Free trade is a must: Soeharto
Free trade is a must: Soeharto
JAKARTA (JP): President Soeharto reaffirmed yesterday
Indonesia's determination to adopt a free trade and investment
system amid a heated controversy over the proposed protection of
a US$1.7 billion olefin project controlled by politically
connected parties.
"We have to do our best to really be ready for free trade in
the future. We cannot afford to be left behind," Soeharto said
in his address at the opening of the 1994 Pacific Conference of
Manufacturing and the 13th congress of the Institute of
Indonesian Engineers here.
The President said: "We have to realize, whether we are ready or
not, the world is moving fast towards a free trade system."
He also pointed out that Indonesia expressed its free trade and
investment commitments at last month's meeting of the leaders
grouped in the Asia Pacific Economic Cooperation (APEC) forum. The
conference concluded with the determination to create the biggest
free trade area in the world by 2020.
Debate on protectionism surfaced when executives of PT Chandra
Asri Petrochemical Center urged the House of Representatives
earlier this month to support their proposal for the imposition of
a duty of between 35 percent and 40 percent on imports of olefin
products, the raw materials for various downstream industries,
which their company will start producing next year.
Chandra Asri is controlled by the Napan Group, Barito Pacific
Group and Bimantara Group.
Warning
On the same occasion yesterday, State Minister for Development
Planning Ginandjar Kartasasmita aired a warning against
protectionism which could raise local production costs and erode
the international competitiveness of Indonesia's industry.
"We have to be very selective in protecting our firms because
such a measure will raise costs for downstream users, which in turn
makes these industries less competitive," Ginandjar said.
"We have to ensure that protection does not constitute a
government subsidy for non-competitive businesses, thus denying
financial resources to the development of the infrastructure,
education and health sectors, which are fundamental to our long-
term success," he said.
"To be successful abroad requires a competitive economy at home,"
added the minister, who also heads the National Development
Planning Board (Bappenas).
Neither Soeharto nor Ginandjar explicitly referred to the Chandra
Asri debate.
Peter F. Gontha, a Chandra Asri executive, has argued that tariff
protection for the olefin project "will not harm downstream
industries, but will benefit them instead".
Despite his assurance, the Indonesian unit of Japan's Teijin
Corp. has declared its opposition to high tariff protection for
Chandra Asri. The unit, which needs petrochemicals to make fiber,
said that if high duties raise its downstream costs, it won't make
any new investments in Indonesia.
The Chandra Asri controversy has already reached the cabinet as
evidenced by the different stances taken by some ministers.
Minister of Finance Mar'ie Muhammad, for instance, has been
quoted as saying that no new industrial projects should receive
protection. On the other hand, State Minister of Investment Sanyoto
Sastrowardoyo was reported to be in favor of the protection for
Chandra Asri.
The debate reached a new intensity last week after Soeharto
reshuffled the country's tariff task force which was formerly
headed by Mar'ie.
The new team now includes Sanyoto and is chaired by Coordinating
Minister for Trade and Industry Hartarto. Neither of the officials
was in the former team.
The finance minister, however, is still included as a vice
chairman in the new lineup. (hdj)