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)