Pulping Cambodia: Asia Pulp & Paper and the Threat to Cambodia's Forests

by Luke Reynolds

Phnom Penh — On a far-flung riverbank in southwest Cambodia last spring, Buth Ran peered out of her wooden stilt home to see a sagging barge unload a half-dozen logging trucks.

“What are they doing here?” she later recalled thinking. Deep inside Botum Sakor National Park, no roads ran through the forest of mangrove and melaleuca. Buth Ran and the peninsula’s few other isolated inhabitants, cut off from any major arteries by rivers and mountains, survived by fishing the Khlang Ye river and farming small plots of vegetables.

No lights burned; no machinery rumbled.

Yet the trucks came in waves, led by contractors carrying documents stamped by Prime Minister Hun Sen’s government that authorized their presence and immediate plans to clear the surrounding forest. The trees were to be cut, chipped and shipped by sea to paper mills in China.

Far from where that company laid claim to the national park, the trucks’ arrival ignited a firestorm in Phnom Penh, spreading from local conservationists to the United Nations to, finally, the government’s Ministry of Environment. It turns out that the trucks in Botum Sakor Park belong to Green Elite, a shadowy timber company with reported ties to Asia Pulp & Paper (APP), one of the world’s largest paper producers, with an embattled environmental record and historic debt burden to deepen fears about the forest’s fate.

In addition to huge swaths of rare forest in Cambodia, the dispute over Botum Sakor Park would put at stake the Cambodian government’s pledges to reform the beleaguered forestry sector and APP’s massive public relations campaign to cast itself as a conscientious pulp and paper corporation.

Pulping APP

APP’s critics are many, and their ammunition varied. Since the company won massive logging concessions in Indonesia under Suharto’s rule in the 1980s, the company has profited from a corporate ethic founded on corruption and environmental exploitation. In Indonesia’s Riau province, where APP has fed paper mills for some two decades, forests have been devastated, while the local population has remained one of the poorest in the country.

A holding company of the Widjaja family’s Sinar Mas Group, headquartered in Singapore, APP’s stated interest is establishing “sustainable” eucalyptus and acacia plantations to feed its many mills in Indonesia, China and India.

But its practices in those countries and, now, Cambodia appear to have brought the company to a nadir in its long and thorny relationship with environmental watchdogs. Following a major fall-out with the company last year, the World Wildlife Fund in February accused APP of clear-cutting Indonesian forests and called on U.S. companies to boycott its products, which include copier paper, notebooks and other paper products. Large retailers such as Office Depot and Staples promptly came on board.

“APP has failed to produce the kind of plan that the international community should expect from a responsible company. We’re asking retail customers who buy from APP to consider how their purchasing affects the forest and the endangered Sumatran elephants and tigers that live there,” said Tom Dillon, director of WWF’s Species Conservation Program.

Human Rights Watch also has accused APP in recent years of reckless logging, as well as using strong-armed intimidation tactics to keep disenfranchised villagers from protesting. The group charged in 2001 that APP employed club-wielding company militias with close ties to Indonesian police and military to bully villagers off forest land and smash their demonstrations. Scores of villagers who protested APP’s expansion in Riau province reportedly were beaten that year, and some hospitalized. (APP has denied any link to human rights violations in Indonesia.)

Facing a rapid depletion of natural forest in Indonesia and growing criticism, APP has looked to expand in southwest China, where a subsidiary called APP China is overseeing several large mills.

There, too, the company’s practices have stoked controversy and opposition.

Most recently, in December, Greenpeace alleged that APP was destroying forests in southwest China’s Yunnan province to feed its mills under the pretense of establishing non-native eucalyptus plantations. Farmers surveyed by Greenpeace said the company had bought up some 1.8 million hectares of land for absurdly low prices since forging an agreement with Yunnan provincial authorities in 2002.

When a local hotel association, the Zhejiang Hotels Association, joined a boycott of APP products based on Greenpeace’s findings, the company retaliated with a lawsuit. APP soon dropped the suit in an apparent attempt to stem bad publicity.

APP has other, not unrelated, troubles, notably an overwhelming debt burden. Since it defaulted on a $13.9 billion debt in 2001 divided among its companies in China and Indonesia, analysts have been pessimistic that the company’s creditors are likely to get more than a few cents on their dollar, if anything. In addition, the debt spawned legal challenges in the United States by the distressed debt investors Oaktree Capital and Gramercy Advisers, both of which have won decisions against APP in U.S. courts.

Chased by debt, APP opened the mills in China and planned to cut forests and establish plantations in Southeast Asia — a strategy of aggressive expansion that will require intense logging to meet growing production capacities. Critics charge that APP’s record shows a willingness to exploit rare forests, then pull out and move into new territories.

“They’re counting on plantations outside of China [to provide raw materials for paper production], and Cambodia is definitely on the top of their list,” says Christian Cossalter, who has been tracking APP’s growth for the Indonesia-based Center for International Forestry Research.

But “in a country with large tracts of forest, there is not much incentive to build a sustainable plantation,” he says.

Enter Cambodia

In January, APP’s public relations office issued a release insisting that the company was committed to “support legal and environmentally sound plantation development and wood supply in Cambodia.”

The statement was intended to tamp down the recent furor over Green Elite’s expansion into Cambodia and allegations that the company planned to send timber to APP — an arrangement that APP flatly denies.

Cambodia’s 13 million people know all too well the harsh lessons of anarchic logging. Throughout decades of civil war and strife, fighting factions including the Khmer Rouge have financed their struggles and accrued riches by felling and selling off hardwood timber. The 1991 Paris Peace Accords brought a nominal end to fighting in Cambodia and saw the Khmer Rouge marginalized, but illegal logging only accelerated as politicians, generals and well-connected business executives took advantage of the relative stability to cut more timber. Forest cover declined precipitously. The logging industry — exploiting irreparably the country’s most valuable natural resource — provided little or no royalties to the state, as an elite few hoarded the profits.

The effects were hard felt. Unchecked logging has been tied to the droughts that in recent years have plagued Cambodia and led to rice shortages. Money-hungry officials have booted families off of their land and deprived them of the meager livelihoods they had earned by hunting and scavenging in the country’s forests.

The logging crisis led to an outcry in the late 1990s among the donors who have largely supported Cambodia’s government over the last 10 years, supplying roughly half of its annual budget in international aid. Threats of losing crucial aid money forced Prime Minister Hun Sen to declare a logging moratorium in 2002 and publicly stake his political future on his pledge to stop deforestation.

But the Prime Minister’s pledges ring hollow, say critics.

Any traveler on a highway in Cambodia will see trucks hauling logs to a nearby sawmill. Following his visit in November, Peter Leuprecht, the UN human rights envoy to Cambodia, said the illegal logging industry appears to rage on despite the ban, under the guise of a land concession system that grants tracts of forest to companies ostensibly for agricultural projects. Those companies then rush to log the concessions, covering their tracks through corrupt government officials, secrecy and intimidation.

“They are contributing to the plundering of natural resources in Cambodia and they are part of the process, which is characterized I understand in Khmer, as ‘eating the Kingdom,’” Leuprecht told reporters. Moreover, companies operating in land concessions are largely outside of public view and benefit from tight relationships forged with high-ranking government officials, he said.

Violence has also marred the system, as illustrated by a grenade attack in December.

Only days before a meeting of international donors in Phnom Penh, where delegates would discuss the usual topics of impunity, intimidation and land-grabbing, hundreds of villagers in Pursat province protested the logging operations of Pheapimex, a land-holding company with known ties to Hun Sen and an egregious history of illegal logging.

At night, as the protesters slept in an open field outside the concession boundaries, a grenade was thrown in their midst, injuring six. Eight hours after the explosion, police arrived at the site and determined the protesters themselves staged the attack in order to frame Pheapimex. No arrests were made.

The Deal

The customary opacity in Cambodian government that has helped so many Chinese businesses acquire large swaths of land has served APP well in obscuring its intentions and alleged ties to Green Elite and plans for the country.

Green Elite started cutting forest and clearing land for an acacia plantation in Cambodia’s Southwest early last year, unheralded and unannounced, toting a concession contract signed by Hun Sen in 1998. The contract bypassed the logging moratorium by designating the project as an “agro-industrial” project, but Green Elite’s plans and its concession inside a national park outraged local public interest and environmental groups that had pressed the government to put a special emphasis on conserving the Southwest. The region is one of the country’s last remaining tracts of forest and a rare habitat for elephants, gibbons, tigers and other species.

To most observers, the company’s early operations blatantly violated a law forbidding concessions of more than 10,000 hectares (Green Elite was awarded 18,000 hectares); a draft law that would forbid so-called “agriculture concessions” in national parks; and a law requiring a company to submit a formal report on its plans’ environmental impact.

Said one investigator with Global Witness, the London-based group that monitors forest crimes in Cambodia, “This is an idiotic plan. If this is the new trend, then the reputation of the whole government is at stake. If this is the protected area system at work, good luck.”

Trying to present itself as a legitimate enterprise, Green Elite contractors from Taiwan and Malaysia told local media it was a “sister company” to PT Arara Abadi, the forestry arm of APP in Indonesia. “We are not the kind of company that is going to cut forest and then run away,” said Frankie Ng, a contractor who previously managed APP projects in Indonesia. (He and others representing Green Elite have declined to elaborate on its relationship to APP, which remains a source of much speculation.)

The tactic backfired, and Green Elite’s suggested ties to the world’s tenth largest paper producer only intensified scrutiny of the project and focused attention on APP’s record. A government document leaked to the press showed that Green Elite requested some 300,000 hectares in the Southwest, an area much larger than previously supposed. The long-term plans for the Southwest include a paper mill and an investment of some $1 billion, according to Paul Yu, a Taiwanese businessperson representing Green Elite in Phnom Penh and Vietnam.

Officials in the Ministry of Agriculture say the request for more land is still under consideration, though Green Elite is likely to benefit from known ties to high-ranking officials, including a close Hun Sen associate, Keo Vuthy, who represented the company at meetings with provincial officials last year.

Disturbing allegations also arose that the company had confined laborers at the work site, which is only accessible by river, and withheld their wages.

Since Green Elite contractors brought hundreds of workers to the plantation on the Khlang Ye River, many have alleged that the company kept them in cyclical debt by overcharging for basic goods and the costs of transport to the site. As their debts to the company mounted, and scores fell ill with malaria, laborers last year escaped the site by swimming across the Khlang Ye river or hiking miles through Botum Sakor Park to reach the nearest village.

Pressure from environmentalists, human rights groups and donors have apparently driven the Cambodian government to act, at least superficially. In an unprecedented move, the Ministry of Environment announced in December it was suing a Green Elite subsidiary, Green Rich, for continuing to cut trees in Botum Sakor even after the ministry had ordered a suspension of the company’s operations for violating the environmental assessment requirement.

Wary of a court system notorious for offering its awards to the highest bidder, environmental and human rights organizations have cautiously praised the ministry and its head, Mok Mareth. The case has been held up in a provincial court as prosecutors ostensibly try to sort out who is behind the company’s operations in Cambodia.

“Given the range of laws that APP/Green Elite has broken, the Ministry must have faced a difficult choice as to which offense to prosecute first,” Mike Davis, head of Global Witness’s Phnom Penh office, said at the time of the lawsuit’s announcement. “This is an open and shut case. If due legal process if followed, the verdict cannot be in doubt.”

In Cambodia, due process is a big “if.” The country’s court system is famously corrupt, and laws are easily swayed by cash on the table. But if the ministry follows through with its case, it could be a significant victory for law and order in Cambodia, as well as as well as sound a warning to foreign companies eager to pillage the country’s timber resources.

Luke Reynolds is a freelance journalist who covered politics and business for The Cambodia Daily in Cambodia.