Hartarto keeps door open to petrochemical investments

JAKARTA (JP): Coordinating Minister for Production and Distribution, Hartarto, said here yesterday that Indonesia still had openings for investment in the petrochemical sector, but he warned of increasingly tougher competition.

"The development of petrochemical industries in Indonesia is strongly supported by a conducive business climate which encourages investment," he said in a keynote address to a conference on the Asia-Pacific Petrochemical Industry.

He said that abundant raw materials and competitive manpower made businesses quite profitable here. An added advantage was the stable social, economic and political climate.

"With a 200 million population, Indonesia will be a considerable potential market," he said.

Hartarto's address was read by Kumhal Jamil, an assistant on industry to the minister. About 200 people from Indonesia and overseas attended yesterday's sessions of the conference organized by S and A Petrokimia, a petrochemical consultancy.

Petrochemical products produced in the country are upstream petrochemicals, plastic raw materials, synthetic fiber raw materials, surfactant raw materials, coating raw materials and plywood chemicals.

"These industries have been growing rapidly, and have made a large contribution to the national economy," he said

He said that in 1989 there were 17 petrochemicals produced in Indonesia. By the end of 1995, there were 33 petrochemical products produced here.

In his speech, Hartarto said that other Asia-Pacific countries, faced with increasing local demand, also looked to expand their petrochemical industries.

"In a short time, it can be expected that competition in this industry will become more severe," he said.

He said petrochemical industries were now moving from developed countries to areas of cheap feedstocks, rapid growing local consumption, and comparative advantage in the workforce, like China, Indonesia, Malaysia, Thailand and the Philippines, to produce consumer goods from petrochemicals.

He said petrochemical producers in developed countries were facing slower growth rates, rapidly rising costs, increasing competition at home and safety and environmental issues. Because of this, producers had turned their attention to the Asia- Pacific, especially East Asia.

About 70 percent of world chemical production still takes place in developed countries, such as the United States, Western Europe, Japan, Korea and Taiwan.

Vice president of the Indonesian Chamber of Commerce and Industry, Fadel Muhammad, said that financial problems due to the reluctance of local banks to enter the sector might hamper the development of Indonesia's petrochemical industries.

"We see a lack of information in the sector that makes (leaves) our businessmen here not quite familiar with the petrochemical industries," he said.

"As a result, local banks are not yet interested in the sector," he said. Fadel is also chairman of the Bukaka Group, which has an interest in the petrochemical industry.

A director and senior consultant of the Singaporean company AFKA Ltd, Jimmie Aung Khin, said Asia-Pacific countries needed to find additional financial sources since international commercial bank credit had contracted.

"There is a need in the Asia-Pacific for additional sources of capital such as tapping local banks, multilateral agencies and capital markets to finance Asian petrochemical and refinery projects," he said.

Aung Khin said the World Bank had estimated that the total investment requirements for downstream projects in Asia during 1995 to 2010 was about US$105 billion, nine percent of the total Asia-Pacific energy project investment requirement of $1,227 billion.

He said a sizable petrochemical market, substantial capital resources for investment and the availability of feedstocks were the three main factors needed to support and sustain the petrochemical industry.

In Asia the first two factors are available, but it has to import a substantial percentage of the feedstocks. (bnt)