Govt asked to lower tariffs on plastics raw materials
JAKARTA (JP): The Association of Indonesian Plastic Producers called on the government yesterday to gradually lift tariff protection on polyethylene and polypropylene.
"The protection given to polyethylene and polypropylene makes them more expensive on the domestic market because the international prices of the two products keeps on rising," said Chairman Sarbini said at the association's congress, which reelected him for a further four-year term.
Polyethylene and polypropylene are used in the production of plastics, synthetic fiber, tires, pesticides, synthetic rubber, and detergents.
The government continues to impose a 20 percent surcharge on top of a 20 percent duty on imports of polyethylene and polypropylene. The tariffs on the two products were not touched by the deregulatory measures announced by the government on May 23.
Prices
Sarbini said international prices of polyethylene and polypropylene had increased by as much as 60 percent since early last year. He declined, however, to say what their current prices were.
He said that, ideally, the surcharge on polyethylene and polypropylene would not be more than five percent. He argued that the function of surcharges was simply to prevent dumping practices on the part of foreign producers.
"Dumping practices did occur until 1993. However, because the international prices of polyethylene and polypropylene have been increasing since 1994, those practices have ceased," Sarbini said.
He said that if the tariff on the two products was not lowered the plastic manufacturers who use them as their raw materials would face increasingly serious problems.
"Plastic producers have to raise the prices of their products whenever the prices of raw materials increase. However, it cannot always go that way because the market is not always ready to absorb the products. And, therefore, they have to forego a portion of their profits or even go out of business," he said.
Contradiction
Sarbini said the protection of the two products was inconsistent with the government's policy on tariff harmonization, under which the government is reducing tariffs on upstream industrial products and higher tariffs on downstream products.
Minister of Industry Tunky Ariwibowo acknowledged in his written address to yesterday's meeting that the tariff structure which applied to the plastics industry was not yet harmonious.
Separately, Tunky said recently that the government was still working on the tariff levels of some petrochemical products, especially those which were not dealt with in the May 23 tariff deregulation package.
Director General of Chemical Industries Sujata, who opened the proceedings yesterday, said the 40 percent protection level given to polyethylene and polypropylene would be gradually reduced to 10 percent by the year 2003, when free trade among the countries of the Association of Southeast Asian Nations is due to come into effect.
Commitment
"We are committed to abiding by international agreements to which Indonesia is a signatory. So, there is no reason not to reduce the level of protection given to the two products," Sujata said.
According to PT Tri Polyta Indonesia, domestic demand for polypropylene resins in 1993 stood at over 330,000 tons, of which almost 50 percent was met by that company, which is listed on the Nasdaq stock exchange in the United States.
Sarbini thanked the government yesterday for not increasing the import duties on ethylene and propylene -- raw materials for the production of polyethylene and polypropylene -- from their current level of five percent.
However, some analysts are predicting that the government will increase tariffs on ethylene and propylene in response to a request from the politically well-connected company PT Chandra Asri, the country's only olefin producer. Last year Chandra Asri asked the House of Representatives to impose tariffs of between 35 percent and 40 percent on imports of olefin products -- mainly ethylene and propylene. (rid)