Indorayon dismayed by Keraf's recommendation

Indorayon dismayed by Keraf's recommendation

JAKARTA (JP): Publicly listed pulp and rayon fiber producer PT
Inti Indorayon Utama is shocked by State Minister of Environment
Sonny Keraf's recommendation to close or relocate its mills in
Porsea, North Sumatra, due to their alleged poor environmental
standards.

"If mass media reports on the minister's recommendation are
accurate, then the minister's opinion is completely one-sided,"
said Indorayon's chief commissioner Palgunadi T. Setyawan on
Tuesday.

Palgunadi said Indorayon would voluntarily cease operations
and leave the area if it was found guilty of violating
environmental rules or of harming the local community.

"But this course of action should be based on the results of
an independent audit," Palgunadi said.

Keraf was reported as saying on Monday that he had recommended
to the Cabinet that Indorayon's pulp and rayon mills be closed or
relocated to another area for violating environmental laws and
harming the health of local people.

The mills have stopped production since late June, 1998, after
a series of protests by local residents alleging they damaged the
environment and their health.

The government then ordered an independent audit on the mills
but the planned audit has yet to be conducted.

Separately, Minister of Industry and Trade Jusuf Kalla said on
Tuesday he understood Keraf's recommendation but he asserted that
any measure should be based on the due process of law.

"Law enforcement is the key issue here," Kalla said, pointing
out that any measure taken without the due process of law would
damage investors' confidence in the country.

Director General for Chemical, Agricultural and Forestry
Industries Gatot Ibnusantosa concurred that any recommendation on
the fate of Indorayon should not preempt an independent audit.

"The government must await the planned audit before taking any
decision," Ibnusantosa added.

Indorayon, which has annual capacities of 180,000 metric tons
of dissolving pulp and 60,000 tons of rayon, started operations
in 1989.

The company, besides being listed on the Jakarta stock
exchange, is also traded in the United States through American
depository receipts.

Palgunadi suggested that since a new independent audit had yet
to be conducted, the government could evaluate and verify the
results of an environmental, safety and health audit made by the
American company, Labat-Anderson Inc., on Indorayon in 1995.

Flabbergasted

Palgunadi said Keraf's recommendation flabbergasted
Indorayon's management, who were waiting for positive government
efforts to reopen the plants.

"We have been expecting the government to evaluate the audit
reports made by independent auditor Labat-Anderson at our own
initiative or to conduct another audit," Palgunadi added.

He cited Labat-Anderson's reports that concluded Indorayon's
effluent and the purity of nearby rivers meet all environmental
standards and that its forestry operations had a negligible
impact on air quality.

"Our position as of today is that we are fully compliant with
the standards as set out in the auditor's report and we have
taken corrective measures recommended by the auditor," he said.

The fairest way to settle this issue is for the government
itself to appoint a new independent international auditor to
carry out an investigation at Indorayon's expense, Palgunadi
added.

"If the audit report found that Indorayon had in fact breached
any laws, Indorayon would be ready to face the legal consequences
because we know Indonesia is a country based upon laws," he said.

"Indorayon, a resource-based business, is the kind of venture
Indonesia needs to create high value added tax and generate
sorely needed foreign exchange. We can minimize the risk of
environmental damages with the appropriate technology," he said.

Palgunadi said Indorayon, which employs around 7,000 people,
had decided to allocate at least 1 percent of its annual
production cost or around Rp 5 billion for community development.
But this had not yet been implemented as the mills stopped
production in mid-1998 due to security risks posed by protesters.

Trading in Indorayon shares was suspended on the Jakarta Stock
Exchange on Tuesday following the newspaper report on the state
minister of environment's recommendation. (udi)