Indonesian tire producers propose 15% export tax on Rubber

Indonesian tire producers propose 15% export tax on Rubber

OsterDow Jones, Singapore

Indonesian tire producers are proposing the government impose a 15 percent export tax on Indonesian rubber to prevent a possible domestic shortage, an industry official told OsterDowJones on Tuesday.

"We're concerned that the (global) supply of natural rubber" will fall in the next few years, said Aziz Pane, chairman of the Indonesian Association of Tire Producers, or APBI.

Indonesia is among the world's biggest producers and exporters of natural rubber. It produces roughly 1.6 million tons of rubber every year, and ships about 80 percent of this to the export market.

Aziz said Indonesia exporters might ship more rubber in the next few years, given that other major rubber exporters like Thailand and Malaysia are cutting down on their production, converting rubber estates into oil palm plantations and/or sites for other types of agribusiness.

This might hurt Indonesian tire makers who mainly rely on local rubber output, Aziz said.

"We need a guarantee that there'll be enough rubber for local tire producers until 2010," he said.

APBI is yet to submit an official proposal on the export tax to the Indonesian government. Aziz said APBI will first discuss the proposal with Indonesian rubber exporters. APBI and the Rubber Association of Indonesia, or Gapkindo, will meet to discuss this matter next week, he said.

Separately, Gapkindo Executive Director Suharto Honggokusomo said there is no need for the government to impose an export tax as there is enough rubber for local tire makers and the export market.

The Indonesian tire manufacturing sector is a growing industry, thanks to expanding sales of cars and motorcycles in the local market and tire exports.