Down to Earth No. 41, May 1999

Violence escalates
at Indorayon pulp plant

Clashes between local residents, staff and members of the security forces have resulted in at least six deaths and hundreds of injuries at the Indorayon pulp and rayon mill in North Sumatra. As a result of the unrest, President Habibie has been forced to order a temporary shut-down of the factory at Porsea.

The latest violent incidents occurred in mid-March when local people threw stones at trucks bringing logs into the mill site. Members of the police's anti-riot corps, Brimob, accompanying the trucks fired warning shots to disperse the crowd.

The day before, the mutilated bodies of two local men were discovered in the Asahan River, near the mill. Another was found the next day. Two of the victims were Indorayon workers. No news has emerged on the identity of the killers, but some local people suspect the security forces of carrying out the murders to provoke more conflict in the community.

People living near the mill site have suffered much over the ten years since the mill was built, from the effects of pollution, deforestation and land-grabbing. Controlled by the well-connected Tanoto family, the company flouted environmental regulations with impunity during the Suharto era. Legal action, demonstrations and deputations to government agencies failed to stop the pollution or improve the lot of local people.

Since the resignation of Suharto, the community has demanded that the promises of reformasi be put into action. Public pressure has forced the company to suspend operations at the mill for months. But their successes have been answered by more violence as the company, with police protection has attempted to enforce continued production.


On March 19, came Habibie's decision to order yet another temporary halt to operations at the mill. According to one report, Habibie has given an organisation called Yayasan Pencinta Danau Toba (YPDT, Friends of Lake Toba Foundation) the task of drawing up terms of reference of a new environmental impact study of the mill within two weeks. After this the government would decide whether or not to hire international consultants to conduct it. The result of the new study would then enable the government to decide whether to close down permanently or relocate the mill, or whether to allow it to continue at the Porsea site. Other reports differ as to what exactly Habibie's instructions were, with some saying that YPDT will carry out the study, not just the terms of reference.

It is highly doubtful that these measures will satisfy the local community who want the plant closed down for good. They do not accept the need for an impact study when the effects of the mill have been obvious to them for many years. "We have learned about the hazards such as bad odor, lung infections, skin defects and birth defects, while we have enjoyed nothing from the company in the way of contributions to local social programmes" said a member of a local anti-pollution group in a Jakarta Post report. The Asahan river, downstream of the mill, has been badly affected by the mill too. A local fisherman said "the water has become dark and brown...No more fish are found in the river and villagers living along the river can no longer drink the river water because of the pollution." Local people say that fumes belched out by the mill corrode the corrugated iron roofs and water sources used for irrigating local farmers' fields have dried up as result of deforestation.

A press statement issued by the North Sumatran chapter of the environmental NGO WALHI, welcomed the temporary closure but said it had come too late to prevent loss of life on both sides of the conflict. Such incidents, it said, would not easily be forgotten by the community. WALHI also asked why YPDT had been given the job of drawing up the terms of reference when it was a shareholder in Indorayon. North Sumatra governor, Rizal Nurdin is the Foundation's chairman. WALHI fears that YPDT, which local people know nothing of, will be used to legitimise Indorayon's presence.

Moreover, independent audits have been promised before. Last year the plant was forced to shut down for more than four months due to public protests. In October, after negotiations involving the government, the company and some members of the community, an agreement was reached to re-open the plant (with police protection) so that its operations could be subjected to a 'total' independent audit, paid for by the government. The general public would be urged to supply the audit team with information, according to the agreement and the company was to be permitted to resume operations 2 to 4 weeks before the audit. (According to the company, the plant needed to be operational for at least three months, before it could be audited properly.)

Audits and seals of approval

Unfortunately conducting an 'independent audit' does not necessarily mean that community complaints will be heard, let alone addressed. A lot depends on the independence of the auditor, the transparency of its process, and the availability of its conclusions. Unfavourable results of monitoring may easily be omitted from company press releases while favourable findings may be emphasised to persuade the public that it has passed with flying colours.

Who will undertake the latest study and whether it will replace the 'total audit' agreed upon last year remains unclear. An Indonesian company PT Sucofindo, named last year both by environment minister Siregar and Governor Rizal Nurdin denied it would be involved. This company is remembered by environmentalists for altering its report on the levels of pollution it found downstream of the Freeport/Rio Tinto mine in West Papua. According to one report, Sucofindo was responsible for the original environmental impact assessment for the Indorayon mill.

Other names circulating for the audit agreed last year included Sandwell (Canada) and unnamed companies from Finland, Poland and Germany. One report stated that funds were being sought from the Asian Development Bank.

Whether the result will be any more meaningful than the last audit at Indorayon is anyone's guess. In 1995 US-based Labat Anderson Inc. carried out an environmental and health audit on the Indorayon plant, and gave the company the all clear. The same year the company was awarded the ISO 9002 certificate by Swiss-based SGS and says it expects to receive the ISO 14001 certification for environmental management systems this year. The Indonesian government's own ranking scheme has awarded the company a "blue" rating under the Clean Rivers Programme, most recently in 1998.

If a 'total audit' is undertaken, this ought to make a difference. This would mean it included environmental, health and social impacts; it would be paid for by the government not the company and local people's views would be properly canvassed.

What makes it less likely to succeed, whatever form the audit or study takes, is the fact that the Habibie government cannot be considered neutral and that the present tension and climate of fear in the Porsea area means that views cannot be freely expressed without fear of intimidation or reprisal.

There is also the question of the government's commitment to funding the audit. According to Indorayon's finance director David Pile, an audit team was previously appointed but never began its work due to government delays in paying a deposit.

During protests against this decision at least two people were killed and hundreds more were injured. Houses belonging to pro-Indorayon people were burned down or damaged and six logging trucks were destroyed.

By the New Year, there was still no news of the audit and local people began to see it as a trick to keep them quiet while operations at the mill went on as normal. The mill was continuing to belch out its foul-smelling fumes and river-polluting sludge.

There have been more, serious incidences of violence at the mill, resulting in the detention and alleged torture of a number of local people. In November villagers rioted in Porsea with hundreds of people burning workers houses, destroying logging trucks, shops, cafes, and houses belonging to government officials. At least four people were shot by Brimob anti-riot police; one, a twenty year old student, fatally. The unrest led to the arrest of dozens of people. By mid-January 8 of these people had been released but were not allowed to leave the town of Porsea. Two of them were reported to be school pupils. Witnesses reported that some of those held had been tortured and that detainees were usually taken to the mill before going to the police station. "Here they are beaten up by people including PT IIU staff." (SiaR 13/1/99) There were also violent clashes between demonstrators and security forces in the provincial capital of Medan and the town of Tarutung.

A chemical spill from an Indorayon truck in December did not help ease any tension. The accident happened in the early hours of December 30th near the village of Parpatulaan, about 10 km from the mill-site. The truck came off the road, emptying its load of chemicals into rice fields irrigated by the river Aek Mandosi. Fish kills resulted and compensation was paid by the company, which local fish farmers claim is far from adequate.

In December, thousands of local people tried to occupy the mill site following the shooting of a youth who was retrieving a volleyball from the road when an Indorayon truck was passing. The security personnel escorting the truck apparently thought he was about to attack the truck. During the protests which followed, another four people were shot by Brimob and fourteen others were detained. The police used rubber bullets and tear gas to break up the occupation attempt.

On January 9th local protesters blockaded the road used by trucks bringing logs to the mill near Balige village. They were protesting against a shooting incident involving the security forces accompanying the logging trucks to the pulp plant. The road was closed for 10 hours by obstacles including burning tyres. A local person told the SiaR news service that since the violence in November the level of security had been stepped up from one police guard per truck to one pick-up full of police for each truck.

By January 25th the local legislature or DPRD had lost patience with the company. At a meeting with Indorayon representatives Maratua Simanjuntak, a member of the local parliament, accused the company of breaking its agreement with the government. She said the people of Porsea and Balige were quite justified in feeling angry and cheated since the plant had restarted operations before the audit team had even been agreed.

On January 30th, around five thousand people, led by Christian and Muslim clerics, walked 5 km along the Trans-Sumatran highway and blocked the road leading to the mill site, singing Batak songs and shouting "close Indorayon!" In Porsea tens of thousands of residents took to the streets to demand the closure of the plant. The following week there was a similar mass protest supported by high school and university students.

There has been protest in the capital too. In February dozens of Batak professionals living in Jakarta, members of Bona Pasogit Forum, held a protest outside the headquarters of the Raja Garuda Mas Group, owners of Indorayon, in Jakarta. They said the mill should be shut down immediately because it was a disaster for local people.

Along with the protests, the violence and intimidation by the security forces continued. A chronology by WALHI North Sumatra describes how all the adult men were forced to flee their homes when army and police teams raided three villages in March.

Divided opinion

Indorayon was Indonesia's first big environmental cause célèbre when, in 1988 WALHI took the company to court on pollution charges. The case was unsuccessful, but served to bring the problems of industrial pollution into the public arena and established the right of NGOs to take court action against a company and members of the government.

Eleven years on, the issue is dividing opinion within the government. Many, like head of the country's investment co-ordinating body Hamzah Haz, fear that closing the Indorayon mill will put off potential foreign investors and worsen an investment climate already reeling from the impact of the economic crisis and post-Suharto political uncertainties. This point was used by the company to persuade the government to reopen the mill in October. In a letter to Habibie and North Sumatra governor Rizal Nurdin, Indorayon warned of the "negative impact" on investor confidence in Indonesia.

The same month, to the consternation of Indorayon, Environment Minister Panangian Siregar announced that the mill should be relocated. In December he said the government had no choice but to close it down altogether. "Indorayon has caused damage, destruction and loss to the local community. What does foreign exchange mean and employment for thousands mean if the factory hurts millions of people?" (Asiaweek 8/11/98)

Deforestation and Lake Toba

Lake Toba, a huge volcano crater lake, is important in the culture and mythology of the local Batak people. It is also the region's main tourist attraction. It is not downstream of the Indorayon mill but the forests which feed the mill are around its shores.

The area of the lake has been decreasing in recent years, as the effects of deforestation and drought take their toll. Indorayon says its own impact is minimal since it has cleared only 4% of around 700,000 hectares of forests in North Sumatra province. Company President Herbun Darlin denied accusations of massive deforestation during a January hearing with the provincial legislature in Medan. As reported in the Jakarta Post, he claimed that the company had replanted 43,252 ha of forest, leaving only 26,814 of denuded land for which the company could be held responsible. [It is clearly a matter of opinion as to what constitutes "massive deforestation".] The total Indorayon concession is 269,000 hectares. [Other figures quoted in a company press release state that Indorayon's concessions account for 2.1% of the total Lake Toba catchment area or around 7,900 hectares out of a total of 369,000 hectares that the mill uses for its operations. Newswire 6/10/98]

According to Environment Minister Siregar, of the 239 rivers that used to flow into the lake, only 97 are still functioning. He points to fewer fish and cattle for the local communities and deteriorating health and IQ levels among local children.

According to company reforestation chief Makmur, not only Indorayon, but also the nearby aluminium smelters have contributed to the fall in the lake's water level. He says that PT Indonesia Asahan Aluminium has dredged the Asahan river to ensure an adequate water supply for the hydroelectric plant which powers its smelter. (Jakarta Post 17/1/99, 27/1/99)

In return, Asahan Aluminium holds Indorayon responsible for the drop in the water level of Lake Toba.


The company has also defended its position by emphasising the employment benefits it brings to this rural community. Around 6,000 people work for the company plus a further 2,000 full-time contractors. According to company deputy general manager and factory manager Rusman, around 60% of the staff are Batak. The company also claims that 90% of workers come from local communities [presumably including other ethnic groups.]

In October around two thousand Indorayon workers staged a sit-in at the North Sumatra Governor's office in Medan, demanding that their jobs be protected.

This signalled the direction the conflict would take in later months, dividing the community into pro-and anti-Indorayon camps. According to local resident J. Gurning, the company has eroded local Batak culture and has caused division in the community, even within families. What is termed "horizontal" conflict, where communities are turned against each other, is becoming increasingly prevalent in many parts of the country. Here, as in other conflicts, the hand of the security forces in instigating unrest is suspected. (See also separate item, p 4.)

But, whatever the acrimony between the two sides, the fact remains that Indorayon itself is the root cause of the recent violence in North Sumatra. If it had not blighted the local environment and brought so much suffering to local communities, the violence would not have happened. At the same time, the failure of the Indonesian government to protect its people is also central. The main development imperative under Suharto was to make more money for the Jakarta-based elite. As with many other industrial projects in Sumatra and on other resource rich islands, almost all of the government revenues flowed to Jakarta. According to Rusman, a paltry Rp 1 billion (around US $100,000) is paid to the local government while Rp 54 billion ($5.4 million) goes to the central government. How far this will change under new legislation which purports to enhance regional control over resources, remains to be seen.

The company is both defiant and conciliatory in its response to the protests. It points to its modern waste treatment facilities and provisions for the local community which include jobs, "skills training" and a school accommodating 1,000 pupils in the town of Porsea. In a tacit admission of past failure, Rusman says Indorayon will make substantial changes and fix any damage. But his promises to recruit more local employees, increase contributions to local development programmes, and carry out reforestation around Lake Toba to ensure water supplies may not be enough to convince a people who have developed a deep-seated mistrust of anything the company says.

APRIL to spin off Indorayon

In January shareholders of Indorayon's Singapore-based parent company, Asia Pacific Resource International Holdings Ltd (APRIL) voted to divest its 62% stake in the company to give Indorayon "more flexibility in its day-to-day operations" and to separate APRIL's pulp and paper operations from Indorayon's viscose business. Company press releases did not mention whether or not any damage to APRIL's international reputation caused by the protests, was a factor in the decision. APRIL has close connections with Finnish paper company UPM Kymmene. European NGOs have been very critical of UPM Kymmene for its share swap deal with APRIL due to the poor social and environmental record of Indorayon and its sister mill, Riau Andalan. (See DTE 38 and FoE Finland's website:

There may also be financial considerations: the company says it lost around US $20 million a month during the shut-down last year and its debt now totals US $360 million. But Indorayon's finance director David Pile insists that a permanent closure of the plant would make no sense. "Even with current high interest rates and low pulp prices, this business makes money."

Indorayon will remain under the control of the Tanoto family (51%) who hold a controlling stake in APRIL. The company is traded on the Jakarta and Surabaya stock exchanges while APRIL is listed on the New York stock exchange. Apart from the Tanotos, shares in Indorayon are held by the investing public, co-operatives and several foreign (including Finnish) financial institutions. Indorayon also owns a rayon plant in Finland.

Sources: WALHI North Sumatra, Statement on the temporary closure of PT IIU...23/3/99; Suara Pembaruan 18/2/99; SiaR 10/2/99; AP 30/1/99, 19/3/99; Jakarta Post 21/1/99, 27/1/99; 28/11/98; Media 25/1/99; SiaR 13/1/99, 25/12/98, 1/2/99; AFP 31/1/99; Waspada 7/12/98; Antara 19/3/99; Asiaweek 8/11/98; Dow Jones 13/12/98, 19/3/99; Newswire 6/10/98)

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