Danish banks and palm oil and pulp & paper in Indonesia A research paper prepared for WWF International December 2001 Jan Willem van Gelder Profundo De Bloemen 24 1902 GV Castricum The Netherlands Tel: +31-251-658385 Fax: +31-251-658386 E-mail: [email protected] Contents Summary ..................................................................................................................i Introduction................................................................................................................1 Chapter 1 Influence assessment of financial institutions....................................2 1.1 The financing of companies....................................................................................2 1.2 Private financial institutions ...................................................................................3 1.3 Public financial institutions.....................................................................................5 1.4 Categories of financial services .............................................................................5 1.4.1 Services related to acquiring equity ...............................................................5 1.4.2 Services related to acquiring debt ..................................................................6 1.4.3 Other financial services ..................................................................................7 1.5 Assessing the influence of financial institutions..................................................9 1.5.1 The present role of financial institutions .........................................................9 1.5.2 Directness of the financial service................................................................10 1.5.3 Currency of the financial relation..................................................................10 1.5.4 Financial importance of the service..............................................................10 1.5.5 Influence assessment...................................................................................11 Chapter 2 Overview of the Indonesian oil palm sector ......................................13 2.1 The oil palm production chain ..............................................................................13 2.1.1 Oil palm plantations......................................................................................13 2.1.2 CPO mills .....................................................................................................14 2.1.3 Crushing plants ............................................................................................14 2.1.4 Refineries .....................................................................................................15 2.1.5 Final processing industries...........................................................................15 2.2 The expansion of the Indonesian oil palm sector ...............................................16 2.3 The financing of the Indonesian oil palm expansion..........................................17 2.4 The slackening of the Indonesian oil palm expansion .......................................18 Chapter 3 Indonesian palm oil companies ..........................................................24 3.1 Kumpulan Guthrie Group ......................................................................................24 3.1.1 Description of the Kumpulan Guthrie Group ................................................24 3.1.2 Oil palm holdings of the Kumpulan Guthrie Group.......................................24 3.1.3 Financial stakeholders Kumpulan Guthrie Berhad .......................................26 Chapter 4 Overview of the Indonesian pulp & paper sector ..............................28 4.1 The pulp & paper production chain......................................................................28 4.2 Expansion of the Indonesian pulp & paper sector..............................................28 4.3 Supplying the Indonesian pulp & paper expansion............................................29 4.4 Financing the Indonesian pulp & paper expansion ............................................30 4.5 The slackening of the Indonesian pulp & paper expansion...............................31 Chapter 5 Indonesian pulp & paper companies..................................................34 5.1 Barito Pacific Group...............................................................................................34 5.1.1 Description of the Barito Pacific Group ........................................................34 5.1.2 Pulp & paper holdings of the Barito Pacific Group .......................................34 5.1.3 Financial stakeholders PT Tanjungenim Lestari Pulp & Paper ....................34 5.1.4 Financial stakeholders Barito Pacific Timber Tbk. .......................................36 5.2 Raja Garuda Mas Group ........................................................................................38 5.2.1 Description of the Raja Garuda Mas Group .................................................38 5.2.2 Pulp & paper holdings of the Raja Garuda Mas Group ................................38 5.2.3 Financial stakeholders Asia Pacific Resources International Holdings Ltd. .39 5.2.4 Financial stakeholders PT Toba Pulp Lestari Tbk........................................40 5.3 Sinar Mas Group.....................................................................................................42 5.3.1 Description of the Sinar Mas Group .............................................................42 5.3.2 Pulp & paper holdings of the Sinar Mas Group ............................................42 5.3.3 Financial stakeholders Asia Pulp & Paper Company Ltd. ............................43 Chapter 6 Danish financial institutions ...............................................................47 6.1 Eksport Kredit Fonden (EKF) ................................................................................47 6.1.1 Description of Eksport Kredit Fonden (EKF) ................................................47 6.1.2 Financing of Indonesian pulp & paper companies .......................................47 6.2 Jyske Bank..............................................................................................................48 6.2.1 Description of Jyske Bank ............................................................................48 6.2.2 Financing of Indonesian pulp & paper companies .......................................48 6.3 Nordea .....................................................................................................................49 6.3.1 Description of Nordea...................................................................................49 6.3.2 Financing of Indonesian oil palm companies ...............................................49 6.3.3 Financing of Indonesian pulp & paper companies .......................................49 6.4 Sydbank ..................................................................................................................51 6.4.1 Description of Sydbank ................................................................................51 6.4.2 Financing of Indonesian pulp & paper companies .......................................51 Annex 1 Company addresses............................................................................52 Annex 2 Index of oil palm and pulp & paper companies.................................55 Annex 3 Notes.....................................................................................................57 Summary Both the Indonesian oil palm sector and the Indonesian pulp & paper sector have expanded very rapidly during the past ten years. This meteoric growth has contributed very significantly to the deforestation of Indonesia’s tropical forests, which have a very high conservation value and are housing a large number of rare animal species. The fast expansion of both sectors has been financed to a large extent by foreign financial institutions from Europe, North America and East Asia. Since 1998, the growth of both sectors has slowed down, as a result of the financial difficulties which most of the business groups in both sectors are facing. Consequently, the amount of fresh foreign financing for both sectors has reduced. But existing financing relations have been extended by foreign financial institutions (voluntarily or involuntarily), and in fact the influence which foreign financial institutions could exert on companies in both sectors has increased as a result of their weak financial situation. This situation provides excellent opportunities for foreign financial institutions to use their influence to let their clients change their social and environmental policies. In October 2001 three of the Dutch top-four banks - ABN AMRO Bank, Rabobank and Fortis Bank - decided to stop or substantially restrict the financing of the development of oil palm plantations and pulp and paper operations for which purposely tropical rainforest is destroyed. This policy-change was the result of strong NGO-pressure. Strengthened by this success, NGO’s in Indonesia and various other countries are pressing foreign banks to follow the example of the three Dutch banks. To offer guidance to these campaigns, WWF is publishing a series of six reports on financial institutions from the United Kingdom, Denmark, the Netherlands, Germany, Switzerland and Sweden which are financing the Indonesian oil palm and pulp & paper sectors. These reports also aim to assess the level of influence these