III. Baseline Results: 1994/1995Page 1| 2 | 3
At mid-decade, assuming Indonesia's HPH-linked plymills and sawmills were running at full capacity, and assuming that the entire output of the country's HPHs were being diverted toward those mills, only a fraction of the roundwood consumed by these companies' mills was supplied from their own HPHs. Even though the distribution of timber concessions was at a high point, and the issuing of mill licenses had not yet peaked, a third of the country's timber conglomerates were already operating with less than half of their timber supply coming from their own concessions. The largest timber deficit was run by the Poleko group, the family company of senior Golkar politician A.A. Baramuli (CISI 1991: 542-543). Only 7 percent of Poleko's licensed output was met by its own timber concessions. Baramuli now heads the "Black" Golkar faction which is trying to purge the leaders of the more reformist "White" faction from the party.
D. National raw material shortfall
Table 3.8 Implications for national supply of timber, 1994/1995
Notes regarding the foregoing table:
Total number of HPHs, total area of HPHs, and total estimated production of HPHs are a major subject of this study, and the means of calculating these figures are discussed at length in the methodology section of this report. The figure for total area of HPHs in this table differs from that given in Table 2.2 due to the fact that the figure in this table was independently derived, while the figure in Table 2.2 is a Department of Forestry figure.
Figures for total production from land clearing come from Departemen Kehutanan, Direktorat Jenderal Pengusahaan Hutan, Direktorat Bina Pengusahaan Hutan, 1995.
Figures for total number of HPH-linked mills and total licensed capacity of HPH-linked mills are a major subject of this study, and the means of calculating these figures are discussed at length in the methodology section of this report.
Estimated production of HPH-linked mills is derived by taking the licensed capacity of HPH-linked mills and multiplying that figure by 0.75. This multiplier, in turn, is derived by averaging two other numbers, ITFMP's in-house rule of thumb for the minimum capacity at which plymills here can operate while still maintaining profitability (90 percent, or 0.9), and the minimum capacity at which sawmills can operate and still maintain profitability (60 percent, or 0.6).
Total number of non-HPH-linked mills and total licensed capacity of non-HPH-linked mills comes from "Industri Pengolahan Kayu Hulu Tidak Terkait HPH," on pages 131-178 of Departemen Kehutanan, Direktorat Jenderal Pengusahaan Hutan, Direktorat Pemanfaatan dan Peredaran Hasil Hutan 1997, or the data underpinning ITFMP 1999, whichever was higher.
Total estimated production of non-HPH-linked mills is derived by taking the licensed capacity of non-HPH-linked mills and multiplying that figure by 0.6, or 60 percent, the minimum capacity at which ITFMP believes a sawmill can operate and still maintain profitability. Nearly all of the non-HPH linked mills are sawmills, not plywood mills. Hence, no plywood multiplier is used.
Balance is obtained by taking the sum of total estimated production of HPHs and total production from land clearing and subtracting from that number the sum of the total estimated production of HPH-linked mills and total estimated production of non-HPH-linked mills.
Table 3.8 presents an even more nuanced view of the supply and demand situation in Indonesia's plymill and sawmill industries in 1995, taking into consideration all land clearing. Furthermore, the table assumes that all the wood obtained through land clearing is used by plymills and sawmills, and not by the fast-growing pulpmill sector. In fact, this is an assumption that is quite generous to the plywood and sawmill sector, given that much of the forests cleared through IPKs do in fact go to the pulp and paper sector, which has a strong price preference for low-cost mixed tropical hardwoods obtained through forest clearing. Data provided to ITFMP from a province it considers to be representative for the country – one neither too close to, nor too far from, the majority of the country's pulp mills – shows that over the three year period between 1996-1999, only 53 percent of the wood from that state's IPKs went to the plywood sector, while 47 percent went to the pulp and paper sector. But again, the reason that this study uses an assumption that is so generous to the sawn timber and plywood sector – namely, that wood from land clearing is used by plymills and sawmills, and not by pulpmills - is so that every effort is made to extend the benefit of the doubt to the country's plywood mills and sawmills in evaluating their raw material status. Second, the demand side of the equation is made more realistic by introducing licensed but non-HPH linked plymills and sawmills: Indonesia has a large number of mills licensed by the Department of Industry and Trade but not connected in any formal way to HPHs. Third, this report now relaxes the assumption that mills are operating at full licensed capacity, and instead assumes that they are operating at the minimum possible level at which they can remain profitable. This report assumes that the minimum level at which HPH-linked plymills and sawmills can remain profitable is 75 percent of licensed capacity; non-HPH linked plymills and sawmills, 60 percent. Another ITFMP study takes what is probably a more realistic position, namely, that plymills and sawmills operate at 80 percent of licensed capacity (ITFMP 1999). However, this report, in order to extend every possible benefit of the doubt to the owners of HPH-liked and non-HPH-linked plymills and sawmills when evaluating their consumption of legal vs. illegal timber, assumes that these mills operate at slightly lower levels than they probably do. As a result of this new set of assumptions, we are left with a realistic estimate of the bare minimum amount of illegal logging that was necessary at mid-decade to keep the country's plymill and sawmill sector alive. To summarize:
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