Olefin firm to ask for protection next year

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)