RAPP Demands Legal Certainty for Indonesian Investment

Riau Andalan Pulp and Paper was told to immediately revise its 10-year business plan before Oct. 30 to comply with the government's new peatland ecosystems protection framework. (Photo courtesy of RAPP)

By : Muhamad Al Azhari | on 12:07 AM October 24, 2017
Category : Business, Corporate News

Jakarta. Riau Andalan Pulp and Paper, or RAPP, the operations unit of global pulp and paper industry leader Asia Pacific Resources International, better known as April, is demanding more legal certainty for its investment in Indonesia, after the government invalidated its 10-year business plan and forced the company to cease downstream activities.

"RAPP is a company that always follows regulations and laws in Indonesia. In response to the Environment and Forestry Ministry's request to revise our work plan, some revisions have already been submitted," Djarot Handoko, RAPP's corporate communication head, said in a statement released on Monday (23/10).

The statement also said the company's work plan revisions were not approved and that the ministry requested RAPP not to replant industrial forests within its concession areas after it harvests timber.

RAPP, which operates a 1,750-hectare manufacturing complex in Pangkalan Kerinci in Riau, has upstream operations in 480,000 hectares of concession area in the districts of Pelalawan, Kuantan Sengingi, Siak, Kampar and Meranti Island in Riau.

The Environment and Forestry Ministry on Oct. 16 issued a letter rejecting RAPP's 10-year business plan, trying to force the company to conform to the government's new peatland protection framework, as detailed in a ministerial decree issued this year which also provides technical details related to the implementation of Government Regulation No. 57/2016.

Djarot cited article 45 in the government regulation which says "business permits, or activities utilizing peatland ecosystem to remain valid until the permits expire."

The statement said this article gives long-term legal certainty to RAPP to invest in its current business.

"In principle, we will abide by the Environment and Forestry Ministry's policy by proposing to prioritize settlement of land swap that can be done gradually," Djarot said in the statement.

He was referring to an earlier incident when a map drawn up by the ministry and the Peatland Restoration Agency (BRG) was synchronized with the company's map, unwittingly revealing half of its concession areas were earmarked as peatland protection grounds.

Since its 10-year work plan had been rejected, the company is assuming its annual 2017 work plan is also no longer valid, announcing that it has ceased all operations in its industrial forest concessions.

"Without legal back-up from the 10-year business plan, the annual work plan is no longer valid. This is the opinion of legal experts in the state administrative court," Djarot said.

He said since the work plan was rejected all activities including seeding, planting, harvesting and transportation-related activities in all of RAPP's operational areas in five districts have had to stop.

"As of today we've invested Rp 85 trillion ($6.2 billion) in Indonesia, and as part of our intention to support the government's program to boost downstream activities, we just invested another Rp 15 trillion to produce rayon fibers and high quality digital paper.

"From upstream to downstream, our group is responsible for up to Rp 100 trillion in total investment," Djarot said.

The April Group, through its pulp and paper producer arm, has been contributing around $1.5 billion in foreign exchange revenue per year, he added.

RAPP RAPP's factory in Riau. (Photo courtesy of RAPP)

Founded by tycoon Sukanto Tanoto, RAPP started its business in Pelalawan, Riau, in 1993. It now exports its products to more than 75 countries.

Djarot said RAPP is also responsible for more than 15,000 employees and more than 35,000 employees of its partner companies.

"Apart from raw materials, we also need assurance and legal certainty for our investment," Djarot said.

Djarot also mentioned that since 2014 the company has followed an integrated landscape approach to fire management through its Fire Free Village Program, working collaboratively with government agencies, other concession holders and communities to learn how not to use fire for land clearing during the dry season.

The program rewards villages that can prevent fires and promotes a comprehensive approach in fire management. It has earned an acknowledgment from the Economics Affairs Coordinating Ministry as a best practice model for other companies.

"We believe the government can offer the best solution for RAPP, for investment in Riau specifically and for Indonesia in general," Djarot said.

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