Protecting upstream industries
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