Minister warns of wrong signals in Indorayon action

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)