Economists question propylene protection
Economists question propylene protection
JAKARTA (JP): Economists have questioned the government's policy, announced on Wednesday, of increasing the protection of propylene producers at a time when it is trying hard to improve the performance of the country's exports.
Didik J. Rachbini, chairman of the Institute for the Development of Economics and Finance, called it another example of the government's inconsistency in economic policies.
"This policy is irrational and demonstrates inconsistencies on the part of the government. And such an irrational policy can only disturb the on-going process targeting better business practices," Didik told The Jakarta Post yesterday.
The government promised last September that it would not protect PT Chandra Asri Petrochemical Center, a propylene producer. However, it has protected it by introducing a 20 percent surcharge on propylene imports, on top of the existing 5 percent duty.
Surcharge
The surcharge is applicable on shipments after Feb. 2 and is effective until June 30. The government has hinted that it may extend the surcharge after June 30.
Christianto Wibisono, chairman of the Indonesian Business Data Center, said the policy indicates the government's confusion on what measures to take to strengthen the country's industrial structure.
The government currently wants to develop the upstream industry, which is relatively behind other countries. However, when it decides on protection for the upstream industry, it directly affects the competitiveness of companies in the downstream level.
"If the competitiveness of companies in the downstream level is affected, it will endanger the performance of our exports. So, what does the government want? Protecting the upstream industry or improving exports," Christianto said.
He suggested that the government give a definite time frame for how long the protection extended to the industry is considered necessary.
Concurring with Christianto's view, Didik said protection with a transparent time frame would be acceptable. However, he questioned if protection can really be used to improve the country's industrial structure.
"What we can see so far is that many of those asking for the government's protection are just rent-seekers. Therefore, the people don't like protection because they have to make sacrifices without getting any rewards," Didik said.
Erie Soekardja, chairman of the House of Representatives' manufacturing, mining and energy commission, explained that introducing protection measures to strengthen any industry is legitimate under existing industrial law.
Development
He said he could understand the government's move to protect the propylene manufacturers as the country needs to strengthen its upstream industry to support the development of the downstream industry.
"Before introducing the surcharge, the government must have considered all the factors. Of course, we (the commission) will ask for clarification on the matter in our next hearing session with the government," Erie told the Post.
When disclosing the surcharge, Minister of Trade and Industry Tunky Ariwibowo contended that it would not affect the production costs of companies in the downstream level because the protection on polypropylene remains unchanged.
Propylene is the raw material for the production of polypropylene which is used in the production of plastics. Currently imports of polypropylene are subject to a 20 percent import tariff and another 20 percent surcharge.
Didik, however, questioned Tunky's statement, saying that the additional surcharge on propylene will eventually affect companies in the intermediary and downstream levels.
"There is bound to be an impact. However, I don't know how much the impact will be. It will need special research to measure it," Didik said. (rid)
Editorial -- Page 4