January

4, 2013 Linda Wijaya, Asia Pulp and Paper Jl. M.H. Thamarin 51 BII Plaza Tower II Jakarta, 10350 Dear Ms. Wijaya, Thank you for your letter of 12 October responding to our letter of 24 September on the human rights audit and Mazars. We hope to use both Bahasa Indonesia and English in future communications. While the human rights initiative that APP is undertaking is a step towards respecting the rights of communities affected by its business, we believe that its limited scope and methodology as well as the lack of transparency and questionable stakeholders process make it inadequate to address the broad range of social and human rights impacts associated with APPs mills and the large areas of land - much of it claimed by indigenous peoples and local communities providing wood and fiber to the business. We intend to address specific responses to the letter forwarded from Mazars and the audit by separately. After conferring in November, the signatories to this letter decided it was a priority to communicate our expectations relating to social conflict and human rights and that APP and its suppliers meet these internationally accepted practices. With this letter, we seek to provide the broad outline of the issues and steps APP and its suppliers must take to demonstrate that it is serious about implementing statements the company has made publicly and in its correspondence. We appreciate that APP is conducting an HCV assessment process, testing social conflict resolution approaches in Senyerang (Jambi) and Soreg/Sorek (Riau) and has contracted Mazars, however, given the limited scope and methodologies of these initiatives and APPs history of broken promises, additional actions need to be taken to show that the company is genuine and sincere about addressing its harmful social and environmental record and avoiding potential future harm. We believe that APP needs to take responsibility for the social and environmental problems linked to all the wood coming into its mills (both from natural forests and pulp plantations) and encompassing its entire supply chain. We ask that the company demonstrate its seriousness in addressing these problems both by meeting the recommendations made in the letter of 1 October, 2012 from WWF and Greenpeace and by meeting the recommendations relating to social conflict and human rights outlined in this letter. We ask that APP inform its suppliers that it will only be able to purchase wood from them if they follow the same human rights and environmental commitments that we suggest APP take on itself.

 At a general level, we urge that APP inform its direct (owned) and indirect (independent) suppliers that it will stop purchasing from any suppliers that: Do not respect the rights of affected communities to the ownership and control of their titled and customary lands and to give or withhold their Free, Prior and Informed Consent (FPIC) to proposed developments on their lands as expressed through their own freely chosen representatives; Have failed to resolve social conflict and human rights violations with affected communities to the mutual satisfaction of affected parties; Evict communities with land claims in concessions and consider CSR activities as adeqate and final resolution of conflicts Do not place a moratorium on logging and natural forest clearance until High Conservation Values have been identified and maintained, and; Continue to clear and drain areas of peat soil or convert High Carbon Stock Forest In preparing a standard operating procedure (SOP) for respecting the right of communities to their lands, to self-representation and FPIC, resolving social conflicts, remediating human rights violations, and for identifying and maintaining High Conservation and Carbon Stock Values, we think it is necessary for APP to distinguish between: 1. Areas already cleared or converted to pulp plantations; 2. Licensed areas with remaining forest cover and/or peat lands and yet to be converted; and 3. Areas planned for expansion or in some preliminary stage of licensing. In this letter, we set out what we believe are APPs responsibilities as well as the actions to respect human rights and address social conflict that the company, its affiliates and suppliers (i.e. direct/owned and indirect/independent) must take to conform with internationally accepted standards. Meeting the preconditions and reaching a long-term agreement would entail independent assessment by mutually agreed assessors. We are open to considering APPs efforts with The Forest Trust to establish processes that are mutually agreed with affected parties to resolve conflicts in Senyerang and Soreg and recommend adding Datuk Rajo Melayu (Kampar, Riau) as starting points for designing and establishing a broader process that would also include the following pre-conditions for constructive engagement. Below we have elaborated the package of pre-conditions we think are necessary to demonstrate APPs sincerity and intent regarding social and rights issues in italics. We have also articulated the other conditions we think are required for APP, affiliates and suppliers (i.e. direct/owned and indirect/independent) to demonstrate responsibility related to social and human rights issues in normal text. Together, we believe these form a package or on ramp for the company on social and rights issues. Specific: APP its affiliates and fiber suppliers (i.e. direct/owned and indirect/independent) will: 1. For areas already cleared or converted:

Propose/provide a draft Terms of Reference (TOR) for social conflict/rights violation assessment process to letter signatories, incorporate recommendations on TOR from letter signatories and make public agreed TOR elements - Provide public access to information and process of implementing social conflict/rights violation assessments and resolution processes - Consistent with agreed TOR, commission credible 3rd parties to conduct conflict/rights assessments in 3-5 areas and allow broad access for signatories to the letter to monitor and advise (note: the 3-5 areas could include Senyerang (Jambi) and Soreg (Pelalawan, Riau) and should include Datuk Rajo Melayu (Kampar, Riau)) - Suspend operations and wood supply from areas under dispute until there is agreement with the affected communities on a process to resolve the conflict/remedy rights violations and resolution/remedy is achieved. - Develop and implement independently verified agreements with the communities that resolve conflicts/remedy rights violations in the 3-5 areas assessed - Commit to suspending operations in this manner as part of resolution/remedy protocol - Make available draft social conflict and human rights resolution/remedy protocol that will be used following the assessments and incorporate input from letter signatories (e.g. on process and elements) and make agreed protocol publicly available - Conduct a review of documents, schematics and models of conflict resolution that are already running, and develop mechanisms for restoring livelihoods and economic support for affected people 2. For areas yet to be converted (and with licenses) - Place a moratorium on logging operations and wood supply from these areas until FPIC process including recognition of land rights is completed and make public commitment to suspend mill expansion and all logging, clearance, peat drainage and plantation establishment while conducting FPIC and until community consent obtained and verified by credible 3rd party - Propose/provide draft methodology to be used to conduct FPIC process and incorporate recommendations provided by signatories to this letter and affected communities and make agreed methodology public. - Establish open access to information and process of implementing FPIC to affected communities and other stakeholders - Initiate process to conduct FPIC using agreed methodology in 3-5 priority communities/areas - Provide list of suppliers & maps of concessions with natural forest cover/un- drained peatlands and with names and locations of villages/settlements in these areas - Establish mechanism that provides access to information and expert advice for communities involved in FPIC process 3. For new mills or areas with application or in licensing process (i.e. land bank expansion): - make public commitment to defer further steps in licensing process and expansion areas until titled and customary lands are identified, a process to respect FPIC is conducted and community consent obtained and verified by agreed 3rd party

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list of areas, supplier names and preliminary concession maps in licensing process or planned made available to key stakeholders list of expansion plans and new pulp and chip mills that will supply APP mills to key stakeholders

General: APP should make public time bound statements that the company, its affiliates and fiber suppliers will: - Invite and empower a group of credible observers/reviewers from civil society, and mutually agreed with signatories to this letter and other key stakeholders, to ensure that the verification, monitoring and management of high conservation and high carbon stock value forests, conflict/rights violation resolution and implementation of FPIC is carried out in accordance with the international best practices. - Acknowledge and respect the rights of indigenous peoples and local communities (including communal rights to land and livelihoods) affected by its operations and its wood sourcing, including their legal and or customary rights to land, their right to give or withhold their free, prior and informed consent to proposed developments, and their right to resolve disputes and remediate rights violations through the application of mutually agreed independent resolution mechanism(s) to address existing or future disputes or rights violations. - Create mechanism(s)mutually agreed with affected communities to provide access to information (e.g. maps, licenses, permits, etc.) and expertise required by communities to understand their rights, options and the consequences of entering into processes and agreements with APP aimed at resolving conflicts and remediating rights violations, preventing new conflicts and respecting the right of communities to FPIC. - Make available to interested parties a list of its current licenses and concessions maps and of its 3rd party suppliers and their concession maps, including names and locations of communities in or bordering concessions - Make no claims regarding APPs performance relating to social conflict and respect for human rights in regard to particular disputes, conflicts or negotiations without prior agreement of affected communities. We hope these suggestions are useful to APP in creating specific goals and performance benchmarks relating to social conflict and human rights in its sustainability commitments and implementation plan. We look forward hearing the companys response and answering any questions you may have. Regards and Best for the New Year, Sincerely,

 Hary Oktavian Executive Director (appointed) Scale Up Andiko Executive Director Huma Deddy Permana Executive Director WBH Marcus Colchester Director Forest Peoples Programme Lafcadio Cortesi Asia Director Rainforest Action Network Rivani Noor Executive Director CAPPA cc: Robin Mailoa Aida Greenbury James Kallman Marzuki Darusman Philippe Castagnac Scott Poynton Bustar Maitar (Greenpeace Indonesia) Abetnego Tarigan (Walhi) Aditya Bayunanda (WWF Indonesia) Muslim Rasyid (Jikalahari) Raflis (Transparency International) Hariansyah Usman (Walhi Riau) Abdon Nababan (Aman)