By Mark Rushton, Editor, Pulp & Paper International Magazine, RISI
Jakarta, Indonesia,
Jan. 19, 2010
(RISI) -
APP is probably the most talked about and the most controversial pulp and paper company in the global industry, mostly because of the publicity generated by the NGOs over environmental concerns relating to its operations on the ground in Indonesia, but also because of its determination to become the world's largest paper supplier - ambitions on such a scale are guaranteed to attract attention. So it was with enthusiasm that we received an invitation at PPI to visit the company's headquarters in Jakarta, and be granted access to some of its major pulp and paper making operations on the islands of Sumatra and Java.
Previously linked to the founder of the Sinarmas Group, APP represents the brand of paper products produced by the APP Group, which also includes APP China. The APP Group's combined operations produce more than 15 million tonnes/yr of pulp and paper, and its annual turnover is around $US10 billion, making it fit easily into the RISI top 10 global producers. However, there are cultural differences in comparison with the west in the way large groups in South East Asia operate, and APP is no exception. The operation in Indonesia itself does not own any mills, nor does it own any of the forestry operations which are often referred to; the company has been formed as a brand umbrella under which numerous independently owned and operated mills get their products to market. The raw material supply chain is also a complex one, involving again, numerous ‘"exclusive pulpwood" suppliers that operate within government allocated concessions within Indonesia.
PPI kicks of its overview of APP's operations by posing some questions to the chairman of the APP Group, Teguh Ganda Wijaya:
PPI: Can you give us a brief history of your association with the paper industry, i.e. when and how it started?
Wijaya: We are relatively new to the pulp and paper industry. We started in 1972 with a small caustic soda plant in East Java. This was followed by our first paper production in 1976, where many of our top competitors have been around literally for hundreds of years. Since then, we've been growing and adapting with the changing times. As a new comer in the industry, we are fortunate to be able to learn from the past mistakes made by other players and to learn the market's current needs. For example, to produce our superior quality paper, most of our mills are using newer, more efficient technologies. Our recent carbon footprint illustrates this reality.
Can you tell us about the position of APP as it is now?
The combined capacity of all aggregated products is more than 15 million tons, which places us as the third largest in the world. Our goal is to be the industry leader and we feel we're making good progress on that. It's worth noting that we couldn't have achieved this without a commitment to research and development, responsible sourcing, best in class, efficient technology and transparency.
Plans for the future: Are there any far a field international expansion plans, ie outside of Asia, for instance in the Americas?
We are always studying new opportunities globally. These are contingent on access to sustainable raw materials and efficient production, as well as ensuring opportunities elsewhere provide healthy, free and fair business climate, reasonable regulatory environment, free of protectionist policies.
What about expansion plans closer to home, ie Vietnam or Korea, or anywhere else more ‘local'?
Closer to home, we are currently concentrating on improvement of our mills in China and Indonesia. Expansion is contingent on access to sustainable raw materials in addition to free and fair business climate as I previously mentioned.
What areas do you see and being the ones you will expand most upon, pulp production or paper production?
We would like to improve the efficiency of both our existing pulp and paper production facilities. To achieve this, we must look into two main factors: the growth of market demand, locally and globally, and accessibility to sustainable raw material.
APP was involved at one time in manufacturing its own paper machines, tissue machines? Can you give us an update on those activities?
APP is a paper producer and that's where we are focused today.
Where would you like to see APP in 10 years time?
Our vision is to become the 21st Century's premiere, world-class pulp and paper manufacturer - a company dedicated to providing superior value to customers, shareholders and employees, by adhering to responsible practices that ensure the sustainability of all our resources and the well-being of the communities.
As I said earlier, we are looking to be the leader in the industry worldwide. We feel like we're already making progress in that regard. Today, we're number three in terms of capacity. In Indonesia, we are leading in terms of promoting certified paper; recycled paper and our commitment to transparent reporting. Globally, we are the first in the industry to conduct a joint carbon-social footprint.
The only way we can be a leader is by committing to continual progress on the sustainability of our operations.
Can you give us a definition as to how you see the paper industry as a whole world wide?
In the past 10 years, I've seen the shift in industry focus from the northern hemisphere, closer to the tropics. The most important factor in the pulp and industry is access to sustainable raw materials. That competitive advantage rests along the tropical belt. Combine this with the accessibility of a high quality workforce and you begin to understand the shift to places like Brazil, Indonesia and China.
As relative newcomers to the industry, we are closely scrutinized and therefore we need to pay extra attention to sensitive issues. That's why we in invest in access to sustainable raw materials and cleaner technology. This all points to a future responsible and sustainable paper-making.
What in your opinion are the industry's challenges, and how should it go about making sure that it stays a valuable product?
Lack of understanding of Indonesia and China development issues amongst certain parties is a challenge for companies operating in these parts of developing world. But this is also an opportunity for us to play a role in the development of these economies and figure out what sustainable pulp and paper industry in the developing world will look like. As a relative newcomer in the industry compared to some of the established titans - we are subject to higher standards, which is why we are using precautionary approach, cleaner and the best technologies compared to other players.
What this means is that the value of paper will actually increase because pulp and paper is now being made in a more responsible way. Our operations are subject to transparency and independent audits, which means the paper increases in value in terms of the benefits it provides communities and the environment. Our pulpwood supplier plants more than one million trees a day. Sustainable pulpwood plantation increases carbon sequestration - which could reach up to 30 times more than plantation in Northern Hemisphere thus carbon footprints are decreasing, as well as helps in government efforts for poverty alleviation and sustainable economic development.
One of our efforts in tackling climate change for example, APP is proud to be supporting 500,000 ha of natural forest rich in biodiversity purely for conservation, which also acts as massive carbon storage.
All of this means greater value from the pulp and paper producer to the consumer and the world in general.
We will be reporting on APP's operations in depth both online and in PPI magazine in the coming months.
