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.