Olefin firm to ask for protection next year

PANDEGLANG, West Java (JP): PT Chandra Asri Petrochemical Center, the country's first olefin firm, will ask the government next year to protect its products against imports.

The company's financial director, Jansen Wiraatmaja, said here on Thursday night that his company will calculate its production costs following the start-up of its plant in June next year before submitting a proposal for government protection.

Jansen made the remarks during a four-day seminar on the petrochemical industry in response to the statement of Director General of Chemical Industries Sujata, who said at the opening of the meeting on Wednesday night that the government should be informed about Chandra Asri's production costs and its funding structure for the consideration of any planned protectionist measure.

When asked about the structure of the funding, Jansen revealed that 73 percent of the company's' total investment of US$1.6 billion will be raised from loans and the remainder from equity.

The equity is 65 percent owned by Siemens International Ltd., 25 percent by Japan-Indonesian Petrochemical Corporation and 10 percent by Stallion Company Ltd.

The construction of Chandra Asri's project resumed in 1992 after its ownership was restructured. The construction was temporarily halted in 1991, when the government announced a new policy on the control of the inflows of offshore commercial loans.

Before the ownership was restructured, the project was supported with an equity of 40 percent by timber tycoon Prajogo Pangestu, 25 percent by Bambang Trihatmodjo, 25 percent by Henry Pribadi and 10 percent by PT Bimantara Citra.

Dumping

Jansen said that during the first six moths of operation, Chandra Asri will analyze reactions from olefin producers in other countries. "Usually they inflict dumping practices against newcomers. If it happens against Chandra Asri, we will ask the government for protection," he said.

Sujata said Wednesday that the government prefers to offer a tax facility to help improve domestic industrial companies' competitiveness against imports rather than imposing high tariffs on imports of similar products.

Wardijasa, an expert assistant to the Minister of Industry, said Chandra Asri deserves incentives from the government as it operates in strategic industries.

"This kind of industry has to be developed because the dependence of this country's intermediary and downstream industries for olefin products such as ethylene, propylene, polyethylene and polypropylene will be greater in the future," Wardijasa contended.

Next year's domestic demand for ethylene, for example, is projected to increase by 30 percent to 540,000 tons, polypropylene by six percent to 371,000 tons and polyethylene by four percent to 547,000 tons.

Indonesia spends almost US$1.9 billion yearly to import olefin products, whose raw materials -- naphtha, liquefied petroleum gas and natural gas -- are all abundant in the country.

When Chandra Asri starts its commercial operation in June next year, it is expected to supply 1.3 million tons of olefin products, consisting of 522,000 tons of ethylene, 243,000 tons of propylene, 300,000 tons of polyethylene, 100,000 tons of polypropylene and 160,000 tons of pyrolyzes gasoline. (rid)