Kalla questions recommendation to close Indorayon

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)