Minister warns of wrong signals in Indorayon action

JAKARTA (JP): State Minister of Investment and State Enterprises Development Laksamana Sukardi warned the government on Wednesday against arbitrarily closing down publicly listed pulp and rayon fiber producer PT Inti Indorayon Utama.

Laksamana cautioned that closing down Indorayon mills without proper procedures would discourage foreign investors and nullify the government's efforts to woo back foreign investment to the country.

"Foreign investors are greatly concerned at how decisions are made here. The government must conduct a professional and independent environmental audit before making further steps," Laksamana said.

Laksamana was commenting to reporters on the recommendation of State Minister of Environment Sonny Keraf to the Cabinet that the government close down or relocate Indorayon's plant in Porsea, North Sumatra, for allegedly damaging the environment and causing public hazards.

Separately, the Jakarta Stock Exchange's (JSX) management announced on Wednesday that Indorayon's stock trading, suspended on Tuesday because of reports on Keraf's recommendation, was reopened on Wednesday.

"The office of the coordinating minister for the economy, finance and industry has notified us that Indorayon has to conduct an independent audit on its operations before the government makes any decision," the JSX's management added.

The statement was signed by chief of the trading section Bambang Aribowo and chief of the registration division Yose Rizal.

Laksamana said the audit on Indorayon should precede any measures to follow up Keraf's recommendation.

Laksamana said any definitive ruling on Indorayon should be made only after the audit result proved the company violated Indonesian laws.

He added that the government should provide clear-cut, standardized guidelines for handling business problems to allow investors to better calculate business risks in the country.

Separately, Keraf on Wednesday defended his recommendation to the Cabinet, saying he could no longer trust Indorayon because the company had always broken its promises to uphold the environmental standards for its mill operations.

He said there was no need to conduct another environmental audit because a previous audit had found some mismanagement in Indorayon's mill that resulted in environmental damage.

But Keraf did not give further details as to who conducted the audit and when the audit report was published.

The government ordered in 1998 an independent audit on the mill, but the planned audit has yet to be conducted.

Keraf said he would not budge from his recommendation, even if Indorayon pledged to better manage its operations and rehabilitate the damaged areas.

"The company can no longer be trusted with environmental concerns. They have broken so many promises," he told The Jakarta Post.

"My recommendation is not new. Former commissions of the House of Representatives also recommended that the government close down the mill for violating regulations concerning the environment," he said.

He added that Indorayon had failed to meet many environmental requirements, including those on water and air pollution, hazardous toxic waste management and environment management since it started operations near Lake Toba in 1989.

The mill stopped production in late June 1998 after a series of protests by local residents alleging the company had damaged the environment and the residents' health.

An executive of the Toba Lake Preservation Foundation, Payaman J. Simanjuntak, said his organization supported Keraf's recommendation, calling it a proper decision.

He said the company's presence in the area had been rejected by local communities from the outset for fear of environmental damage.

"Indorayon has no commitment to the environment. For example, it deliberately built a duct under the mill to secretly channel its liquid waste to the nearby river and was very careless in waste handling," he said.

The foundation had several times asked the previous government to close down and relocate Indorayon's mills to other areas, such as a site across from the Bukit Barisan mountains, he said after a meeting with Keraf on Wednesday.

Keraf said Indorayon should be allowed to relocate its mill to other areas, provided the company involved government institutions in preparing for an environmental impact study on the new site.

He said an immediate closing down of Indorayon would not necessarily discourage foreign investors.

"I believe all foreign investors are concerned with the environment and are aware of the legal consequences if they fail to meet the requirements. The government will never hinder companies from operating in Indonesia as long as they follow the regulations, including those on the environment," he said.

Indorayon, which has an annual capacity of 180,000 metric tons of dissolving pulp and 60,000 tons of rayon, began operations in 1989.

Apart from trading on the Jakarta Stock Exchange, the company has also floated it shares in the United States through American depository receipts. (03/cst)