Indorayon's fate to be decided next month: Sonny

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)