Import tariff on plastics, chemicals to be cut

Adianto P. Simamora, The Jakarta Post, Jakarta

The government will slash import tariffs on chemical and plastic products to between 0 percent and 5 percent in early January next year in line with ASEAN free trade area (AFTA) requirements, the Ministry of Trade and Industry said Thursday.

"We are committed to fully implementing the AFTA agreement. The import tariff on all products, including chemicals and plastics, will be lowered to between 0 and 5 percent starting (January) next year," Ketut Suarka, head of ASEAN trade cooperation at the ministry, told The Jakarta Post.

Ketut said complying with the AFTA scheme was also important to help restore investor confidence in Indonesia.

AFTA is a free trade arrangement among the members of the Association of South East Asian Nations (ASEAN), under which import tariffs on thousands of products have to be cut to between 0 percent and 5 percent. The scheme was applied for the first time in January this year.

Indonesia initially registered 7,206 items in the inclusion list of the AFTA scheme, but only 7,137 items were immediately affected by the import tariff reduction measure, while the tariffs on the remaining 69 items, mostly chemicals and plastics, remained above 5 percent.

Ministers of the six founding members of ASEAN (Indonesia, Malaysia, Singapore, Philippines, Thailand, and Brunei Darussalam) agreed in 1998 to allow member countries to delay cutting tariffs on several products until 2003 under its flexibility scheme. Indonesia proposed the above 69 items.

The government initially hoped that by delaying the tariff reduction plan for these items, the related industries would have more time to improve their competitiveness before facing head-on competition with players from ASEAN.

However, the ailing local chemical industries said that they were not yet ready for regional competition next year.

Azis Pane, chemical industry chairman at the Indonesian Chamber of Commerce and Industry, said the liberalization drive would force the local industries to stop their operations.

"We've just started to recover from the impact of the economic crisis, we are not yet ready to compete with players from other countries next year," Azis said.

He said that Kadin had repeatedly explained to the government that the country's chemical industries were still in a weak condition and that the AFTA plan must be delayed once again.

"This (AFTA) is bad news for us ... We'll fight for a delay," he said.

Among the problems plaguing the domestic chemical industry are outdated technology, limited financial ability and huge debt burdens.