The Pulp and Paper industry also plays a major role in the Indonesian economy, accounting for 6.7 percent of the country’s processing industry’s gross domestic product (GDP) and providing employment to 260,000 direct workers and 1.1 million indirect workers. In 2016, Indonesia’s pulp and paper industry ranked seventh in terms of biggest foreign exchange earners (excluding the oil and gas sector) when it reaped USD $3.79 billion.
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.
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.
Based on a report by USDOC International Trade Administration nearly 100% of pulp and paper machinery and parts installed in the mills are imported. There is no local production of pulp and paper machinery. Most of Indonesia pulp and paper manufacturers have set up their own workshops to repair and produce spare parts.