International Business / Spotlight on Indonesia : Turning Over a Green Leaf : Indonesian Firms Cash In on Environmental Awareness

Jakarta businessman Didi Rasyidi has a hot product.

As the sole Indonesian licensee of solar panels from Hawthorne-based Solec International, Rasyidi has found an eager customer in the Indonesian government, which is snapping up the panels to provide a renewable source of power for remote villages that have yet to be reached by the state electric company.

“My dream is . . . in every small town, people could buy a packaged solar system with cash,” said Rasyidi, whose PT Altari company is heading toward $3.5 million in annual sales. But his is not the only firm here dreaming of cashing in on a new environmental awareness.

Indonesia, long considered the bad boy of the international “green” movement, has blossomed into a promising market for environmental goods and services.

Armed with new satellite photos and other disturbing proof of environmental degradation, the government is moving with fresh vigor to rein in the destruction of the nation’s tropical rain forests, protect its coral reefs, cleanse its rivers, utilize renewable energy sources and promote recycling.

In addition to revising environmental regulations, banning the import of toxic waste and clarifying rules on environmental impact studies for new investments, officials are anxious to tap the private sector to get the job done.

“I think it is necessary to introduce sufficient economic motives to protect the environment,” says State Minister for Environment Sarwono Kusumaatmadja. “ . . . People should see a vested interest in preserving and protecting the environment.”

Indonesia’s Environmental Impact Management Agency (BAPEDAL) has obtained $120 million in loan funds from Japan’s Overseas Economic Cooperation Fund to help implement a program to clean up 24 of the nation’s most polluted rivers.

Low-interest loans and technical expertise will be provided to companies in polluting industries as an incentive to add safeguards such as waste water treatment plants.

Some companies are proceeding without government help. PT Texmaco Jaya, one of Indonesia’s largest textile producers, plans to build a $1-million treatment plant at one of its factories.

The plant, part of a $450-million expansion, will complement an “aerated lagoon” already in operation at Texmaco’s West Java polyester factory, which churns out water clean enough to irrigate rice fields downstream along the Citarum River. At least two other textile factories in the area have also begun constructing treatment plants.

“The industry is concerned now,” said Yani Witjaksono, president of Yayasan Bina Usaha Lingkungan, a foundation that provides funding and technical assistance to environmental entrepreneurs.

“The impact of pollution does not only affect the community, but it affects other industries as well. In east Java, for example, the waste from the wood industry can destroy a shrimp farm,” Witjaksono said.

Even the family of President Suharto has gotten involved in anti-pollution efforts. In May, PT Bimantara Citra, a conglomerate controlled by one of the president’s sons, helped launched Indonesia’s first hazardous and toxic waste disposal facility, a joint venture with U.S.-based Waste Management Inc.

“I think we’re doing quite well, said Patrick Heininger, president of PT Waste Management Indonesia.

The disposal facility has 55 customers--at least half of them companies with foreign partners. Customers represent the chemicals, pharmaceuticals, fertilizer and pesticide industries, among others.

The disposal plant needs some 200 customers for the plant, which will ultimately cost $100 million, to break even.

Heininger said the company will offer industry relatively inexpensive disposal services. But to dissuade companies from turning to an even cheaper disposal outlet--the river--local officials in the industrial zones ringing Jakarta have invited factory managers to industry-specific seminars on safe disposal.

The campaign will eventually be expanded to other areas of the country where three more toxic waste facilities are planned.

In recognition of Indonesia’s traditionally weak and corrupt legal system, the government plans to supplement legal measures with the tool of public exposure of the “good guys and bad guys.”

BAPEDAL plans to begin publicizing ratings of companies according to how responsible they are to the environment. To turn up he heat, it also plans to publicize information showing whether support banks and other financial institutions back responsible or irresponsible companies.

PT Freeport Indonesia, the giant copper- and gold-mining concern long targeted by environmentalists for allegedly irresponsible practices in the Irian Jaya province, promptly volunteered to be rated. “We think we’re doing the right thing and have nothing to hide,” Executive Vice President Paul Murphy said.

In coming months, Freeport will undergo an environmental audit, conducted by an outside firm chosen with government consultation. Sarwono has proposed that other major companies submit to voluntary audits every five years.

Seasoned observers here caution that Indonesia’s environmental efforts may be limited. For the most part, the country’s abundant national resources remain in the hands of an elite few, long cushioned from domestic and international criticism by political connections. And for all its professed good intentions, the government has relatively few resources to police this immense archipelago.

But overseas financial institutions may prove of assistance to the government. As Indonesian companies go offshore for capital, their environmental records are coming under increasing scrutiny.

Earlier this year, for example, PT Indah Kiat was fined for environmental violations at its pulp and paper plant in Sumatra. The parent firm, Sinar Mas Group, faced sharp questions from its American bankers.

Sinar Mas replied that an intermediary was responsible for the violation. “We have to practice good environmental management, insisted PT Indah Kiat’s public relations officer, Purnama Kusumaningrat.

“We’re under pressure,” he said, noting that the company has dropped chlorine bleaching in favor of a less harmful method.