Plastic firms ask for lower tariff

Benget Simbolon Tnb., The Jakarta Post, Singapore

The government should quickly cut import tariffs on plastic products to below five percent in compliance with the ASEAN Free Trade Area (AFTA) and stop protecting the sector for too long, plastics industry businessmen said on Thursday.

President director of publicly listed PT Dynaplast Tony T. Hambali said that if the government continued protecting the local product then the industry would not mature and would be unable to compete with other countries' products.

"I'm afraid we'll never learn the lesson to compete freely with the others if the government continues to protect local products. It should liberalize them soon, as has been done by Singapore," he told The Jakarta Post here on Thursday.

Under the AFTA scheme, Indonesia and several other member countries of the Association of Southeast Asian Nations (ASEAN) cut most of their import tariffs to below 5 percent this year. But Indonesia is allowed to maintain tariffs on plastic products above five percent until 2003 under a mechanism that allows each ASEAN member to delay the implementation of AFTA on certain products.

Tony, who was visiting the four-day Aseanplas 2002 -- a trade fair for plastic and rubber in Singapore -- said that with that tariff foreign plastic products should be more expensive than Indonesian products. But, in fact, local producers also adjusted their prices to those of the foreign ones.

"Local producers also adjust their prices to the foreign ones. If the foreign price is Rp 660 (6.6 U.S. cents) after a 10 percent import tariff, the local producers will also price their goods at Rp 660," he said.

Bambang Purnomo, the marketing manager of PT Yanaprima Hastapersada, the only Indonesian company participating in the Aseanplas, shared Tony's views, saying that generally, Indonesia's plastic products were ready to compete with other foreign products.

"There is no need for the government to spoil the Indonesian products too much. It won't help them to grow well. Just apply the AFTA requirements and they will find their way to win the competition. Otherwise they'll never improve," he pointed out.

He said that past experience had shown that too much protection from the government had made many local products unable to develop as well as expected.

But besides the tariff, there were other factors that made the local products less competitive. These included high operational costs and interest rates.

"Here we have interest rates of up to 20 percent, while in other countries they are just below 10 percent. In Thailand, for example, they are just 5 percent. In Singapore, they are even lower than that," Tony said, adding that the government should address the other factors to help sharpen local competitiveness.

Gary Fielding, the vice president of the Clariant Group, which participated in the Aseanplas trade fair, also asked the Indonesian government to liberalize plastic products.

"I'd like to see the tariffs disappear and every producer can then compete fairly in the market," he noted.

Gary, whose company has a subsidiary in Tangerang under the name PT Clariant Indonesia, said the government ought also to improve the investment climate in the country.

"The main issue facing Indonesia now is how the government can create stable banking and consistency in tariff regulations, procedures and legal issues. What the investing community needs the most is stability and consistency. If you keep changing, then it will be very difficult for investment," he said.

According to him, apart from low costs of production thanks to low labor costs, many investors were attracted to Indonesia, given its large market potential.

"If investors only considered production costs then they'd go to China, the cheapest place. But they also take into consideration Indonesia's market potential, which is very big," he noted.

"If the government does not create stability they won't come," he said, adding, however, that political stability was improving, although foreign media reported otherwise.

He suggested that foreign investors go to Indonesia to see for themselves. By going they would find out that the actual situation was not as bad as the foreign media had reported.

"We still see it (Indonesia) as a market with large potential. But the government needs to improve things in order to attract more investment," he said.

Indonesia's plastic consumption has steadily increased during the last three years, from 1.1 million tons in 1999 to 1.4 million tons in 2000 and 1.6 million tons last year.