Indorayon warns govt to let it reopen or face lawsuit

JAKARTA (JP): Publicly listed pulp and fiber rayon firm PT Inti Indorayon has given the Indonesian government one week to allow the company to resume operations or face international arbitration.

"If the government closed Indorayon without a due process of law, I would see that as the government's choice. However, in that situation, there is no choice left for us, but to seek international arbitration," finance director David Pile told a news conference on Friday.

Indorayon factory's operations in Porsea, North Sumatra, were suspended by the government in mid-1998 due to claims of the factory causing environmental and social problems.

"We are talking about a 'straight damage claim' arbitration suit," he said.

He declined to specify the amount of settlement the company would request, saying Indorayon would not want to get into the details of the arbitration as yet because the discussion with the government was not final.

Pile urged the government to provide proof that Indorayon had breached the country's laws or the company's operating permit.

The only way to establish such proof is to reopen the mill and find an independent auditor to work on the environmental auditing, according to Pile.

"But if the government decided to arbitrarily close down the mill, what you are saying is that every single company (in Indonesia) is subject to that," he said.

New Minister of Industry and Trade Luhut Pandjaitan, who replaced Yusuf Kalla on Wednesday, said shortly after his installment that he supported the closure of the Indorayon mill as he said the mill had created environmental problems in the surrounding area.

"(It's) not exactly certain what the new minister of industry and trade has said, though it is free to say that (former minister of investment and state enterprises development) Laksamana Sukardi and Yusuf Kalla were very supportive of a process of due process of law and order implementation," he said.

Earlier this month the trustee of Indorayon foreign shareholders, lawyer Todung Mulya Lubis, said his clients planned to register its case against the Indonesian government with the International Center for Settlement of Foreign Investment Dispute in Washington DC.

"They will charge the Indonesian government with unlawful closure," Todung said.

The foreign shareholders, together, own 86 percent of Indorayon.

The two-decade presence of Indorayon's pulp and fiber factory in North Sumatra, which has a capacity to produce 240,000 metric tons of pulp in addition to 60,000 tons of rayon fiber a year, has led to mounting criticism and pressure from local people and many non-governmental organizations.

Indorayon's inability to operate during the last 20 months has resulted in a sharp drop in its market capitalization value from about $1.4 billion in 1996 to only around $40 million at present.

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

Both exchanges have threatened to delist Indorayon from their trading board if the company fails to resume its factory operations by next week. (udi)