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Last Stand of the Orangutan

Multinational Networks


Figure 14: Export of wood products from Indonesia, a large proportion travels through Malaysia.
The forestry sector in Indonesia includes a number of actors, including concession holders, mill operators and wood manufacturers. Most of the logging companies operating on Borneo and Sumatra are subsidiaries or contractors of multinationals or their networks, some changing names and ownership fairly rapidly, thus eluding monitoring.  While many contractors are Indonesian based or owned, multinational networks, foreign investors and recipients play a crucial role in the industry.

everal mills, for example, are owned by or through subsidiaries of UFS (United Fiber System), a consortium of companies from eight countries, with its headquarters in Singapore. In 2002, ten companies controlled 45% of the total logging concessions in Indonesia (WRI 2002). And in 2005, logging concessions on 11.6 million hectares of forests in Papua province alone were granted to 65 different logging companies.

Figure 15: Smuggling routes of illegally logged ramin timber from Indonesia, including from national parks and protected areas (Currey et al., 2005).
A considerable share of the timber and pulp mills are subsidiaries of multinational companies and processed in Indonesia, but 10–15% of the logs are exported directly to Malaysia or other Asian destinations (Figure 147) (Schroeder-Wildberg and Carius 2003; Currey et al. 2001). The remaining large share of timber, most of it illegally logged, is processed in sawmills, plywood mills, pulp mills and chip mills prior to export.

The forestry and wood-processing industry of Indonesia make up around 10% of the GDP and plywood, pulp and paper exports account for 10–20% of the total export earnings. China and Japan receive near half of all the wood products exported from Indonesia. Other Asian countries, Europe and North America account for the rest. China’s import of wood products overall increased from 40 million m3 in 1997 to over 140 million m3 in 2005 (White et al. 2006).

Figure 16: A generalized diagram of how multinational networks exploit natural resources by developing numerous temporary subsidiaries and use corruption and security firms to ensure rapid exploitation and maximum profits. Arms trading has been reported from the Democratic Republic of the Congo, while the bribes and “security firms” also play a major role in Indonesia.
Illegal logging may be conducted by companies with no right to be in the area, but also by legal concession holders, operating in several ways. Concession holders may over-harvest from the lands granted to them, or they may exploit areas outside these lands. In a 2001 survey, loggers from 14 out of 18 surveyed concessions illegally expanded their operations into protected areas (Curran et al. 2004). The timber or processed wood products may be smuggled secretly from the country, or sold and transported as if produced from a legal concession. To avoid international tracking of the timber or wood products, the products often change ownership multiple times in transit. Hence, when the wood products arrive in port in another country, it is no longer recorded as Indonesian timber.

The extent to which smuggling poses a problem can be seen in official trade data. Import figures from many countries including China, Taiwan and Malaysia, to mention a few, are generally far above that of officially reported exports from Indonesia (Schroeder-Wildberg and Carius 2005). A comparison of the official import data for a series of countries compared with Indonesia’s export figures suggests discrepancies in magnitudes of up to a hundred, typically a factor of three to five.  Once again, the looting and destruction of Indonesia’s rainforests is an international concern, with multinational networks operating openly, while the protection of the parks is a primary law enforcement issue of Indonesia.