Govt to protect olefins from imports
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)