Thu, 25 Aug 1994

Govt defends protection of PT Chandra Asri

JAKARTA (JP): State Minister for Investment Sanyoto Sastrowardoyo defended the government's plan to protect PT Chandra Asri, the country's first olefin plant, against imports yesterday.

Sanyoto said that an infant industrial plant, such as that owned by Chandra Asri, still needs the government's protection to allow it recoup its huge investment.

Chandra Asri's plant, constructed in Cilegon of West Java with an investment of US$1.7 billion, is scheduled to start operating next year. The company is controlled by Prayogo Pangestu, a timber tycoon.

"Upstream chemical plants encounter greater difficulties competing with advanced plants as the return on their investments normally take a longer period of time," he told newsmen following the opening of the first meeting of APB Net, an APEC business forum.

The meeting of the business forum, established by national business organizations of the 17-member Asia Pacific Economic Cooperation (APEC) last year, will end today. The meeting is attended by around 140 business executives of the organization's member countries.

Sanyoto said the government has yet to decide how high the tariff to be imposed on imported olefin products.

He stressed that the protection would not be exclusive as other upstream chemical producers could also receive a similar treatment.


"It will only be by chance if Chandra Asri is the first to receive this kind of protection," he said as an indirect response to the criticism made by a number of noted economists on the government's exclusive protection to that company.

Sanyoto argued that the temporary protection given to Chandra Asri is not against the free trade principles stipulated in the General Agreement on Tariffs and Trade (GATT).

"Article 18 of GATT allows developing countries to protect their infant industries," he said, adding that the protection would not hurt intermediary chemical industries such as polyethylene and polypropylene manufacturers since they are also protected.

"So far, the government has imposed a 20 percent import duty and 20 percent surcharge to protect locally produced polyethylene and polypropylene," he argued.

Sanyoto, also the chairman of the Investment Coordinating Board (BKPM), said that the protection would enable Indonesia to save a huge amount of foreign exchange as local producers would no longer import such products to feed up their chemical plants.

At present, Indonesia imports between US$1.2 billion and $1.9 billion of chemical products a year to feed more than 1,000 downstream chemical industries in the country.

In addition, he said, the operation of upstream chemical industries will give added value to the country's oil industries, which also produce basic materials for petrochemical industries.

"At present most of those basic materials are sold to producers overseas," he said. (hen)