Indorayon's fate to be decided next month: Sonny

JAKARTA (JP): State Minister of Environment Sonny Keraf said on Monday the decision whether to shut down or maintain the operations of pulp and fiber rayon producer PT Inti Indorayon Utama would be decided next month.

"We expect to achieve the final say on Indorayon by June at the latest. Intensive talks are currently being held at the concerned ministry's offices," he said after a meeting of ministers in the economic and financial sectors.

He said a government-sponsored environmental audit to prove the alleged damages caused by Indorayon's operations to the surrounding environment was currently underway at the company's factory in Porsea, North Sumatra.

President Abdurrahman Wahid ordered the ministries involved to form a special team to conduct a new environmental audit on Indorayon but without having to reopen the company's factory.

In mid-1998 the government suspended Indorayon's operations due to claims that the factory was causing environmental and social problems, allegations which have been rejected by the company's management.

"However, the audit result will not necessarily be the main reference for the government in deciding whether to completely shut down the company's operations in the area," Sonny said.

Sonny previously recommended that the government shut down the company's operations because it had failed to comply with environment regulations.

But the government did not respond to the recommendation following a proposal from other ministers to conduct a new audit of Indorayon before any decision was made.

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

The two-decade presence of Indorayon's pulp and fiber factory, 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.

Last week Indorayon gave the Indonesian government one week to allow the company to resume operations or face international arbitration.

The company said its foreign investors had lost their patience because the government had not demonstrated serious efforts to resolve the dispute that forced the plant to stop operating in June 1998.

The foreign shareholders will file suit against the Indonesian government at the International Center for the Settlement of Foreign Investment Disputes in Washington D.C.

The foreign shareholders, who together own 86 percent of Indorayon, will charge the government of Indonesia with unlawful closure.

Indorayon said its inability to operate during the last 20 months had resulted in a sharp drop in its market capitalization value from about US$1.4 billion in 1996 to only about $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 this week. (rei/cst)