Olefin protection boosts imports of plastic products
Olefin protection boosts imports of plastic products
JAKARTA (JP): Imported plastic goods will continue flooding the Indonesian market if the government provides tariff protection for a US$1.7 billion olefin plant controlled by PT Chandra Asri Petrochemical Center, warns an executive.
"Our plastic goods, despite the absence of upstream tariff protection, already face tough competition from the Malaysians who offer cheaper prices," Sarbini, chairman of the Association of Plastic Industry of Indonesia (Apindo), told reporters yesterday.
"Tariff protection for upstream plastic industry will pave the way for imported plastic goods to flood the domestic market," Sarbini said during a break of a meeting held by the Indonesian Chamber of Commerce and Industry here.
Heated debates on protectionism surfaced when Chandra Asri executives urged the House of Representatives in early December to support their proposal for the imposition of a duty between 35 percent and 40 percent on imports of olefin products.
Olefin products are raw materials for various downstream industries, including fiber and plastics.
Chandra Asri is controlled by the Napan Group, Barito Pacific Group and Bimantara Group -- all of which are believed to have strong political connections.
The government, which has not stated that it will give what Chandra Asri wants, but has conceded that "protection is possible as long as it does not adversely affect the downstream industries."
Sarbini also said yesterday that the government should give other forms of protection for Chandra Asri such as tax incentives or soft loans, instead of tariffs.
Rate
"But if the government insists on giving the tariff protection, we can only hope that the rate takes market and industry developments into account," he said.
He added that tariffs on upstream products should be lower than those downstream.
Government data indicate that the average tariff protection for mid-stream plastic industries is around 15 percent, while the average rate for the downstream ones is about 30 percent.
Three other plastics associations stated last year that their businesses would be "disadvantaged" if the government granted tariff protection for the olefin project.
The three associations are the Association of Plastic Raw Material Producers (AB-Plastik), the Association of Basic Organic Chemical Producers of Indonesia (APKODI) and the Association of Formaline and Thermosetting Adhesive Industries (AIFTA).
The Indonesian unit of the Japanese fiber maker Teijin Corp. has also expressed its opposition to extensive tariff protection.
Teijin also threatened that it will not make any new investments in Indonesia if Chandra Asri has its way.
Proponents of the olefin project have argued that the proposed protection will not harm downstream industries and that it is consistent with Indonesia's free trade commitments.
It is not clear whether tariff protection was accounted for in the feasibility study on the olefin plant, a project Chandra Asri executives call "a measurement of national pride."
The olefin project, financed mostly through foreign loans, has become a controversial issue ever since its early stages. The country's monetary authorities, anxious about the country's current account deficit, ordered Chandra Asri to stop construction for 18 months in 1991.
After successfully ducking restrictions on domestic borrowing, the olefin complex is now legally defined as a foreign investment project.(hdj)