The success of Indonesia's pulp and paper industry comes on the back of ever-increasing global demand for paper. Despite competition from electronic devices (that reduce the need for paper), global demand for paper grows between 2 - 3 percent every year. Therefore, it is not surprising that the Indonesian government is eager to expand production capacity of the national pulp and paper industry. The current target is to raise capacity from 7.93 million tons per year to 10.53 million tons.

 

Recently, Asia Pulp and Paper (APP), one of the world's largest pulp and paper companies, opened a new (and rather massive) mill in South Sumatra that contributes to the expansion of Indonesia's pulp and paper industry. However, as usual, the project caused controversy as local residents (and Indonesian environmental groups) oppose to the mill and accuse the company of using intimidation to push through their plans. Protestors also argue APP violates the zero-deforestation pledge it had made in 2013.

 

The Indonesian Pulp & Paper Association (APKI) says most of national pulp and paper output is exported abroad. Approximately 60 percent of domestic production is shipped to Indonesia's export destinations. Araminta Setyawati, analyst at Bank Mandiri, adds that Indonesia ranks ninth in terms of biggest global pulp producers and sixth in terms of biggest paper producers. Moreover, she sees good potential for Indonesia's pulp and paper industry as demand for paper is expected to stay strong in Southeast Asian nations as well as in the USA. Furthermore, Indonesia's domestic paper consumption is still low at 32.6 kilogram per capita per year and therefore has much room for further growth. In Malaysia paper consumption stands at 100 kilogram per capita per year, while in Japan this figure is 242 kilogram. In fact, Indonesia's paper consumption is below the ASEAN average of 55 kilogram per capita, per year.