Government to cut petrochemical tariffs
Government to cut petrochemical tariffs
JAKARTA (JP): The government plans to cut import tariffs on
several chemical and petrochemical products by Nov. 10 to boost
the local downstream chemical industry, Minister of Trade and
Industry Rahardi Ramelan said yesterday.
The tariff cut would target the current high import duties on
certain petrochemical products designed to protect the country's
upstream petrochemical industry, he told a seminar on the
chemical industry.
"The government will decide on the tariff harmonization before
the special session of the People's Consultative Assembly." The
session is also scheduled for Nov. 10.
Rahardi admitted there were inconsistencies in the current
import tariffs for petrochemical products.
Tariffs on several upstream and midstream products were higher
than products for the downstream industries, he said.
He identified the products as ethylene, propylene, styrenes,
polyethylene, polypropylene, polystyrene and polyvinyl chloride.
Import duties on those petrochemical products are currently at
up to 35 percent.
"This isn't healthy, especially because the tariffs were set
when our currency exchange rate was around Rp 2,300 against the
dollar," he said.
The rupiah has dropped in value by 80 percent against the U.S.
dollar since July last year.
Rahardi said the high cost for upstream products had pushed up
prices of prepackaged consumer goods.
At yesterday's seminar, economist Faisal Basri urged the
government to abandon import tariffs altogether because they were
no longer relevant to the crisis-hit economy.
"The rupiah's collapse automatically means import tariffs rose
by over 100 percent," he said.
Tariffs only gave protection to certain companies, such as PT
Chandra Asri Petrochemical Center, he said.
Chandra Asri, which produces ethylene, propylene and
polyethylene, is partly and indirectly owned by former president
Soeharto's son Bambang Trihatmodjo.
Currently, smaller companies must buy from the local upstream
industries at a very high cost, Faisal said.
Prices should be given to the market forces, and the
government must instead provide subsidies on facilities, which
have social benefits, such as the seaport of plant facilities, he
said.
Peter F. Gontha, the newly appointed president of Chandra
Asri, said the consequence of eliminating protection for Chandra
Asri and other petrochemical companies would be the relinquishing
of development of the petrochemical industry in the country.
"If they want to lift them now, it's ok, but that means
everyone must carry the consequences."
Responding to Faisal's charge that Chandra Asri was involved
in graft practices, Peter said the petrochemical industry had
been much too politicized by the public.
"I am a crony capitalist, because I have been working with
Bambang for 12 years," he said. He added that he had nothing to
do with nepotism and corruption.
He said Chandra Asri would be better off to halt all
production now, except for that of polyethylene, because the
price of ethylene was no longer sufficient to cover purchase of
its raw material naptha.
If the company shut down, local downstream petrochemical
companies which bought products from Chandra Asri would lose
their supplies, he added.
Also speaking at the seminar was Habil Marati, the president
of chemical firm PT Batavindo Kridanusa, Samto Utomo, a director
of the state-owned oil and gas firm PT Pertamina, and Benny
Soetrisno, head of the Indonesian Textile Association. (das)