KPPU to examine petrochemical firms' alliance

KPPU to examine petrochemical firms' alliance

JAKARTA (JP): The country's antimonopoly watchdog will study
the planned alliance of petrochemical manufacturers PT Petrokimia
Nusantara Interindo (Peni) and PT Chandra Asri to ascertain if it
will hurt competition in the country's polyethylene market.

Syamsul Maarif, a member of the Business Competition
Supervisory Commission (KPPU), said the commission had yet to
receive a report on the planned alliance.

"But, we're collecting data on the different forms of
alliances, mergers and partnerships from various sources to see
if such a move will violate the Antimonopoly Law," Syamsul told
The Jakarta Post.

Peni, which is partly owned by British energy giant BP Plc,
said on Thursday it was considering creating an alliance with PT
Chandra Asri in manufacturing, marketing and distribution to
boost their competitiveness against foreign players.

Through the alliance, both companies will control a combined
70 percent of the domestic polyethylene market as currently Peni
holds 30 percent and Chandra Asri holds 40 percent of it. The
remaining 30 percent is filled from polyethylene imports.

The country's polyethylene market demand stands at 700,000
tons a year.

Under the 1999 Antimonopoly Law, a company or business group
will be suspected of conducting unfair business practices if it
controls more than 50 percent of the domestic market. An alliance
of two or three companies will also come under suspect it
controls a combined 75 percent of the market.

Peni's president Robert M. Genovese said on Thursday the
alliance was crucial for Peni and Chandra Asri to maintain their
domestic market share ahead of the implementation of the ASEAN
Free Trade Area (AFTA) next year.

In line with AFTA's ruling, Indonesia should slash import
duties on polyethylene products to 5 percent from the current 10
percent.

Genovese said the decrease in import duties would result in an
influx of imported polyethylene and thus tighten competition in
the local market.

Syamsul said the Antimonopoly Law did not ban companies from
forming alliances as long as the alliances did their businesses
in a fair and transparent way, including not hindering new
players from entering the market.

Genovese said the planned alliance would not violate the
Antimonopoly Law as it was aimed mainly at improving efficiency
and reducing costs.

He said Peni was awaiting approval from the Ministry of
Industry and Trade as well as the Indonesian Bank Restructuring
Agency (IBRA) to carry out the alliance with Chandra Asri.

Chandra Asri, whose founding shareholders include former
president Soeharto's second son Bambang Trihatmodjo and tycoon
Prajogo Pangestu, have been taken over by IBRA following its
owners' failure to repay Rp 3 trillion (US$348 million) in debts
owed to state banks.(dmr)