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)