimia Pindo Deli Lontar Papyrus

CR ST AP NR D IN CR ST AP NR D IN CR ST AP NR D IN CR ST AP NR D IN

Indah Kiat * * * * * * * * * * *

Tjiwi Kimia * * * * *

Pindo Deli * * * * * *

Lontar Papyrus * *

APP Australia * * *

APP Belgium *

APP Canada * * *

APP China * *APP China Trading *

APP Co Ltd Singapore * * * * * * * * * *

APP Finance Virgin Islands * * *

APP France * * *

APP Hong Kong * * * * *

APP Import & ExportSingapore * *

APP Japan * *

APP Malaysia * *

APP Marketing Scandinavia *

APP Printing Singapore * * * *

APP Paper Co Ltd *APP Singapore Pte Ltd *

APP Scandinavia *

APP Spain * * * *

APP International Trading *

APP Taiwan *

APP Trading Cayman Islands * *

APP Trading Singapore * * *

APP Trading UK * *

APP Trading USA * *

APP Trading Virgin Islands *

APP UK *

APP USA * * *

Arara Abadi * * * *

Asia Paperindo Perkasa *

Asia Trade Logistic *

Asuransi Sinar Mas * *

Bina Sinar Transportation *

Bina Sinar Utama *

Cakrawala Mega Indah * * * * * * * * * * *

Capania Trading, UEA *

Collins Of ce, Virgin Islands *

Dian Swastika Sentosa * *

Dinamika Mustika *Duta Teguh Paperindo Nusa *

Ekamas Fortuna * * * * *


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Source: Annual Reports of PT Indah Kiat Pulp & Paper (2003), PT Pabrik Kertas Tjiwi Kimia (2002)PT Pindo Deli (2003), and PT Lontar Papyrus (2003).Categories: CR (Current Trade Receivable), ST (Signi cant Transaction to related parties), AP (Advance Payment), NR (Non Current Receivable),D (Due), and IN (Investment)- * means that there is a related party transaction between companies

Company NameIndah Kiat Tjiwi Kimia Pindo Deli Lontar PapyrusCR ST AP NR D IN CR ST AP NR D IN CR ST AP NR D IN CR ST AP NR D IN

Gold East Paper China * * *

Gold Hong Ye Papers *

Linden Trading USA * * * * *

IK Import & Export *

Intercipta Kimia Pratama *

Jin Xin Paper China * * *

Karawang Ekawarna *

Kerawang Bukit Golf *Kinno Ltd *

Konverta Mitra Abadi *

Linden Trading USA * * * * *

Mega Kertas Pratama * *

Ningbo Asia China *

Ningbo Zhoghua, RRC *

Nippercraft Singapore *

PAK 2000 * * * *

Paper Box Singapore *

Paramita Gunakarya *

Paramitra Abadimas *Persadamas Langgeng *

Purinusa Ekapersada *

Royal Oriental * *

Satria Perkasa Agung *

Sinarindo Pirantimas * * *

Sinar Dunia Makmur * * * * * * * *

Sinar Mas Speciality Mineral * *

Sinar Mas Holding *

Summit Sinar Mas Finance * *

Univenus Company * * * * * * *

Vestwin Trading Singapore * * * * * * * *Wirakarya Sakti * * * * * *

Yalong Paper Produc, RRC *

Zhenjiang Dadong, RRC *


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The following are some more detailed examplesof these transactions:

In January 1998, PT Cakrawala MegaIndah (CMI) and PT Sinar Dunia Makmur(SDM) agreed to distribute Indah Kiatsproduction in the domestic market (pulp,paper and packaging products). This is veryimportant as it gives the ultimate ownersthe opportunity to manipulate the salesprices as desired, and generate pro ts forwhichever company they choose. Thesetransactions are recorded under tradereceivables to related parties. Tjiwi Kimiais in the same situation.

Tjiwi Kimia bought paper, directly or throughits subsidiary PT Mega Kertas Pratama, fromCMI, SDM, PT Ekamas Fortuna, Indah Kiatand Pindo Deli.

Pindo Deli and Lontar sell their products toVestwin Trading Pte Ltd, Tjiwi Kimia, IndahKiat, Mega Kertas Pratama, CMI and PTUnivenus Co. These transactions are notedas trade receivables to related parties.

In July 1996, Indah Kiat entered intoan exclusive contract with PT Sinar MasSpeciality Minerals (SMSM) for the supplyof calcium carbonate mega l and albagloss.Indah Kiat also agreed to supply carbondioxide gas to SMSM at no charge, and otherresources and services (land, utilities andservices, land ll, electrical services andusage and product storage) at their actualcost. SMSM promises to pay a managementfee to the company. This is recorded underDue from Related Parties. Indah Kiatalso invested in SMSM and in the otherchemical company, PT Paramitra Abadimas

Cemerlang.

Lontar Papyrus invested in PT DinamikaMustika, PT Persadamas Langgeng, PTSinarindo Pirantimas and PT KerawangEkawana Nugraha.

Indah Kiat purchased raw materials fromLinden Trading Company Incorporated(USA), Vestwin Trading Pte. Ltd (Singapore),PT Ekamas Fortuna and Intercipta KimiaPratama (Indonesia). This is noted as tradepayable to related parties on the balancesheet. The company also provided advancesto Linden and Vestwin, noted as Advanceand Prepaid Expenses.

Indah Kiat used PT Binar Sinar Utama fortransportation, and had a membershipcerti cate in PT Kerawang Bukit Golf.

Indah Kiat and Tjiwi Kimia entered intoa sale and leaseback transaction with PT

Summit Sinar Mas Finance.


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Source: Adapted from data published in Bisnis Indonesia.

Data are in 000 US dollars as at 31 December of the year concerned. For the period 1993 to 1997, amountsin Rupiah were converted into US dollars according to the exchange rate on 31 December.*Pindo Delis consolidated report includes Lontar Papyrus from 1996 onwards.** Not included: Pindo Deli for 1993, 1994, 1997. Starting 1996 Lontar Papyrus is accounted for in Pindo Deli,but for 1997 Lontar Papyrus is shown separately.

Source: Adapted from data published in Bisnis Indonesia.Data are in 000 US dollars as at 31 December of the year concerned. For the period 1993 to 1997, amountsin Rupiah were converted into US dollars according to the exchange rate on 31 December.*Pindo Deli consolidated report includes Lontar Papyrus from 1996 onwards.** Not included: Pindo Deli for 1993, 1994, 1997. Starting in 1996, Lontar Papyrus is accounted for in PindoDeli, but for 1997 Lontar Papyrus is shown separately.

Table 6: Evolution of net pro ts (losses) for APPs principal Indonesian mills consolidated accounts (000 US $)

Table 7: Evolution of debt burden (principal plus interest payable during the year) for APPs principal Indonesianmills (000 US $)

Annex 4: APP Indonesia nancial gures

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Indah Kiat 24,408(to 30 June) 66,782 204,601 111,030 84,403 325,126 4,027 (400,683) (182.391) (266.308) (286.631)

Tjiwi Kimia 37,391 23,088 73,849 60,888 74,929 113,704 103,989 (359,661) (50,682) (47,432) (30.270)

Pindo Deli* - - 32,885 22,641 - 76,713 (9,224) (375,813) (171,120) (119,463) (158.823)

Lontar Papyrus - - 77,090 19,550 91,670 55,350 - - - (22,589) (38.539)

IK + TK + PD + LP** 61,799 89,870 388,425 194,559 251,002 515,543 98,792 (1,136,157) (404,193) (433,203) (448.481)

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Indah Kiat 6,901(to 30 June) 38,616 103,156 74,114 99,630 183,738 181,519 249,686 294,272 259,878 260,735

Tjiwi Kimia 28,826 44,241 58,137 50,616 50,645 86,183 92,836 122,960 114,137 107,795 109,736

Pindo Deli* - - 16,093 33,948 - 115,640 105,152 183,493 161,879 158,808 153,812

Lontar Papyrus - - - 38,642 35,290 43,042 - - - 47,962 49,982

IK + TK + PD + LP** 35,727 82,857 177,386 158,678 185,565 385,561 379,507 556,139 570,288 526,481 524,283


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Table 8: Evolution of sales for APPs principal Indonesian mills (000 US $)

Source: Adapted from data published in Bisnis Indonesia.Data are in 000 US dollars as at 31 December of the year concerned. For the period 1993 to 1997, amountsin Rupiah were converted into US dollars according to the exchange rate on 31 December.*Pindo Deli consolidated report includes Lontar Papyrus from 1996 onwards.**Not included: Pindo Deli for 1993, 1994, 1997. Starting 1996, Lontar Papyrus is accounted for in Pindo Deli,but for 1997 Lontar Papyrus is shown separately.

Table 9: evolution of operating costs (not included marketing costs and overhead costs) for APPs principalIndonesian mills (000 US $)

Source: Adapted from data published in Bisnis Indonesia.Data are in 000 US dollars as at 31 December of the year concerned. For the period 1993 to 1997, amountsin Rupiah were converted into US dollars according to the exchange rate on 31 December.*Pindo Deli consolidated report includes Lontar Papyrus from 1996 onwards.** Not included: Pindo Deli for 1993, 1994, 1997. Starting 1996, Lontar Papyrus is accounted for in Pindo Deli,but for 1997 Lontar Papyrus is shown separately.

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Indah Kiat 127,338(to 30 June) 280,760 499,230 501,563 326,936 554,912 768,719 1,011,721 904,398 1,028,989 1,193,132

Tjiwi Kimia 207,407 244,640 360,748 424,985 291,208 394,364 586,476 770,959 552,510 613,818 676,276

Pindo Deli* 161,797 208,098 275,151 479,603 641,136 531,700 612,254 673,004

Lontar Papyrus 122,906 120,845 79,888 194,306 211,876

IK + TK + PD + LP** 334,745 305,224 1,021,775 1,134,646 618,144 1,224,427 1,834,798 2,423,816 1,988,608 2,255,061 2,542,412

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Indah Kiat147,514

(to 30 June) 474,436 906,536 760,585 634,073 1,158,112 1,306,288 1,544,275 1,100,228 1,197,712 1,345,832

Tjiwi Kimia 292,044 382,052 543,159 583,764 434,534 631,391 868,254 827,984 710,418 778,498 870,143

Pindo Deli* 225,645 284,401 534,305 727,315 760,522 619,199 743,366 785,259

Lontar Papyrus 196,121 221,937 217,325 250,532 254,563

IK + TK + PD + LP** 439,558 856,488 1,675,340 1,628,750 1,068,607 2,323,808 2,901,857 3,132,781 2,429,845 2,719,576 3,001,234


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Documents

2006 Eka Tjipta Widjaja APP Report (Cifor)