Independent team to decide Indorayon's fate: Minister

JAKARTA (JP): The government will form an independent audit team to decide whether to close or relocate PT Inti Indorayon Utama's pulp and rayon fiber factory in Porsea district, North Sumatra.

State Minister of Investment and State Enterprises Development Laksamana Sukardi said on Wednesday he would coordinate with State Minister of Environment Sonny Keraf and Minister of Industry and Trade Yusuf Kalla in forming the team.

"If necessary, we'll hire a top-notch auditor from abroad with financing provided by Indorayon," Laksamana said after a hearing with House of Representatives Commission V for trade and industry.

The plan follows recent accusations by Keraf that Indorayon has damaged the environment with its operations. The state minister recommended the factory be shut down.

Indorayon suspended its operations in Porsea in June 1998, following a series of protests by local residents who accused the company of causing environmental damage in the area and threatening residents' health.

The company, which began operations in the area in 1980, has an annual capacity of 180,000 metric tons of pulp and 600,000 tons of rayon.

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

American auditor Labat-Anderson Inc. conducted a environmental, safety and health audit on Indorayon's factory in 1995, concluding the factory met all environmental standards.

However, concerned by the lingering controversy, the administration of former president B.J. Habibie ordered an independent audit of the factory last year.

An international tender was held but the results were never announced and an auditor never named.

It remains unclear if the team proposed by Laksamana will include the auditor selected through this earlier tender.

Laksamana said he expected several possible results from the audit, two of which he outlined.

First, the audit may conclude the company has caused environmental damage, but that the damage is repairable. As a result, the company will have to pay for the cleanup, he said.

The second result is that the company will be found to have caused such extensive environmental damage that the factory will have to be closed or relocated.

If the audit proves the company has caused environmental damage, Indorayon will be required to compensate local residents for all losses, regardless of the extent of the damages, Laksamana said.

"This would serve as a lesson to other investors to respect local environmental standards," he said.

Laksamana, who gained the support of the House commission for the formation of the team, said an independent audit was necessary to help investors avoid the sudden suspension or closure of their operations due to alleged failures to meet environmental standards.

"We still don't have a policy regulating the closure of companies on charges of violating environmental standards," he said.

Laksamana said the government would not allow the closure of companies' operations based on unclear policies, particularly if foreign investors were concerned.

"We're trying to attract foreign investment here, so how can we expect them to enter Indonesia if we can't assure the supremacy of law for existing investors," he asked.

Because of this, Laksamana said the government currently is drafting a new investment law that will include guidelines for cases similar to Indorayon's. (03)