Peni considers alliance with Chandra Asri

JAKARTA (JP): Petrochemical producer PT Petrokimia Nusantara Interindo (PT Peni) is considering creating an alliance with PT Chandra Asri to strengthen the local polyethylene industry in order to compete with international players.

Peni's president Robert M. Genovese said the alliance was necessary ahead of the implementation of the ASEAN Free Trade Area (AFTA) which would oblige all ASEAN member countries, including Indonesia, to cut import duty on polyethylene products to 5 percent.

Indonesia today imposes a 10 percent tariff on the product.

Other country members of the Association of South East Asian Nations are Malaysia, Singapore, the Philippines, Thailand, Cambodia, Vietnam, Myanmar, Laos and Brunei.

He said the decrease in the import duty would result in a wave of polyethylene imports into the country.

"With the alliance, we want to raise our international competitiveness as we do not want to become casualty of free trade," Genovese said on Thursday.

Genovese said the alliance would cover the areas of polyethylene manufacturing, marketing and ethylene distribution.

Genovese said that Peni and Chandra Asri had submitted the proposal for the alliance to the Ministry of Industry and Trade as well as the Indonesian Bank Restructuring Agency (IBRA).

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

"We hope they (the ministry and IBRA) will give their approval before the AFTA agreement comes into effect," he told reporters on the sidelines of the signing ceremony of the agreement between Peni and logistics service provider PT TNT Logistics Indonesia on warehousing and transportation management.

Genovese said Peni fulfills 30 percent of the country's polyethylene market demand which stands at 700,000 tons a year, while Chandra Asri takes 40 percent. The remaining 30 percent market demand is filled by imported products.

TNT Logistics' president Colin Moran said under the five year contract, his company would handle the receiving and handling of Peni's products after production, the management of the 300,000 square meters warehouse complex, palletization, inventory control, distribution and transportation management.

Genovese said by teaming up with TNT logistics, PT Peni expected to boost its cost efficiency, strengthen reliability, and improve services to its customers.

PT Peni is owned by British energy giant BP (75 percent), Japanese firms Sumitomo (12.5 percent), and Mitsui (12.5 percent). (dmr)