Kalla questions recommendation to close Indorayon

JAKARTA (JP): Minister of Trade and Industry Jusuf Kalla said on Wednesday the decision on whether or not to close down pulp and rayon fiber producer PT Inti Indorayon Utama should be made by the court.

Kalla said the government should bring the case to court so that a legal resolution to the disputed industrial activities could be attained.

"It's not right to close the mill on the grounds of a minister's recommendation. It's a bad precedence for our legal system. We will be sued by foreign investors (of Indorayon) if we shut the mill down without any legal procedures ... The international community will question our legal system," he said.

Kalla said he was strongly against the recommendation recently raised by State Minister of Environment Sonny Keraf to shut down or relocate Indorayon's mill in Porsea, North Sumatra, due to alleged violations of environmental regulations.

Earlier on Tuesday, the deputy of the state minister for environment, Aca Sugandhy, reiterated the ministry's intention to stick to its recommendation despite the call from Indorayon's executive for a dialogue.

But Aca said his office was ready if Indorayon's management wanted to challenge the closure proposal in court.

"A court settlement is better than allowing another audit to determine the fate of the mill because local people may again get furious and possibly attack and burn the mill, making the situation even worse for all of us," he said.

Kalla said it was wrong if the government ordered a closure of an industrial project without passing it through a court procedure.

"Indorayon should be given fair treatment to defend itself in court," said Kalla, who owns a diversified business group.

Indorayon has been under fire since 1998 when it became the target of demonstrations by residents living near Lake Toba who opposed its operations over alleged improper environmental- related operations, which resulted in bad odors and polluted water and air.

Environmental organizations alleged Indorayon's operations harmed local forests and caused the water level in Lake Toba to decrease.

Indorayon holds a concession right to 269,060 hectares of pine forests in the regencies of Dairi, Simalungun, North Tapanuli and South Tapanuli in North Sumatra.

The company, which started commercial production in 1989, has the capacity to produce 240,000 metric tons of pulp, in addition to 60,000 tons of rayon fiber a year.

The House of Representatives ordered the company in July 1998 to suspend operations pending an audit on the environmental impact of its activities.

The company resumed operations in November, supposedly to allow the environmental audit to take place. The audit, however, was called off and demonstrations turned ugly when protesters clashed with company employees fearful of losing their jobs.

The violence forced then president B.J. Habibie in March 1999 to completely suspend the company's operations pending an audit by an independent auditor to be appointed through a bidding process.

The government said five bidders from Germany, the United States, Finland and Australia would enter the final round in September. The bidding, however, has not been made so far.

Indorayon's chief commissioner Palgunadi T. Setyawan said it would be not fair for the government to shut down the company without first specifying the firm's infractions and giving the firm a chance to correct the alleged mistakes.

"What I am asking for here is a fair settlement. Let's all first sit down and talk about the problems," he said.

He told The Jakarta Post that Indorayon's foreign investors, who own roughly 86 percent of the firm, had expressed their regret over the Keraf's recommendation.

"Our investors have questioned the legal certainty in Indonesia because it seems that (the government) does just whatever it wishes," he said.

Palgunadi said besides some possible shortcomings in management, Indorayon had complied with the required environmental standards, including passing an environmental, safety and health audit conducted by United States-based Labat- Anderson Inc. in 1995.

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

Indorayon is a unit of the Raja Garuda Mas Group, a diversified conglomerate controlled by local businessman Sukanto Tanoto.

Apart from trading on the Jakarta Stock Exchange, Indorayon has also floated it shares in the United States through American depository receipts. (cst)