Fri, 12 Aug 1994

Govt to protect olefins from imports

JAKARTA (JP): Less than two months after ruling out tariff protection for new industrial ventures, the government announced yesterday that it plans to protect the olefins produced by PT Chandra Asri Petrochemical Center in Serang, West Java, from import competition.

"Tariff protection is a must in view of the huge investment in the plant," Minister for Investment Promotion Sanyoto Sastrowardoyo said during a visit to Chandra Asri's industrial complex yesterday.

He added, however, the government is still considering the level of the tariff protection.

"But for sure, the tariff protection will be granted when the olefin plant comes on stream," Sanyoto was quoted by the Antara news agency as saying.

The government announced in the June 27, 1994 package of deregulation measures that new projects would not be granted any commitment of tariff escalation.

"Rather, it (new project) must comply with the going tariff rate as stipulated in the Indonesian Import Tariff Book," the government press release said.

Sanyoto, who was guided by Chandra Asri's president Prajogo Pangestu during the visit, defended the policy by arguing that even developed countries such as Japan protect their petrochemical plants with 40 percent import tariffs.

Thailand and Malaysia grant their industries 30-35 percent tariff protection, he added.

Sanyoto further argued that Chandra Asri's billion-dollar olefin project should be protected because its production would save US$1.6 billion a year in foreign exchange that would have been used to import various olefin products.

The government allowed the Chandra Asri project to go ahead in 1992 only six months after it ordered the postponement of large petrochemical projects at least until 1995 to reduce pressure on the country's balance of payments.

The $1.6 billion olefin project was converted into a wholly foreign-owned investment venture in 1992 though the original Indonesian sponsors. Prajogo and his associates remain significant shareholders through their companies incorporated overseas.

Foreign shareholders include Marubeni Corp.

The project will come on stream in the first half of next year with a designed capacity of 522,000 tons of ethylene, 243,000 tons of propylene and 300,000 tons of polyethylene a year.

The plant will further be expanded in 1996 to increase its production capacity and diversify its product lines into polypropylene, benzene, paraxylene, ethyl benzene, butane and ethylene glycol. (vin)