Study :

INDONESIAN PULP AND PAPER INDUSTRY PROGRESS, 2010

(After facing Global Crisis)
April, 2010

After going through global economy crisis, Indonesian pulp and paper industry rises again,
encouraged by the world’s pulp price that begins increasing. For example, in November 2009, the
pulp price skyrocketed to US$ 710 per ton. The price increase is estimated to continue until 2010. In
fact, the pulp price once fell to the lowest point at the level of US$490 per ton.

Before global economy crisis, Indonesian pulp and paper export was prone to increasing, in line
with the high demand for paper product use in the home country and overseas. Paper export until
2008 was recorded increasing by about 5.1% per annum, whereas export of the raw materials
thereof (pulp), was stagnant at the range of 2.4 million ton. The high export performance was
caused by more competitiveness of Indonesian pulp and paper industry than products of other
countries, especially from developed countries such as United States of America and Canada.

The need for pulp and paper in this period was reflected from the increasing production capacity.
During 2004 – 2008 period, domestic pulp capacity increased by 0.6% per annum on the average,
namely from 5.2 million ton to 6.4 million ton per annum. In 2009, the installed capacity thereof
increased again to 6,9 million ton per annum, in line with new factory operation. In the same
period, paper production capacity went through significant increase as well, from 10 million ton to
10.9 million ton per annum.

Meanwhile, Indonesian pulp and paper productivity still faced constraints in raw materials,
because supply from Industrial Forest (HTI) has not fully replaced raw materials from natural
forest. The Government gave opportunity to pulp factories to complete their supply from
Industrial Forest not later than in 2009. With this deadline, pulp factories were expected to be
capable of continuously fulfilling raw materials demand from their Industrial Forest.

This study book prepared by PT Media Data Riset consisting of 350 pages also explain about
performance aspect of each company, such as competition level and business map and strategy of
large company (Group). The role of supporting industry thereof is also discussed, like machine
and spare parts industry, and availability factor of power energy, infrastructure, waste treatment
of pulp and paper industry, and so forth. In addition, it is completed with regulations on pulp and
paper business. Therefore, this study is very beneficial for decision makers from pulp and paper
producers, banking sector, suppliers, investors, capital market circles, and other relevant business
sectors.

This comprehensive study book is offered at the price of Rp 5,000,000 (Five million rupiah) per
copy for the Indonesian version or US$ 750 (Seven hundred and fifty US Dollar) per copy for the
English version. The interested applicant could directly contact PT Media Data Riset Jakarta
through telephone number (021) 809 6071, 809 3140, facsimile (021) 809 6071, or e-mail to
mediadata.co.id. The order form is attached to this proposal letter. For overseas or outside Jakarta
order, additional delivery fee would be charged.

Jakarta, April 2010

PT Media Data Riset

Drh. H. Daddy Kusdriana M.Si.

President Director
 LIST OF CONTENT
INDONESIAN PULP AND PAPER INDUSTRY PROGRESS, 2010
(After facing Global Crisis)
April, 2010

1. INTRODUCTION 3.11.1. Price fluctuation

1.1. Background 3.11.2. Competition
1.2. Coverage and Purpose of Study 3.11.3. Change of interest rate and
1.3. Data and Information Source exchange rate of foreign currency
3.11.4. Environmental factor
2. POPULATION AND GENERAL 3.11.5. Scarcity of raw materials
DESCRIPTION OF INDONESIAN 3.11.6. Natural disaster
ECONOMY 3.12. Use of Nonstandard Raw Materials
2.1. Population of Indonesia 3.13. Investment Interest
2.1.1. National population growth rate
2.1.2. Population growth by province 4. RAW MATERIALS FOR PULP
2.1.3. Composition of population by age 4.1. Sources of Raw Materials for Pulp
group 4.1.1. Main log for pulp raw materials
2.1.4. Projection of Indonesian 4.1.2. Logging waste
population growth 4.1.3. Smallholders’ Forest
2.2. General Description of Indonesian 4.1.4. Log for Pulp Industry
Economy 4.2. Government Regulations Plan 2010
2.2.1. 2009 economic growth exceeds 4.3. Riau Natural Forest is logged
the target 4.4. The Opportunity of Smallholders’ Forest
2.2.2. Inflation rate of 2010 is 5.7% (HTR)
2.2.3. Income per capita of Indonesia 4.5. Forest Area is narrowing
2.2.4. Rupiah exchange rate 4.6. Soft Landing threatens wood raw
2.2.5. Foreign exchange reserve materials
2.2.6. Current transaction balance sheet 4.6.1. Land Clearing: A Shortcut to get
2.3. 2010 Economic Rate is Projected 5.5% Logs
2.3.1. 2010 APBN (State Budget and 4.7. Industrial Forest (HTI) Project
Revenue) is affected 4.7.1. Potentials of HTI development
2.3.2. Increasing Rp 21.9 trillion areas
2.3.3. Revision opportunity 4.7.2. Issuing the permit of HTI of 7.8
hectare
3. PULP INDUSTRY DEVELOPMENT 4.7.3. HTI-Pulp becomes the mainstay
3.1. Description 4.7.4. Non priority HTI-Pulp
3.2. Types of Pulp 4.7.5. Dominated by big business group
3.3. Pulp Production Process 4.7.6. Raw material supply for Sinar Mas
3.4. Loss Level in Production Process Group
3.5. Pulp Production Capacity 4.7.7. PT KBRI develops HTI
3.5.1. The Largest Domestic Investment 4.7.8. HTI Investors invested Rp 33
3.5.2. Integrated quintillion
3.5.3. Sumatera is the largest 4.7.9. Business permit will be revoked
3.6. Factories and their capacities 4.8. High Capital and High Risk
3.7. Controlled by Large Groups 4.9. 4 Plantation Government Owned
3.7.1. Sinar Mas Group is the largest Companies (BUMN) develop HTI
3.7.2. Raja Garuda Mas Group 4.10. Investors’ worries
3.7.3. Barito Pacifik dan Citra Agratama
Group 5. WASTE PAPER RAW MATERIAL
3.7.4. Kalimanis Group 5.1. Waste paper production increases by 5.5%
3.7.5. State-owned Company Group each year
3.8. Production Development 5.2. Waste Paper Import
3.8.1. Pulp production increases by 1.6% 5.2.1. Import is still quite high
per year 5.2.2. Import by type
3.8.2. Production by company 5.2.3. Import by country of origin
3.9. Demand for Pulp Increases again 5.3. Export Development
3.9.1. Price reaches the highest point 5.3.1. Waste paper export is insignificant
3.10.60% of raw materials is supplied from 5.3.2. Export by type
Industrial Forest (HTI) 5.3.3. Export by country of destination
3.11. Risks encountered by pulp industry 5.4. Consumption
6. PAPER INDUSTRY 7.4.2. Chemical wood pulp dissolving is
6.1. Types of Paper the largest
6.1.1. Industrial Paper 7.4.3. Canada is the main market
6.1.2. Cultural Paper 7.5. Paper Import
6.1.3. Cigarette paper 7.5.1. Import increases by 15.8%
6.1.4. Tissue/household paper 7.5.2. Kraft Linier Moves Sack Kraft
6.1.5. Other paper 7.5.3. China is the main supplier
6.2. Paper Manufacturing Process
6.3. Total Plants and Capacity Thereof 8. MARKET SIZE AND DOMESTIC
6.3.1. Capacity increases 1.7% CONSUMPTION
6.3.2. Total paper plants by location 8.1. Pulp
6.4. Production capacity by type 8.2. National Paper Consumption
6.4.1. Industrial paper capacity 8.3. Paper Consumption by Type
6.4.2. Cultural paper 8.3.1. Industrial paper
6.4.3. Tissue Paper 8.3.2. Cultural paper consumption
6.4.4. Cigarette Paper 8.3.3. Cigarette paper consumption
6.4.5. Types of Other Paper 8.3.4. Tissue Paper
6.5. Paper Business Is Controlled by Big 8.3.5. Other papers consumption
Groups 8.4. Paper Consumption per capita
6.5.1. Sinar Mas Group
6.5.2. Raja Garuda Mas Group 9. THE WORLD’S PULP AND PAPER
6.5.3. Garama Group INDUSTRY
6.5.4. Indhasana Group 9.1. The World’s Pulp Production Capacity
6.5.5. Kalimanis Group 9.1.1. The largest product is wood pulp
6.5.6. State-Owned Company for paper & paperboard
6.6. National Paper Production 9.1.2. Indonesia is number 12
6.6.1. Production increases 0.9% per 9.2. The world’s paper production capacity
annum 9.2.1. The world’s paper production
6.6.2. Paper production by type 9.2.2. The world’s writing and
6.6.3. Industrial paper production printing paper production
6.6.4. Cultural paper industry 9.3. The world’s pulp price
6.6.5. Cigarette paper production is 9.3.1. The world’s paper price
stagnant
6.6.6. Tissue production increases 6.6% 10. INFRASTRUCTURES AND FACILITIES OF
6.6.7. Other paper production PULP AND PAPER INDUSTRY
6.7. Dumping Charge 10.1. Condition of Factory Machines and
6.7.1. The United States of America Instruments
imposes BMI 10.2. Technology and Machine Application
6.7.2. Benefit Import Duty 10.3. Dependence on Imported Machines is
6.7.3. Philippine Safeguard Action still High
6.7.4. Gulf countries threat 10.4. Imported Machines should be reduced
6.7.5. Exportation to Korea is pressed 10.5. Need for Power Energy Source
6.7.6. Review 10.5.1. Power need is supplied by PLN
6.8. Investment 10.5.2. Cause of power energy supply
6.8.1. Japan’s Interest Is High crisis
6.9. Producers complain about Regional 10.5.3. Electricity condition in Sumatera
Regulations 10.5.4. Power deficit in Sumatera needs
Rp 3.7 trillion
7. EXPORT-IMPORT DEVELOPMENT 10.5.5. Estimated condition of Java –
7.1. Pulp Export Drops Bali system condition 2008
7.2. Pulp Export by Type 10.6. Human Resources
7.2.1. The largest chemical wood pulp 10.7. Cost Aspect
soda 10.7.1. Classified into capital intensive
7.2.2. China remains the largest industry
7.3. Paper Export 10.7.2. Capital market fund is quite
7.3.1. Gaining foreign exchange of US$ desired
3.7 billion 10.8. Issues
7.3.2. Paper export by type
7.3.3. Export by country of destination
7.4. Import Development
7.4.1. Absorbing foreign exchange of
US$ 958.9 million
11. INDUSTRIAL WASTE TREATMENT 13.5.2. Mechanism of one-roof service
11.1. Type of Pulp and Paper Industry Waste system
11.2. Government Regulation on Pulp and 13.6. Formation of National Team for Export
Paper Industry Waste Treatment and Investment Increase
11.2.1. Analysis on Environmental 13.7. Government’s Policy on Forestry Sector
Impacts (AMDAL) 13.7.1. Forestry layout is arranged
11.2.2. Emission standard again
11.3. Waste Treatment in Pulp and Paper 13.7.2. Forest-plants Concession Right
Industry is increased to 35 years
11.3.1. PT Indah Kiat Pulp & Paper 13.7.3. Timber Use Permit for Peat Soil
11.3.2. PT Toba Pulp Lestari Development area is stopped
11.3.3. PT Pindo Deli 13.7.4. Reforestation Fund
11.3.4. PT Lontar Papyrus 13.7.5. 50% of IPK (Timber Use Permit)
11.3.5. PT Suparma wood must be used for domestic
11.3.6. PT Surabaya Agung consumption
11.3.7. PT KBRI 13.8. Forestry investment permit is assigned
11.3.8. PT Fajar Surya Wisesa to BKPM
11.4. Chemical Substance for Pulp and 13.9. Policy on Industrial Sector
Paper Industrial Waste Treatment 13.9.1. Industrial Operation Permit
13.9.2. Licensing procedure
12. MARKETING ASPECT simplification
12.1. Distribution channel 13.9.3. Pulp and paper product quality
12.2. Domestic Production Distribution standard
Channel 13.10. Policy on Trading Sector
12.3. Pulp and Paper Distribution Channel 13.10.1. Facility for the purpose of
12.4. Competition increasing export
13.10.2. Simplification of regulations
13. GOVERNMENT’S POLICY ON PULP AND on export
PAPER INDUSTRY, AND FORESTRY 13.10.3. Organization of harbor
13.1. Investment Sector
13.2. Investment Facility 14. CONCLUSION AND PROSPECTS
13.2.1. Fiscal facility 14.1. Conclusion
13.2.2. Imported goods and materials 14.1.1. Supply-demand and export
contained in the master list aspect
13.2.3. Granting of tax holiday facility 14.1.2. Every year a paper factory
is expanded needs to be built
13.3. Presidential Decree on One-Roof 14.1.3. Superiorities of Indonesian
Investment pulp and paper industry
13.4. Approval of Investment Permit 14.1.4. Constraints faced
13.4.1. Approval letter 14.2. Pulp and Paper Business Opportunity
13.4.2. Expansion permit is still Fine
13.4.3. Amendment approval letter 14.2.1. Government’s guidelines for
13.5. Application of the Decree of the pulp investment
President on One-Roof Investmen 14.3. Prospect
13.5.1. One-Roof Investment 14.4. Pulp and Paper Export Potential
Presidential Decree is profitable
for certain regions only DIRECTORY : PULP AND PAPER PRODUCER
IN INDONESIA

***
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Study :
INDONESIAN PULP AND PAPER INDUSTRY PROGRESS, 2010
(After facing Global Crisis)
April, 2010

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