Indonesia imposes 20% surcharge on propylene imports
Indonesia imposes 20% surcharge on propylene imports
JAKARTA (JP): The government has imposed a 20 percent
surcharge on propylene imports, on top of the current five
percent duty, Minister of Industry and Trade Tunky Ariwibowo said
yesterday.
"This policy is aimed to ensure business transparency and will
not affect either propylene producers or users," Tunky said after
meeting foreign trade attaches and business groupings at his
office here.
Tunky argued that the surcharge is expected to make
transactions between propylene producers and consumers
transparent and encourage them to make long-term purchase
contracts.
Industry analysts, however, said they were surprised by the
move, which contradicted Tunky's statement last September that
the government would give neither tariff protection, tax
incentives nor regulatory protection to the country's first
olefin plant in Cilegon, West Java, which is owned by PT Chandra
Asri Petrochemical Center.
In mid-1994, the company asked the government for tariff
protection against imported olefin products, including propylene.
The call sparked vigorous public debate involving economists,
legislators, company executives and ministers.
There are currently two producers of propylene in the country,
Chandra Asri with a production capacity of 243,000 tons per annum
and the state oil company Pertamina's export-oriented oil
refinery in Indramayu, also in West Java, with a production
capacity of 186,000 tons per annum.
Chandra Asri's propylene is used by PT Tri Polyta Indonesia's
polypropylene plant, which is also located in Cilegon. Tri Polyta
is a public company whose shares are listed on the Nasdaq stock
exchange in New York.
Effectivity
A Tri Polyta spokesperson was quoted by Reuters as saying in
New York on Tuesday that the company had been told the surcharge
is applicable on shipments after Feb. 2 and is effective until
June 30.
Tunky said yesterday, however, that the 20 percent surcharge
may be extended after June 30.
Tri Polyta also said Chandra Asri had canceled an interim
propylene supply agreement with the company which was due to
expire March 31.
Tri Polyta expects to continue to purchase propylene from
Chandra Asri on an ad hoc basis and to enter into negotiations
for a new purchase arrangement taking into account the surcharge.
It currently purchases about 60 percent of its propylene needs
from Chandra Asri and imports the rest to meet its feed stock
requirements.
Chandra Asri is jointly owned by the Barito Pacific and
Bimantara and Napan groups -- all believed to wield strong
political clout -- and Japan's Marubeni Corp. The first two
groups also have stakes in Tri Polyta.
Tunky said that the 20 percent surcharge on propylene imports
will not affect the production costs of companies in the
downstream level because the protection on polypropylene remains
unchanged.
Imports of polypropylene are currently subject to a 20 percent
import duty and another 20 percent surcharge.
Tunky added that the introduction of the surcharge is aimed to
make the country's industrial structure more integrated from
upstream to downstream.
"We would like to reduce imports. Therefore, we would like to
have our own industry substitute imports. That is the upstream
industry.
"However, we don't want to impose tariffs because everybody
will then be suffering. It will be a win-lose situation, and we
don't want it," Tunky told reporters after attending the meeting.
Yesterday's meeting, closed to the press, was attended by 38
Indonesian trade attaches overseas and representatives of nine
business groupings, including the Indonesian/German business
group Ekonid, the Indonesia/Netherlands Association, the
Indonesia-Canada Business Council, the American Chamber Indonesia
and the Korean Business Community.
"At the meeting, we gave further information on our January
deregulatory measures and collected inputs from foreign
representatives," Tunky said. (kod/rid)