Mixed reactions greet Soeharto's protection views<\/p>\n
JAKARTA (JP): Entrepreneurs, legislators and an economist gave
\nmixed reactions yesterday to President Soeharto's views on
\nprotection for upstream industries.<\/p>\n
Soeharto said in his annual budgetary speech before the House
\nof Representatives here yesterday that tariff protection can be
\ngiven to upstream industries as long as certain conditions are
\nmet.<\/p>\n
First, protection may be given for a limited period of time
\nonly and must be gradually reduced. \"The sooner the better,\"
\nSoeharto added.<\/p>\n
Secondly, protection must not be contrary to any international
\nagreements to which Indonesia is party, such as the General
\nAgreement on Tariffs and Trade, and those signed by the
\nAssociation of Southeast Asian Nations and by the Asia Pacific
\nEconomic Cooperation forum.<\/p>\n
Finally, the level of protection must not stifle or hinder the
\ngrowth of companies operating in downstream industries, the
\nPresident said.<\/p>\n
\"Excessive protection will result in higher production costs
\nfor downstream industries and, consequently, remove their
\ncompetitive edge,\" Soeharto warned, while unveiling the draft
\nstate budget for 1995-1996 fiscal year which begins in April.<\/p>\n
He called on the public not to prolong debate on protection.
\nProtection has become a widely-discussed issue during these last
\nfew months after the PT Chandra Asri Petrochemical Center, the
\ncountry's first olefin plant, asked for the government's
\nprotection against imports.<\/p>\n
However, Soeharto made no explicit mention of Chandra Asri.<\/p>\n
Acceptable<\/p>\n
Sharing Soeharto's view, entrepreneurs Sukamdani S.
\nGitosardjono and Tanri Abeng noted yesterday that protection is
\nacceptable as long as it benefits the country.<\/p>\n
Tanri of the Bakrie Group specified that protection should not
\nbe awarded on the basis of political considerations, while
\nSukamdani of the Sahid Group proposed that the maximum time limit
\nfor protection be set at 10 years.<\/p>\n
Meanwhile, legislators Hamzah Haz of the Moslem-based United
\nDevelopment Party, and Tadjudin Noer Said and Bambang Warih
\nKusumah, both of the ruling Golkar faction, said they could
\naccept any level of protection for any upstream industry as long
\nas it is given transparently and meets the conditions set by
\nPresident Soeharto.<\/p>\n
Tadjudin, however, asked the government to consult with the
\nHouse before opting to protect any industry. \"Although the final
\ndecision rests with the government, it would be wise for the
\ngovernment to consult with the House first\", he said.<\/p>\n
He noted that the presence of representatives of Chandra Asri
\nat a hearing with the House's commission for manufacturing and
\nenergy industries last month was a sign of growing transparency.<\/p>\n
At the hearing, Chandra Asri's Peter F. Gontha proposed that
\nthe government impose a duty of between 35 percent and 40 percent
\non imports of ethylene and propylene, two of the olefin products
\nto be manufactured by his company.<\/p>\n
Gontha acknowledged that the imposition of higher tariffs on
\nolefin products will affect the prices of downstream products but
\nsaid that the \"impact will be small\".<\/p>\n
Tadjudin, a member of the budgetary commission, contended that
\nif the protection was given in the form of import tariffs,
\n\"sooner or later it will hinder the growth of companies in
\ndownstream industries\".<\/p>\n
Instead of tariffs, Tadjudin asked the government to consider
\nother forms of protection, such as subsidies -- if possible -- or
\nmonetary or fiscal support.<\/p>\n
Concurring with Tadjudin, economist Hadi Soesastro queried how
\ntariff protection could be introduced without hurting downstream
\nindustries, as mandated by President Soeharto.<\/p>\n
\"I want to see how possible it is; imposing tariff protection
\nfor Chandra Asri without damaging the competitiveness and
\nefficiency of companies downstream,\" Hadi told The Jakarta Post.<\/p>\n
Hadi, also a director of the Center for Strategic and
\nInternational Studies, asked the government to not even consider
\ngiving protection to Chandra Asri to save it from defaulting on
\nloans.<\/p>\n
\"Chandra Asri's creditors, which are mostly foreign banks,
\nmust have made their own calculations when they decided to extend
\nloans to the company. It's wholly their responsibility, not the
\ngovernment's,\" Hadi argued.<\/p>\n
Chandra Asri's plant represents an investment of US$1.7
\nbillion and is controlled by the Barito Pacific, Napan and
\nBimantara groups. Located in Cilegon, West Java, it is expected
\nto start trial production later this year.<\/p>\n
It will manufacture ethylene and propylene, the intermediate
\npetrochemicals used to make polyethylene and polypropylene, the
\nraw materials for the production of plastics, synthetic fiber,
\ntires, pesticides, synthetic rubber and detergents.(hen\/hdj\/rid)<\/p>",
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