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)