It is a well known ‘secret’ that Sukanto Tanoto is connected in business with the Suharto family and also Lim Sioe Liong.
How does it started?
Sukanto Tanoto was a business partner of Lim Lioe Liong.
In the 1960s Japan financed pine plantations in the Lake Toba area with an
understanding that a joint venture company would be established to export pulp
to Japan. A decade later, Indonesia’s President Soeharto contacted Liem Sioe
Liong, head of the Salim Group, to find an entrepreneur willing to undertake
the venture. Liem recommended his friend, Sukanto Tanoto, ‘king of the
plywood industry’. Tanoto’s younger brother, Polar, ‘was an engineer [with]
experience in the pulp industry’ (Polar Tanoto got an engineering degree from Taiwan). The Tanotos’ PT Raja Garuda
Mas, became holding company for the new PT Inti Indorayon Utama (and
later, its new sister company, PT Riau Andalan Pulp and Paper, discussed
Indorayon was originally a ‘joint venture of Canadian, Korean, and Indonesian partners backed by the president’s oldest son’. In 1992, Indorayon’s 405 million shares were held as follows:
PT Adimitra Rayapratama 102 million shares (25%)
Sukanto Tanoto 98 million shares (24%)
PT Indorayonesia Lestari 75 million shares (19%)
Other public corporations 43 million shares (11%)
Scan Fiber Co., SA 37.5 million shares (9%)
Cellulosa Int. SA 25 million shares (6%)
Polar Yanto Tanoto 23.5 million shares (6%)
Tanoto has close connection with, Tirtamas (Hashim Djojohadikusumo, brother of Prabowo, and his sister-in-law, Titiek Prabowo), Marison Nusantara (Akbar Tanjung).
All the shares in Tantono companies are overlapped with Salim and Suharto Family’s
Probosutedjo, a younger stepbrother of Soeharto was known in the late 1970s
to be close to the Raja Garuda Mas (RGM) Group, a business conglomerate
active in forestry, paper & pulp, palm oil manufacturing and coal mining in
Indonesia (North Sumatra, Riau & South Kalimantan) and Malaysia (Riau).
RGM also has several overlapping companies with the Salim Group, in which
the Suharto family are represented by Sudwikatmono, Suharto’s cousin, and
two of the Suharto siblings, Sigit Harjojudanto and Siti Haryanti Rukmana
(Tutut), who are both co-shareholders of Salim’s financial flagship, Bank
Central Asia. It also has some overlapping shares with the family of Golkar
chairman, Akbar Tanjung, through the Tanjung family’s business vehicle, PT
Sandwell, from Canada, and Jaakko Po¨yry, from Finland, conducted initial
engineering studies for Indorayon in 1983–84. The Government of Indonesia
arranged funding through national banks. Road construction began in 1986, as
did establishment of timber plantations on 236,000 ha of forestry concessions
(HPH). These actions were taken ‘without prior consultation with the
community or any local groups’ (Tanjung 1992). Soon after, a landslide,
blamed on Indorayon’s poor engineering of logging roads, buried a village.
Construction proceeded with government protection.6
Trial operations began at the Indorayon mill in May 1988. Three months
later, the mill’s aeration lagoon burst, sending raw chemical waste into the
Asahan River (Sungai Asahan), and into the water supply for villages and
industries downstream. In December, WALHI, and YLBH sued Indorayon and
government officials, alleging the company’s failure to conduct an
environmental impact assessment and the government’s failure to enforce
new environmental regulations. Although ultimately losing the suit, WALHI
and YLBH set an important legal precedent, establishing Indonesian NGOs’
standing to sue corporations and government officials (Moniaga, 1993; Fox,
1994; Eldridge, 1995).
The most widely publicised conflict between Indorayon and its neighbours
occurred in 1989, concerning the company’s right to plant eucalyptus seedlings
in its concession area. Angered at Indorayon’s incursion into traditional cattle
grazing areas, Batak villagers ‘systematically [cut] down some 16,000 trees
planted by the company’ (Eldridge, 1995:116–7). The company sought and
obtained military protection for its forest operations. Ten village women were
jailed on charges related to the protest. Legal proceedings ensued (Simbolon,
1991; Sayadi et al., 1992).
In May 1989, students in Medan held a large demonstration in support of the
communities in conflict with Indorayon. Church activists,7 environmentalists
and others called on the Government of Indonesia to force Indorayon to respect
community rights; protesters also called for a halt to further pulp mill
development throughout the country.
Indorayon’s management had different ideas, however. The firm went public
on the Jakarta Stock Exchange in May 1990 to finance expansion. With 10
million Finnmarks from government-run Export Credit Ltd., Jaakko Po¨yry
helped Indorayon develop a new plantation programme (Ulvila, 1994). In
support of the company, the Government of Indonesia cracked down on unrest
in the Lake Toba area. The Study Group for the Development of Community
Initiative (KSPPM),8 a church-organised NGO involved in the Indorayon
conflict, was ordered to cease operations for two months (Jones 1994). A
congress by the ‘trouble-making’ church was cancelled. Lawsuits wended their
way through the courts. Indorayon’s expansion proceeded.
Students and environmentalists persisted in efforts to bring attention to the
Indorayon mill’s social and environmental impacts. Activists in Medan
established a new NGO to examine pulp industry development in Indonesia.
WALHI staff wrote lengthy articles about the company in the Indonesian and
English editions of the network’s magazine (cf. WALHI 1992b; WALHI
1992a).9 Separately, human rights advocates documented government efforts
to silence Batak church activists (see Eldridge, 1995; Jones, 1994).
Then, on November 5, 1993, a boiler exploded at Indorayon, showering the
countryside with chemicals. Scared of ‘another Bhopal’ – of chemicals
contaminating themselves, their children, rice fields, and livestock – ten
thousand people reportedly left the area by any means at their disposal. ‘People
walked until they could walk no more; if they had access to a vehicle, they
drove until they ran out of gas’, one local resident recounted.
Again, community activists and their Medan-based supporters demanded
government action against Indorayon. NGOs documented the company’s
history of industrial accidents and raised serious questions about effects of
chemical exposure (cf. WIM, 1994a). One month later, Sarwono
Kusumaatmadja, new minister of Indonesia’s Environmental Impact
Management Agency (BAPEDAL), shut the mill down until it could be
inspected. After a thorough inspection, Indorayon was allowed to resume
partial operations. The firm was required to submit to an independent
environmental audit, correct any flaws discovered in the audit, and be
reinspected before resuming full operations.10
Attempting to address activists’ more general concerns about pulp industry
development in Indonesia following the Indorayon boiler explosion, Minister
Sarwono went even further. An engineer by training and a former Islamic
student activist, he declared that, henceforth, any new pulp mill built in
Indonesia would have to use the more environmentally friendly elementally
chlorine-free (ECF) pulping technology (World Paper, 1994a).11 ‘We want
your investments’, he told delegates at a UNIDO co-sponsored conference on
clean production, ‘but don’t come to Indonesia expecting to build factories
with anything less [environmentally friendly] than what you are using in your
own countries’ (Kusumaatmadja, 1994).