Experts back new audit of Indorayon

Experts back new audit of Indorayon

By Berni K. Moestafa

BOGOR, West Java (JP): Experts from the Bogor Institute of
Agriculture supported a new audit of pulp and rayon firm PT Inti
Indorayon Utama on Saturday, following a recent recommendation by
the environment minister to close down its operations.

Social economics expert Bungaran Saragih, environmental
management expert Gunarwan Suratmo and forestry expert Rudolph
Tarumingkeng said a comprehensive audit of Indorayon was badly
needed to get a clearer picture of the company's operations and
thereby ensure an objective decision on its fate.

Bungaran said a new audit of Indorayon should be more wide-
reaching than the previous one by American consultants Labat
Anderson Inc. in 1995, and not only cover the company's
environmental management system.

"What's more important is to study its socioeconomic impact,"
Bungaran told The Jakarta Post after chairing a discussion held
by the institute's Center for Development Studies on the results
of the 1995 Labat Anderson audit.

Nevertheless, Bungaran suggested the government gave Indorayon
a chance to improve its operations based on the results of the
new audit before it decided to close it down.

"If Indorayon can improve its environmental and socioeconomic
impact, then it should be given a chance to keep operating," he
said.

The company's two-decade presence in Porsea district near Lake
Toba in North Sumatra has led to mounting criticisms and pressure
from local people. Some have demanded the closure of its pulp and
rayon mill, complaining it has caused environmental degradation
in the area.

Their demands were heard by State Minister of Environment
Sonny Keraf, who recently recommended to the Cabinet that the
plants be closed down or relocated to another area.

State Minister of Investment and State Enterprises Development
Laksamana Sukardi disagreed, however, and proposed a new audit of
Indorayon before any decision was made.

Indorayon's operations have been on hold since June 1998,
after pressure from local residents prompted the then president
B.J. Habibie to order its suspension.

Last year Habibie ordered an independent audit but the
instruction was never implemented.

The company is listed on the Jakarta Stock Exchange and is
also traded in the United States through American depository
receipts.

Indorayon's US$600 million timber estate and mills, which
began operations in 1980, have an annual capacity of 180,000
metric tons of dissolving pulp and 60,000 tons of rayon.

Firman Manurung from the Lake Toba Heritage Foundation
insisted that whatever the result of the audit, assuming that
such an audit was necessary, the company must relocate its plant
from Porsea.

"They must relocate their toxic plant to an industrial area,
far from residential housing areas," he said, adding that his
demand was based on a recent study by the foundation's team of
experts on the impact of Indorayon's operations on the
environment of Lake Toba.

The study showed that Indorayon's operations had caused not
only serious environmental problems but also economic, social,
cultural, legal and political problems in North Sumatra, he said.

Firman said the best solution to the current problem would be
to close down Indorayon's plants because they had made people in
the surrounding area suffer for so long.

Environmental management expert Gunarwan, however, argued that
closing down Indorayon would be a setback to the region's
economy, the country's entire textile industry and most of all to
Indorayon's local employees.

The benefit, he added, would of course be a cleaner
environment.

The continuation of its operations may prove costly to
Indorayon, since it would require additional investment in its
environmental management system and additional spending on
community development, he said.

Gunarwan agreed with Firman's argument that the choice for the
site of Indorayon's mills -- some two kilometers downstream from
the major tourist destination of Lake Toba -- was a mistake from
the start, because polluting industries such as pulp and rayon
should avoid populated areas.

"Indorayon's closeness to populated areas has automatically
incited conflicts with local communities," he said.

Meanwhile, forestry expert Rudolph Tarumingkeng said that
based on Labat Anderson's 1995 audit he saw no problem in
Indorayon's deforestation activities as the company had continued
to replant deforested areas.

However, he said the company did not apply sound forestry
management in fire prevention and pest control. In addition, the
company neglected the condition of its roads, which used to
transport between 400 to 500 truck-loads of logs a day from its
forests to its plant, resulting in noise pollution.

Labat Anderson conducted the audit in 1994 and 1995 at the
request of Indorayon in response to growing criticisms by local
residents. The company focused its audit on the company's
forestry operations and its mills activities.

Experts participating in the discussion, however, said the
audit lacked validity due to its reliance on data provided by
Indorayon when auditing the mills.

They further argued that the auditor's understanding of the
social impact of Indorayon operations was insufficient.

Willy Tjen, the then leader of the Labat Anderson audit team
for Indorayon, defended the result, saying the audit was never
intended to be comprehensive.

"It was merely a management tool for Indorayon to improve
their environmental systems," Tjen said.

He said Indorayon did not entirely pass the environmental
audit, and that several environmental issues in its plant
operations needed to be resolved.

Nevertheless, he added, some members of the audit team had
recently revisited Indorayon and witnessed that the company had
largely followed the consultant's recommendations to improve its
environmental management system.

According to Tjen, one of the main problems during Indorayon's
first few years of operations had been a lack of proper concern
at upper management level with environmental issues.

"The management culture simply had to change," he said, but he
added he expected by now Indorayon's management to be more
committed to protecting the environment.