APP’s continued deforestation a ‘double default’ on int’l creditors

Date: 
March 27, 2012

Asia Pulp & Paper (APP) has been accused of a “double default” on international creditors, after an investigation revealed that the company has decimated tropical forests it promised to conserve under “legally binding” debt restructuring agreements.

APP Default on Environmental Covenant,” a new report from Sumatra NGO coalition Eyes on the Forest, shows that the company in 2004 agreed to protect high conservation value forest under debt restructuring agreements it made with taxpayer-backed financial institutions in nine countries. The debt restructuring agreements were negotiated after APP in 2001 defaulted on USD13.9 billion of debt and was delisted by the New York and Singapore stock exchanges.

The 2004 agreements covered the restructuring of USD6 billion in debt to the taxpayer-backed export credit agencies of Germany, Japan, France, Austria, Sweden, Finland, Italy, Spain and Denmark. Under the agreement, APP – part of the giant Sinar Mas conglomerate - also promised to be fully sustainable by 2007, something it defined as producing all pulp exclusively from plantation wood. The company described the agreements as a “legally binding contractual obligation”.

The Eyes on the Forest investigation, however, shows that 2007 was the year APP’s wood suppliers began clearing the very areas of high conservation value forest in central Sumatra’s Pulau Muda, a rain forest in the Kerumutan tiger landscape, that had been highlighted by APP as an example of a new “scientific basis for the sustainable development of our plantations and the management of our conservation areas”.

“Despite APP’s praise for the independent mapping of the high conservation value forest in the Pulau Muda rainforest, our analysis of recent satellite imagery shows a third of the identified 34,000 hectares has now been drained and cleared,” said Muslim Rasyid, co-ordinator of Jikalahari (Forest Rescue Network Raiu), a member of Eyes on the Forest.

APP has missed self-imposed deadlines of 2004, 2007, and 2009 of supplying its pulp mills exclusively from renewable plantation wood.  An announcement it would finally fulfill this promise by 2015 was recently amended to a new deadline of 2020 – when there is a risk there will be little forest left in Sumatra, according to Eyes on the Forest.