Free trade set amid protection talk

Free trade set amid protection talk

JAKARTA (JP): The government continues to brush aside debate
over the proposed tariff protection for a US$1.7 billion olefin
plant, but has reaffirmed its determination to implement a free
trade system.

"We have discussed with the President our preparations for
free trade as called for by the Bogor Declaration of APEC leaders
and for a new multilateral trading system under the World Trade
Organization (WTO) treaty," Coordinating Minister of Industry and
Trade Hartarto told reporters after a meeting with President
Soeharto yesterday.

Hartarto was accompanied by Minister of Trade Satrio B.
Joedono, Minister of Industry Tunky Ariwibowo and Minister/State
Secretary Moerdiono.

The Bogor Declaration, drafted by Indonesia, was adopted by
the leaders of the 18 member economies of the Asia Pacific
Economic Cooperation (APEC) forum in November.

The Declaration, although legally non-binding, aims to create
the largest free trade zone in the world. It stipulates that its
developed member economies members should adopt free and open
trade and investment by 2010 and the emerging ones by 2020.

The APEC members are scheduled to hold another forum in Osaka,
Japan, next November.

Indonesia also signed and ratified the WTO treaty last year.
The treaty stipulated that signatories must lower tariffs and
eventually abolish all non-tariff barriers by early next century.

"We hope to reach a decision in Osaka on how the Bogor
Declaration is to be implemented," Hartarto said.

Hartarto said that Indonesia must take full advantage when the
developed members of APEC fully liberalize their trade and
investment in 2010.

"By that time there will be a faster restructuring of the
developed nations' economies. This will prompt them to increase
their investments in the emerging economies including Indonesia,"
the minister added.

The country registered a record level of approved foreign
investment in 1994 of US$23.7 billion, more than double the 1993
level.

Chandra Asri

Hartarto, who was recently appointed as the chairman of the
country's tariff task force, declined yesterday to elaborate on
the status of the proposed tariff protection for PT Chandra Asri
Petrochemical Center's olefin plant.

"We are still assessing the proposal," he said.

Hartarto, while stating that Chandra Asri executives had not
formally submitted their proposal for protection, said that
"protection is possible as long as it does not adversely affect
the downstream industries."

Debates on protectionism surfaced when Chandra Asri executives
urged the House of Representatives in early December to support
their proposal for the imposition of up to 40 percent import
tariffs on olefin products, the basic materials for plastics.

Chandra Asri is controlled by the Napan Group, Barito Pacific
Group and Bimantara Group, all of which are believed to have
strong political connections.

Advocates of the olefin project have argued that the proposed
protection will not harm downstream industries and is consistent
with Indonesia's free trade commitments.

While it is not clear whether tariff protection had been
accounted for in the feasibility study on the olefin project,
proponents of Chandra Asri have called the project a "measurement
of national pride."

The controversy over the proposed protection intensified when
Minister of Finance Mar'ie Muhammad, who opposed tariff
protection for the olefin project, was later replaced by
Hartarto.

The olefin project, financed mostly by foreign loans, has
become a controversial issue ever since its pre-development
stage. The government, anxious about the widening current account
deficit, ordered in 1991 that all major projects, including the
Chandra Asri olefin project, be shelved.

The project was, however, revived in 1992 after it was
restructured into a wholly foreign-owned venture, thereby ducking
legal restrictions on overseas borrowings by Indonesian
companies. (hdj)