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)
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