Inaplas urges Pertamina to provide more naphtha

Adianto P. Simamora, The Jakarta Post, Jakarta

The Indonesian Olefin and Plastic Industry Association (Inaplas) urged state-owned oil and gas company Pertamina to produce more naphtha products for local petrochemical companies to help boost the competitiveness of the domestic plastic industry ahead of the liberalization of the sector next year.

Naphtha is used in the production of raw materials needed by the plastic industry.

Secretary-general of Inaplas Budi Susanto told The Jakarta Post on Wednesday that the move would help local plastic products compete with imported products when import tariff were slashed to below five percent next year from the current 10 percent as scheduled under the AFTA plan.

There are currently some 5,200 local plastics producers.

AFTA stands for the ASEAN Free Trade Area, which was launched earlier this year and is a trade block made up of members of the Association of South East Asian Nations.

Budi said that because of the lack of naphtha supply from Pertamina, local petrochemical firms, including PT Chandra Asri, PT Petrokimia Nusantara Interindo and PT Tri Polyta had been importing 80 percent of their naptha needs, particularly from the Middle East, at high prices.

Pertamina has been exporting most of its naptha products to obtain hard currency.

Budi, however, said that in general, plastic makers were ready to face AFTA.

Under the AFTA scheme, Indonesia and another five ASEAN member countries -- Singapore, Malaysia, the Philippines, Thailand and Brunei Darussalam -- are to cut most of their import tariffs to between zero and five percent this year.

But tariff reductions on chemical and plastic products is allowed to be delayed until 2003 under a flexibility mechanism.

Indonesia's plastic consumption has steadily increased over the last three years, from 1.1 million tons in 1999 to 1.4 million tons in 2000, and 1.6 million tons last year.