South Korea's Korindo Group is planning to invest US$500 million to construct a pulp mill on Kalimantan Island (formerly known as Borneo). The mill would have an annual capacity to produce 600,000 tonnes of pulp for particle board and paper.
The announcement was made by Kim Hoon, Korindo's executive director, on Thursday, March 5, according to a regional news source.
The project is slated to begin over the next two-years, Kim said, after signing a memorandum of understanding between Indonesia and South Korea.
The signing was witnessed by the Indonesian Forestry minister MS Kaban and Chung Kwang-soo, Korea's minister of forest service.
"We will use acacia mangium and eucalyptus as raw materials," Kim said.
Fast-growing Acacia mangium is found in Papua New Guinea, Maluku Province and in Australia.
Korindo is licensed to manage 170,000 hectares of plantation forest, most of it in Kalimantan. The company has already planted 78,000 hectares as raw material, Kim said.
He acknowledged that investors faced problems, including the lack of adequate infrastructure and jurisdictional questions between the central government and regional administrations.
"It happens that infrastructure in some districts cannot support the industry," Kim said, adding that some potential investment areas did not have roads.
After the MOU signing, Kaban said the ministry had also granted forestry licenses to two other South Korean companies, PT Taiyoung Engreen and PT Inni Joa. He pledged to aid investors seeking to get involved in forestry.
"Investment in forestry plantation is large-scale," he said. "For example investment in sengon [ paraserianthes falcataria, a fast-growing species of wood found in East Java Province] requires about Rp 12 million [$996] a hectare," Kaban said, adding that ministry support would be required, without elaborating on how assistance would be offered.
Aside from supporting the large-scale forestry industry, the ministry is making an inventory of forest areas belonging to local residents, he said.
The Ministry of Forestry said Korea has about 564,000 hectares of land for plantation in Indonesia, slated for pulp production and jathropa for biofuels.
Indonesia has about 120 million hectares of forest, with 20.5 million hectares converted for other uses, 66.3 million hectares in production forest and 33.5 million in conservation forests.