Indonesian Village Chiefs Protest Pulp Mill

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Indonesian Village Chiefs Protest Pulp Mill

Anti-World Bank Protests


By: Bay Ismoyo

Date: June 13, 2003

Source: BAY ISMOYO/AFP/Getty Images.

About the Photographer: Bay Ismoyo is a photographer for Getty Images, a worldwide provider of visual content materials to such communications groups as advertisers, broadcasters, designers, magazines, new media organizations, newspapers, and producers.


The World Bank is an international organization that loans money to the governments of poorer nations. Although technically a United Nations project (formed 1944), it is in practice run by its member states, whose voting power is proportional to the amount of money they invest in the bank. Thus, the United States holds over sixteen percent of voting power at the World Bank, more than twice as much as its next most powerful member, Japan (with 8% of voting power). This gives the U.S. an automatic veto of World Bank decisions; moreover, the World Bank president has always been an American nominated by the American president.

The stated purpose of the Bank is to lend money for development projects such as dams, utilities, factories, agriculture, and so forth, with the ostensible goal of reducing poverty worldwide. Virtually all the loans made by the Bank are to poor countries in Asia, Africa, and South America. However, the Bank is a controversial institution. Critics argue that it imposes a free-trade ideology on debtor nations that does not relieve poverty but instead deepens poverty while allowing transnational corporations to make greater profits, often at the expense of local human rights. Critics charge that the Bank causes a net reverse flow of money to the rich nations in the form of interest payments on unpayable debts.

The Bank itself has admitted several mistakes. One was its backing of the Indonesian transmigration program in the 1970 and 1980s, which sought to resettle 65 million people from the most densely populated islands of the archipelago to more rural islands. The result is widely acknowledged as disastrous, with poorly-planned agricultural settlements failing and indigenous peoples displaced by waves of government-backed newcomers. Another Indonesian case of controversial World Bank funding is the pulp operation run by PT Inti Indorayon Utama starting in the 1980s in the remote Toba-Samosir regency in North Sumatra. The purpose of the operation was to produce approximately 90,000 to 100,000 tons of wood pulp per year, seventy percent for export to China, South Korea, and Taiwan. The operation also produced rayon, a synthetic fiber derived from wood cellulose and used to make clothing. Operations commenced in the early 1980s, but by 1986 conflicts between the company and the rural villagers around the operation began to intensify. Villagers accused the company of clearing community lands for planting eucalyptus trees for pulp and dumping toxic waste into local rivers and Lake Toba, one of the world's largest lakes. Tens of thousands of people joined in the protests and some were imprisoned, beaten, or shot by security forces.

Protests and road blockades shut down the PT Indorayon plant in 1999. In 2002, the government announced its intention to reopen the plant (then renamed PT Toba Pulp Lestari, PTL). Protests and blockades resumed, along with arrests and beatings of villagers. In June 2003, the heads of fifty-two villages in the area of the plant traveled to Jakarta, the capital of Indonesia, to protest the plant reopening. One was quoted in the Indonesian press as saying, "There is no point in us continuing to go about our everyday affairs if the government does not listen to the views of our people, who have consistently demanded a permanent closure of the pulp mill."



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The World Bank has long operated on the Washington Consensus, a set of policies based on capitalist theories of economics which shape the conditions that the bank imposes on borrowing nations. Through lists of demands called Structural Adjustment Programs, the Bank requires borrowing governments to lift trade barriers, deregulate markets, sell off state-owned assets such as utilities and water supplies, and cut aid to the poor. The ostensible goal of structural adjustment is to alleviate poverty by promoting growth through industrial developments such as the pulp and rayon operations in northern Sumatra. However, these policies have been cited by movements resisting free-market globalization. Such discontent contributed to the election in the early 2000s of a number of leftist, anti-globalization presidents in Latin America (e.g., Evo Morales in Guatemala, who nationalized the natural-gas industry in early 2006). The anti-globalization movement has charged that the rich countries have run the World Bank to enrich themselves at the expense of poorer nations.

In February, 2006, the World Bank released a report admitting that two decades of the Washington Consensus had not cut poverty in one of the world's poorest regions, Latin America, but worsened it. The report, apparently questioning free-market doctrines promoted by the Bank for decades, stated that private-sector growth does not necessarily relieve poverty and that policies must directly target inequity (rather than trusting to the invisible hand of the market to distribute benefits). Moreover, it argued that governments must do more, not less, to control economies: "Converting the state into an agent that promotes equality of opportunities and practices efficient redistribution is, perhaps, the most critical challenge Latin America faces in implementing better policies that simultaneously promote growth and reduce inequality and poverty" (quoted in "Breaking Ranks at the World Bank," the Washington Post, Feb. 17, 2006).

Nevertheless, opposition to the TPL pulp plant in Indonesia remains stalled. The Indonesian government, which has been repeatedly penalized in recent years by the World Bank and International Monetary Fund for official corruption, has been historically unwilling to enforce environmental laws or to side with rural peoples against corporations, which can afford to pay cash bribes to military and political figures.



Woods, Ngaire. The Globalizers: The IMF, the World Bank, and Their Borrowers. Ithaca, NY: Cornell University Press, 2006.


Sanchez, Marcela. "Breaking Ranks at the World Bank." The Washington Post. February 17, 2006.

Web sites

Trudeau Centre for Peace and Conflict Studies, U. of Toronto. "Environmental Scarcities, State Capacity and Civil Violence: The Case of Indonesia." May, 1997. <http://www.library.> (accessed May 26, 2006).