Govt upset over reaction to tariff protection plea

Govt upset over reaction to tariff protection plea

JAKARTA (JP): The government is concerned over a Japanese
synthetic fiber company's threats to move its operation from
Indonesia if tariff protection is given to the country's first
olefin project.

"Basically the government tries to defend the presence of
Teiji Indonesia Fiber Corporation (Tifico) here. But I have to
know first what the real problem is," Minister of Industry Tunky
Ariwibowo told journalists over the weekend.

Kikuo Hori, president of Tifico, a Japanese-Indonesian joint
venture producing synthetic fiber, said on Thursday that he will
not hesitate in relocating the company's operation in Vietnam or
China if the government raises import tariffs of certain
petrochemical products in favor of PT Chandra Asri Petrochemical
Center, the sponsor of the olefin project controlled by the
Barito Pacific, Napan and Bimantara groups.

"This is the voice of the principal company's management in
Japan. Principally, we don't want protection given to the
upstream industry," Hori was quoted by Kompas daily as saying,
referring to Chandra Asri, which is scheduled next year to
produce intermediate materials needed by Tifico.

In a hearing with Commission VI of the House of
Representatives last week, Peter F. Gontha of Chandra Asri asked
the government to impose a duty of between 35 percent and 40
percent on imports of ethylene and propylene, two of the olefin
products to be manufactured by his company.

Following Gontha's statement, a number of government officials
gave mixed reactions. Minister of Finance Mar'ie Muhammad, for
instance, ruled out any possibility of imposing import tariffs
higher than those written on the official tariffs book.

Defense

Minister of Investment Sanyoto Sastrowardoyo, however,
defended Chandra Asri, saying that the company deserves the
government's support because in the long run it will strengthen
the structure of the country's industries.

Hori contended that tariff protection for the upstream
industry will only hurt companies operating in downward
industries, including his company which depends largely on
petrochemical products.

Chandra Asri, projected to start its trial production next
year, will manufacture ethylene and propylene, the intermediate
petrochemicals used to make polyethylene and polypropylene, the
raw materials for the production of plastics, synthetic fiber,
tires, pesticides, synthetic rubber, housewares and detergent.

"If the government wants to satisfy Chandra Asri, which wants
to rake in profits easily, just go ahead. But the government has
to be ready if intermediary and downstream industries drop off
one after another," Hori said.

Peter Gontha argued last week that the imposition of higher
tariffs on olefin products will affect the prices of downstream
products but said that the "impact will be little."

If the tariff is set at 30 percent, consumers will have to
bear an additional cost of 0.1 percent for sugar which is
packaged with plastic film, he said.

As quoted by Antara news agency Saturday, Tunky declined to
elaborate on what kind of government support will be given to
Chandra Asri, saying, "Just come to a hearing at the House of
Representatives on Dec. 13. I'll explain everything clearly,
including the protection asked by Chandra Asri." (rid)