Mixed reactions greet Soeharto's protection views
Mixed reactions greet Soeharto's protection views
JAKARTA (JP): Entrepreneurs, legislators and an economist gave
mixed reactions yesterday to President Soeharto's views on
protection for upstream industries.
Soeharto said in his annual budgetary speech before the House
of Representatives here yesterday that tariff protection can be
given to upstream industries as long as certain conditions are
met.
First, protection may be given for a limited period of time
only and must be gradually reduced. "The sooner the better,"
Soeharto added.
Secondly, protection must not be contrary to any international
agreements to which Indonesia is party, such as the General
Agreement on Tariffs and Trade, and those signed by the
Association of Southeast Asian Nations and by the Asia Pacific
Economic Cooperation forum.
Finally, the level of protection must not stifle or hinder the
growth of companies operating in downstream industries, the
President said.
"Excessive protection will result in higher production costs
for downstream industries and, consequently, remove their
competitive edge," Soeharto warned, while unveiling the draft
state budget for 1995-1996 fiscal year which begins in April.
He called on the public not to prolong debate on protection.
Protection has become a widely-discussed issue during these last
few months after the PT Chandra Asri Petrochemical Center, the
country's first olefin plant, asked for the government's
protection against imports.
However, Soeharto made no explicit mention of Chandra Asri.
Acceptable
Sharing Soeharto's view, entrepreneurs Sukamdani S.
Gitosardjono and Tanri Abeng noted yesterday that protection is
acceptable as long as it benefits the country.
Tanri of the Bakrie Group specified that protection should not
be awarded on the basis of political considerations, while
Sukamdani of the Sahid Group proposed that the maximum time limit
for protection be set at 10 years.
Meanwhile, legislators Hamzah Haz of the Moslem-based United
Development Party, and Tadjudin Noer Said and Bambang Warih
Kusumah, both of the ruling Golkar faction, said they could
accept any level of protection for any upstream industry as long
as it is given transparently and meets the conditions set by
President Soeharto.
Tadjudin, however, asked the government to consult with the
House before opting to protect any industry. "Although the final
decision rests with the government, it would be wise for the
government to consult with the House first", he said.
He noted that the presence of representatives of Chandra Asri
at a hearing with the House's commission for manufacturing and
energy industries last month was a sign of growing transparency.
At the hearing, Chandra Asri's Peter F. Gontha proposed that
the government impose a duty of between 35 percent and 40 percent
on imports of ethylene and propylene, two of the olefin products
to be manufactured by his company.
Gontha acknowledged that the imposition of higher tariffs on
olefin products will affect the prices of downstream products but
said that the "impact will be small".
Tadjudin, a member of the budgetary commission, contended that
if the protection was given in the form of import tariffs,
"sooner or later it will hinder the growth of companies in
downstream industries".
Instead of tariffs, Tadjudin asked the government to consider
other forms of protection, such as subsidies -- if possible -- or
monetary or fiscal support.
Concurring with Tadjudin, economist Hadi Soesastro queried how
tariff protection could be introduced without hurting downstream
industries, as mandated by President Soeharto.
"I want to see how possible it is; imposing tariff protection
for Chandra Asri without damaging the competitiveness and
efficiency of companies downstream," Hadi told The Jakarta Post.
Hadi, also a director of the Center for Strategic and
International Studies, asked the government to not even consider
giving protection to Chandra Asri to save it from defaulting on
loans.
"Chandra Asri's creditors, which are mostly foreign banks,
must have made their own calculations when they decided to extend
loans to the company. It's wholly their responsibility, not the
government's," Hadi argued.
Chandra Asri's plant represents an investment of US$1.7
billion and is controlled by the Barito Pacific, Napan and
Bimantara groups. Located in Cilegon, West Java, it is expected
to start trial production later this year.
It will manufacture ethylene and propylene, the intermediate
petrochemicals used to make polyethylene and polypropylene, the
raw materials for the production of plastics, synthetic fiber,
tires, pesticides, synthetic rubber and detergents.(hen/hdj/rid)