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)