Protecting upstream industries

Protection, in any form, negatively affects any effort to strengthen competition. Industrialists are less likely to promote efficiency and professionalism if they are assured a captive market. The higher the tariff protection an industry enjoys, the more difficult it will become and the longer it will take for the industry to adjust its competitive capabilities.

In the case of PT Chandra Asri Petrochemical Center (PT CAPC) the problem is even more grave because it is an upstream industry. Any protection given to an upstream industry will affect the price the product used by downstream industries. All downstream industries using PT CAPC products will be burdened with material costs higher than those of similar industries abroad. These industries will encounter difficulties and may even be pushed out of the world market. The industries using PT CAPC products are mostly textile industries, and textiles are among our leading exports. Hence, national growth will be effected.

Since they are unable to sell their products abroad, the downstream industries will concentrate on the domestic market, forcing consumers to pay higher prices for textiles. This is despite the fact that national development efforts have worked to guarantee adequate supplies of textiles.

Many industries will be forced to close and dismiss their workers. To overcome their difficulties, downstream industries may in their turn ask for protection. Therefore, protecting upstream industries slows down economic growth, lowers the level of social welfare and constricts employment opportunities.

It must be admitted that PT CAPC's investment level is very high. Completion of the plant was delayed for three years while turnout of its vitally important product fluctuated. At one point, it was threatened by the dumping practices of its competitors. For these reasons, investment in the petrochemical sector is usually protected during the initial stages.

In considering the level and the duration of any protection that might be given to PT CAPC, attention should be paid to public interest and to downstream industries. In the final analysis, it is all in the national interest.

-- Suara Karya, Jakarta