Govturged to adopt ruling on tariff protection

JAKARTA (JP): Members of the House of Representatives (DPR) and economic analysts urged the government on Saturday to adopt a new ruling that will prevent the permanent implementation tariff protection for upstream industries.

"I am deeply concerned that our industrialists tend to see tariff protection as a permanent facility for their industrial activities," a member of the DPR's Budgetary Commission, Tadjuddin Noer Said, told The Jakarta Post.

Citing an example, he said the country's automotive industry has enjoyed protection for over 20 years.

"In spite of the long protection, the automotive industry has not grown strong," he said.

"I would say that any protection should be limited to, at the most, five years during initial operation of new industrial plants. Otherwise they will remain impotent and inefficient," he said.

Tadjuddin criticized the recent proposal of PT Chandra Asri Petrochemical Center, the sponsor of the country's first olefin project, for the imposition of a duty of between 35 percent and 40 percent on imports of olefin products, including ethylene and propylene, for a period of seven to eight years.

Sri Bintang Pamungkas, another member of the Budgetary Commission, said that he rejected the planned protection tariff proposed by Chandra Asri.

"You can see that without Chandra Asri, our downstream industries can survive. I am afraid that the planned protection will make the company monopolize the business, with a consequence that the prices of its products will be higher than imports," he told reporters Saturday.

Senior economist Sumitro Djojohadikusumo said earlier any protection should be limited at between five and 10 years.

"There is no reason to protect any industry against imports for more than 10 years because ten years is enough for an industrial plant to improve its efficiency," he said here on Thursday.

The long protection time could threaten downstream industries, he warned.

Mohammad Arsjad Anwar, a lecturer of the economic faculty of the University of Indonesia, told a one-day seminar on the 1995 outlook of the economic and advertising business on Saturday that tariff protection should be at a proportional level.

Considering that our foreign investors, who come from countries with tariff protection of less than 35 percent, the possible tariff protection in Indonesia should also be less than that level.

Arsjad declined to comment on Chandra Asri's proposal on the level of tariff rates, but he said the government should reduce existing tariff rates to as low level as possible in order to make the downstream industries able to survive amid the rapid decline in the state's subsidies to the industries.

Transparency

Tadjuddin said that there should be a political commitment among the policy makers on the presence of Chandra Asri in the country.

"I believe all parties have agreed on the presence of the petrochemical industry. The relevant question is then how to make the company go ahead without killing our downstream industries, which are labor intensive in nature," he said.

He argued that the current problem of Chandra Asri is not only the determination of tariff rates. "The problem is also how far the transparency of the business is made available to the public," he added.

He suggested the tariff team disclose the considerations for determining certain levels of tariff rates, the timeframe of the protection, prospects of the business as well as the pricing of products.

"I suggested that the government provide a new ruling on tariff protection in order to avoid conflicts of interests," he said. (fhp)