When they went to work in their gardens, the residents of Lubuk Mandarsah village in the Indonesian province of Jambi found drones flying over their crops and spraying poison. This is the way the pulp plantation company PT Wirakarya Sakti, a subsidiary of Asia Pulp and Paper (APP) resolved its conflict with the local community: by jeopardising the safety of their food in the middle of the Covid-19 crisis.

In another case, earlier this month, the security team of PT Arara Abadi, another APP supplier, arrested Pak Bongku, a member of the Sakai indigenous people, for planting sweet cassava in his ancestral land, which is now claimed by the company. Indonesian governments that did not recognise the traditional land rights of local communities and indigenous peoples granted territories to companies for exploitation. The company security handed Mr Bongku to the police and he now risks spending one year in prison.

The risk of a lengthy imprisonment is not hypothetical: last month, an Indonesian court sentenced two indigenous farmers, Jonny and Thomson Ambarita, to nine months in jail for a conflict over 40,000 hectares of ancestral land occupied by Toba Pulp Lestari, sister company of Asia Pacific International Resources Limited, APP’s major Indonesian competitor in the market for pulp and paper.

In areas sought by Indonesian pulp and paper giants for their business development, social conflicts that lasted one or two decades may intensify. Consequently the cost of compensation, or, in case of conflict escalation, the damage to companies’ operations, may grow exponentially.

On top of this, APP and APRIL are making the situation worse by creating disillusionment: they repeatedly promised a fair resolution to all their social conflicts in the region, but these cases and others indicate a return to their original attitude of dealing with conflicts using intimidation, violence and abuses.

This attitude is not only ethically problematic, but may become dangerous and escalate violence, considering the scale of these conflicts.  A comprehensive mapping done by EPN, together with a coalition of Indonesian NGOs, revealed that APP’s affiliates or suppliers are involved in conflicts with 107 communities in Indonesia, while at least 101 villages or communities are in active conflict with affiliates, suppliers or sister companies of APRIL, involving around 350,000 hectares of disputed land.

Considering a financial risk assessed by a recent study at between USD 3,530 and USD 28,941 per ha of social conflict area, over the 350,000 hectares, the overall financial risk of social conflicts connected to APP and APRIL wood supplier plantations can be estimated to be between USD 1.2 and 10 billion.

The newly published EPN assessment warns investors that, should APP and APRIL default in attempting to resolve hundreds of social conflicts, this might result in extensive extra costs, and may even lead the Indonesian paper companies to be unable to return the money they borrowed. APP famously defaulted already in 2001, and billions in debt remains unpaid to this date.