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)