Chandra Asri gets 25 percent import tariff protection

Chandra Asri gets 25 percent import tariff protection

JAKARTA (JP): The government has made permanent the temporary
protection granted in February to PT Chandra Asri Petrochemical
Center, subject to scheduled tariff cuts.

Minister of Industry and Trade Tunky Ariwibowo confirmed over
the weekend that under a new deregulation package announced last
week, Chandra Asri would now receive permanent protection.

"With the new regulations, PT Chandra Asri must follow the
pattern of the existing tariff reduction scheme, that is, by 2003
its maximum tariff will be 10 percent," Tunky said.

In February, Chandra Asri's ethylene and propylene were given
temporary protection until June 30, with a 20 percent surcharge
on top of the existing 5 percent import tariff on both olefin
products.

According to Finance Minister Decree No. 378/KMK.01/1996,
dated June 4, both ethylene and propylene will be protected by a
25 percent import tariff each. The decree is part of the
government's new reform package.

When announcing the new deregulation package last week,
Minister of Finance Mar'ie Muhammad said the new tariff scheme,
including those on the olefin products, will be affective on July
1.

Tunky confirmed that the finance minister's decree dated June
4 revised two previous finance minister decrees -- Finance
Minister Decree No. 56/KMK.01/1996, dated 2 February, 1996, and
Finance Minister Decree No. 81/KMK.01/1996, dated February 19,
1996 -- which had given tariff and nontariff protection only
until this month.

"It used to be temporary, but with this revised regulation,
ethylene and propylene products will follow the new tariff
reduction scheme," Tunky said, reported Bisnis Indonesia.

Mar'ie said that the definition of surcharge is not found in
the 1995 Customs Law, and therefore, the new package transfers
the existing surcharges to the tariff scheme or eliminates them
altogether.

"However, for a certain number of products, which are
considered necessary to be protected...the existing surcharges
are cumulatively included in the tariff rate," Mar'ie said.

Hail

Economist Christianto Wibisono hailed the government's
decision to include the protection for Chandra Asri in its
gradual tariff reduction scheme.

"Every protection given to a certain sector, such as
petrochemical and automotive sectors, shall follow such a
timetable so that their dependency on such a protection can be
reduced," Christianto told The Jakarta Post on Saturday.

Chandra Asri, with a total investment of US$2 billion, began
operations in May last year with a designed capacity of 510,000
tons of ethylene per annum, 240,000 tons of propylene, 300,000
tons of polyethylene and 230,000 tons of pyrolysis gasoline.

During its first year of operations, the chemical plant
manufactured 322,000 tons of ethylene, 185,000 tons of propylene,
160,000 tons of pyrolysis gasoline and 178,000 tons of
polyethylene.

Chandra Asri procures its condensate feedstock from the
Kangean gas field offshore East Java and naphtha from the Cilacap
oil refinery in Central Java and the Middle East.

Chandra Asri has been rocked by criticism since the company
asked the government's tariff protection for its olefin products
in mid-1994.

Until late last year, government officials, including
ministers Mar'ie Muhammad and Tunky, repeatedly said the
government would neither give tariff protection, tax incentives
nor regulatory protection to Chandra Asri.

Chandra Asri is jointly owned by the Barito Pacific, Bimantara
and Napan groups -- all believed to wield strong political clout
-- and Japan's Marubeni Corp, Toyo Engineering and Showa Denko.
The first two groups also have stakes in PT Tri Polyta Indonesia,
a public company whose shares are listed on the Nasdaq stock
exchange in New York.

Chandra Asri has been selling all of its propylene production
to Tri Polyta, the country's largest producer of polypropylene.

Under the new deregulation measure, the government also made
permanent the temporary protection for polypropylene and
polyethylene.

Imports of both polypropylene and polyethylene are currently
subject to a 20 percent import duty and another 20 percent
surcharge.

Under the finance minister decree dated June 4, both
polypropylene and polyethylene will be protected by a 40 percent
import tariff -- and no more surcharge is imposed.

Olefin products are used for the production of plastic wares.
Domestic demands for olefin products remain high. Last year,
Indonesia imported 349,884 tons of ethylene valued at US$173.43
million, 236,514 tons of propylene at $143.77 million, 200,260
tons of polyethylene at $230 million and 140,260 tons of
polypropylene at $168.48 million. (rid)