Royal Golden Eagle’s Next Generation Seeks New Leaf

By Muhamad Al Azhari on 10:29 am Jul 25, 2013Category Business, Corporate News
Tags: Indonesia pulp and paper industry, Royal Golden Eagle RGE
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Royal Golden Eagle’s Next Generation Seeks New Leaf
Anderson Tanoto, 24, is tipped as the favored successor to lead the family business Royal Golden Eagle. (GA Photo/Suhadi)
Kerinci, Riau. A leading figure among the next generation of leaders at family-run conglomerate Royal Golden Eagle hopes to take a different approach to his forebears on the environmental concerns that have long dogged the company.
Pledging the company’s long-term commitment to Indonesia, Anderson Tanoto, 24, says it wants to reset its relationship with green activists who have criticized the practices of its pulp and paper business.
“It is the aspiration of the second generation that we be more interactive with the environment to navigate a changing world,” Anderson told reporters, including the Jakarta Globe, invited to a company gathering in Kerinci.
Anderson is an assistant manager at Asia Pacific Resources International Limited (April), a management company based in Singapore that controls the conglomerate’s pulp and paper businesses. He is the youngest son of Sukanto Tanoto, the 63-year-old current company leader who is ranked number 10 on this year’s Globe Asia rich list with a net worth of $2.1 billion.
Analysts say Anderson is the favored successor to lead the family business, which stretches from pulp and paper to energy to agriculture. The pulp and paper operation is regularly attacked by environmental activists for contributing to deforestation in Indonesia. Greenpeace has described April as the “largest driver of deforestation in the sector.” In response, Anderson said: “It is not that we don’t want to interact with them , but it must be on the same playing field.” Anderson said the group prefers to avoid pointing fingers at campaigners. “We want it [the relationship] to be constructive,” he said. “If you are curious about how we run our business, just ask people around. In fact we have set a specific $17 million budget for Kampar restoration.”
In Kampar, Riau, a company affiliated with April has pledged to spend up to $17 million over 10 years to restore a peat forest. The program is aimed at protecting rare animal species, including Sumatran tigers, and also one of the world’s largest natural carbon-absorbing areas.
The program will cover 20,265 hectares of Kampar’s 700,000 hectares of peat swamp forests and mangroves. Its budget represents just over 0.1 percent of Royal Golden Eagle’s total assets. Greenpeace has recently voiced concerns about the condition of the area being protected. It claims that Kampar had been environmentally damaged by illegal loggers, who contributed to forest burning, hurting the stability of the peat swamp hydrology.
“Five years ago, we stood silent on such accusations. … [Now] we want to promote transparency,” Anderson said.
Diverse empire
The Tanoto family’s RGE has more than $15 billion in total assets and directly employs around 50,000 people worldwide, according to a company document.
“We have been here for 20 years. … We will continue investing in Indonesia. We will not only invest in the economy directly, but also invest in people,” Anderson said. “There is a huge prospect in Indonesia. This country has a population of around 240 million. … Not only from the population side, in its demography, we have a big proportion of young-aged population.”
Sukanto’s first plantation development begin in Kerinci in 1993 through Riau Andalan Pulp and Paper. Its first commercial pulp production began in 1995 and commercial paper production started in 1998. Sukanto’s pulp and paper business has grown significantly since then. Under April, Sukanto built his pulp and paper business into one of the largest pulp mills in the world. April controls RAPP, Riau Andalan Kertas (a paper maker) and Riau Power (a power producer) to support an integrated pulp and paper business.
On its 1,750-hectare manufacturing complex, April produces 2.8 million tons of pulp and 820,000 tons of paper per year. Its PaperOne office paper product is sold in more than 75 countries. In agriculture, Sukanto owns Asian Agri Group, comprising palm oil producers that have been operating in Indonesia since 1979. The group now manages 28 oil palm plantations and 19 palm oil mills. It controls a total plantation area of 160,000 hectares, of which 60,000 hectares is developed with smallholders under Plasma Schemes.
Tax sagaAsian Agri has been embroiled in a years-long tax saga. The Supreme Court on Dec. 18 last year ordered it to pay Rp 2.52 trillion ($261 million) in back taxes and fines for tax embezzlement.
The verdict came after a review in a criminal case of tax evasion involving Suwir Laut, Asian Agri’s former tax manager. Suwir was found guilty of misstating the annual tax notice of Asian Agri’s 14 subsidiaries from 2002 to 2005. He was sentenced to two years in prison with a three-year probation period. The investigation began in 2007.
Asian Agri plans to defy the court ruling. It claims it has already paid some of the amount due, and other taxes are still in dispute with the tax office, rendering the latest court order non-executable. It also intends to request a judicial review on the case, saying the judges and overlooked some evidence and the ruling contained contradictions.
“There are many judicial processes that are not balanced here,” Anderson said.
As evidence for challenging the court ruling, he said the prosecuting attorney had used evidence from Vincentius Amin Sutanto, a man sentenced to 11 years in prison for attempting to embezzle $3.1 million from Asian Agri.
Vincentius is now out on parole as a reward for providing evidence in the tax fraud case. “Evidence must come from a reliable source,” Anderson said of the basis for a sound conviction.
RGE also has operations in China, through Asia Symbol, a pulp producer, and owns Pacific Oil & Gas, an independent energy resources development. In Brazil, RGE owns Sateri, one of the world’s largest specialty cellulose producers.