Humpuss Aromatic needs no protection

Humpuss Aromatic needs no protection

JAKARTA (JP): PT Humpuss Aromatik, a subsidiary of the
politically well-connected Humpuss Group, said yesterday it would
not seek government protection provided that no dumping practices
occur.

The company's president, R. Soejatno, said yesterday that the
company would be able to compete with foreign aromatic producers
without government assistance as long as they compete fairly
here.

"I'm sure we can compete even without government protection,
because we have established this company without any assumption
of government protection for our products," Soejatno told
journalists.

However, he declined to state clearly whether his company will
seek tariff protection, saying that the decision lies with the
shareholders.

Soejatno made the remark in response to concerns expressed by
industries working at the downstream level about the possibility
of the company seeking government protection when its aromatic
plant in Arun, Aceh begins producing paraxylene and benzene in
1998.

Both paraxylene and benzene are much needed by downstream
petrochemical plants. Paraxylene is the material for making
purified terephthalic acid, which is a basic material used in the
textile industry.

Such concerns are not groundless, especially since the
government broke its promise by protecting other upstream
chemical products, the olefins.

Last February, the government established a temporary 20
percent duty surcharge on imports of ethylene and propylene on
top of a 5 percent import tariff. Then, last month, the
government turned the temporary measure into a permanent one by
incorporating the surcharge into the tariff structure.

Both ethylene and propylene are produced by PT Chandra Asri
Petrochemical Center, which is believed to have strong political
connections.

Moreover, Minister of Industry and Trade Tunky Ariwibowo said
last week that the government might use the protection scheme it
has granted to Chandra Asri to help other infant industrial
companies.

Dino M. Vega, another executive at the Humpuss Group, noted
that government protection for upstream chemical industries
should not be considered as a taboo, considering that advanced
countries like Japan and South Korea also protected their
chemical industries.

"They have even established a 60 percent tariff protection for
certain chemical products," said Dino, a former planning director
at holding firm PT Humpuss and now president of PT Humpuss
Patragas and PT Humpuss Karbomethil Selulosa.

Dino said that although Humpuss Aromatik is designed to
compete without government protection, the company will not stand
competing with foreign producers when the latter conduct dumping
practices here.

"It is very often that established chemical companies form a
cartel to block the entrance of newcomers to the market and force
them out by dumping," he said.

The US$800 million aromatic plant in Arun is designed for an
annual capacity of 370,000 tons of paraxylene and 160,000 tons of
benzene.

The country's need for paraxylene, which is currently
estimated at approximately 240,000 tons per year, is expected to
increase to 650,000 tons in the year 2000.

The plant, slated to come onstream in 1998, will require
70,000 barrels of condensate a day from the Arun gas field.

Currently, the import tariff on both paraxylene and PTA is set
at 0 percent. (rid)