Inaplas asks govt to rise import duty on polypropylene
Inaplas asks govt to rise import duty on polypropylene
Adianto P Simamora, The Jakarta Post, Jakarta
The Indonesian Olefin and Plastic Industry Association (Inaplas) called on the government to raise the import duty on polypropylene to 10 percent in order to protect local producers from cheaper imported products.
Polypropylene is a raw material for plastics. The government currently imposes an import duty of 5 percent on the product, the lowest import duty among Association of Southeast Asian Nation (ASEAN) countries.
"Indonesia is the most aggressive country in ASEAN in reducing the import duty on polypropylene, while our neighbors continue to maintain a high import duty to protect their industries," Didie W. Soewondho, chairman of Inaplas, said on the sidelines of a seminar.
Last May, the government cut the import duty on polypropylene to 5 percent from 10 percent, but maintained the 10 percent duty on polyethylene, polystyrene and polyvinyl chloride, which are also raw materials for the production of plastics.
Since this decision, Didie said, cheaper imported polypropylene products from ASEAN neighbors have flooded the local market, adding to the misery of the country's ailing plastic industry.
"Imported polypropylene from Thailand, Malaysia and the Philippines are on the rise, as they are facing difficulty entering other markets such as China and India that have imposed 16 percent and 40 percent import duties, respectively," Didie said.
The government of Thailand has set a 10 percent import duty on polypropylene, while both Malaysia and the Philippines currently impose a 15 percent duty.
"There is an oversupply of polypropylene on the international market now, so the ASEAN polypropylene-producing countries are eager to take advantage of the low import duty in Indonesia," Didie said.
"This is not fair and the government must respond by increasing the import duty," he said.
Indonesia's plastics consumption has steadily increased over the last three years, from 1.1 million metric tons in 1999 to 1.4 million tons in 2000 and 1.6 million tons last year.
The association predicted that plastics consumption would reach an all-time high of 1.85 million tons this year.
Indonesia imported some 225,000 tons of polypropylene in 2000, about 31.73 percent of total domestic consumption.
The country is expected to import some 305,000 tons of polypropylene this year.
A source told The Jakarta Post that the Ministry of Finance would announce a decision next month about whether it would increase the import duty or impose a non-tariff barrier.
"The government may reimpose a 10 percent import duty next month," the source said.
The association also urged the government to delay the liberalization of the plastics industry under the ASEAN Free Trade Area (AFTA) agreement. As part of this agreement, the import tariff of polypropylene must be reduced to below 5 percent next year.
"Looking at the reality, our industry has yet to fully recover from the economic crisis," Didie said.
Didie, however, said the local plastics industry would be ready to implement the AFTA agreement so long as other ASEAN countries also implemented it.
"Ready or not we must go on if our neighbors are committed to implementing it in 2003," Didie said.