Footwear producers lament higher raw material prices

Footwear producers lament higher raw material prices

JAKARTA (JP): Manufacturers of plastic sandals in East Java have been complaining about the rising price of polypropylene, which has increased by up to 10 percent over the last few months.

The manufacturers contend that higher prices for polypropylene, a raw material used to make plastic footwear, are bound to lead to declining sales.

Chairman of the East Java chapter of the Federation of Indonesian Footwear Manufacturers, Ari Soetrisno, was quoted by the Jawa Pos daily as saying that the rising prices of polypropylene had a significant impact on members of the federation, which consists mostly of home industries and small- scale factories.

However, Ari said, because home industries use finished raw materials -- which contain materials other than polypropylene -- their higher prices cannot simply be blamed on costlier polypropylene.

"Because propylene has been blended with other materials before the chemical is sold as an industrial material for footwear companies, the industrial users might not realize that the higher prices they pay for their material was caused by costlier polypropylene," Ari said.

The government earlier this month decided to impose a 20 percent surcharge on propylene imports -- the raw material for polypropylene -- on top of the current five percent duty.

The ruling contradicted the government's earlier statement to not give tariff protection, tax incentives or regulatory protection to PT Chandra Asri Petrochemical Center, the country's first olefin plant.

In 1994, Chandra Asri asked the government for tariff protection against imported olefin products, including propylene. The call sparked vigorous public debate.

Chandra Asri's propylene is used mainly by PT Tri Polyta Indonesia to make polypropylene.

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. The first two groups also control Tri Polyta, a publicly listed company.

Economists have spoken out against the surcharge, saying that the government should not sacrifice the competitiveness of companies at the downstream level by developing -- through protection -- the upstream industry. (pwn)