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)