IBRA asked to maintain Chandra's operation

IBRA asked to maintain Chandra's operation

JAKARTA (JP): The Ministry of Industry and Trade has urged the
Indonesian Bank Restructuring Agency (IBRA) continue operating PT
Chandra Asri Petrochemical Center, despite its massive bad debts.

Director General of Chemical, Agriculture and Forest Product
Industries Gatot Ibnusantosa said on Thursday maintaining Chandra
Asri's operation was vital because most of the local downstream
chemical industries relied on the petrochemical giant, especially
for supply of their raw materials.

"For example, Chandra Asri's polyethylene products supplies
the country's plastic bottle, and other industries use
polyethylene as raw materials."

If there were disruptions in Chandra Asri's operations, the
activities of these downstream industries would also be
disturbed, he said.

Chandra Asri was placed under the control of IBRA after it
failed to settle debts of about Rp 2.92 trillion to local state
banks.

Gatot said the government, through IBRA, should help Chandra
Asri and other chemical industries keep operating and help them
boost their production capacity.

IBRA might sell the company to foreign parties if its
shareholders could not repay its debts, he said. "But don't kill
the company."

Chandra Asri is a joint venture between Japanese companies
Marubeni Corp. and Showa Denko KK, and Indonesian partners,
including PT Bimantara Citra, owned by Soeharto's son Bambang
Trihatmodjo, and PT Barito Pacific Timber, owned by timber tycoon
Prayogo Pangestu.

The country's only ethylene producer was set up with the
backing of an investment firm established by Japanese
participants.

The US$1.88 billion venture has produced 510,000 tons of
ethylene and 300,000 tons of polyethylene annually since 1995.

Chandra Asri was also reported to have been surrendered to
IBRA as parts of the collaterals of its shareholders' debts.

Prayogo, known as one of former president Soeharto's closest
associates, reportedly owes Rp 2.6 trillion ($288 million) to
state banks, the third largest debtor after Bambang Trihatmodjo
and his associates (Rp 1.9 trillion, $2.7 billion) and Hutomo
Mandala Putra (Rp 1.7 trillion, $400 million).

"Without strong upstream chemical industries, our goals to
build a strong, competitive local chemical industry can not be
achieved," Gatot said.

He said that despite its competitive production costs,
Indonesia was left far behind other Association of South East
Asian Nations (ASEAN) countries such as Thailand, Malaysia and
Singapore in developing a downstream chemical industry, such as
an aromatic industry.

He said the slow development of the local aromatic industry
was the result of an absence of upstream industries for producing
raw materials such as paraxylene.

"For example, we have to import 1 million tons of paraxylene
annually, because our local PTA (purified terephthalic acid)
industry needs at least 1.2 million tons, while we can only
produce 220,000 tons of paraxylene annually."

Gatot said Indonesia would host the 29th ASEAN Chemical
Industries Club Conference and the Chemical Industry Business
Forum on Nov. 23 and Nov. 24.

The conference, to be held in Bali, will discuss efforts to
help chemical industries in the ASEAN region survive the crisis,
and to prepare them for the global trade era.

"I hope we can gain input to develop our chemical industry
from this meeting," he said. (gis)