Protection for aromatics firm criticized
CILEGON, West Java (JP): A business leader expressed his worry yesterday about the possibility of the government setting up a new tariff structure to protect a politically well-connected aromatics firm.
Aburizal Bakrie, chairman of the Indonesian Chamber of Commerce and Industry, called on the government to harmonize the messy tariff structure on imported olefin and its derivatives and to not impose new protection measures on aromatics and aromatic derivatives.
"If the government extends tariff protection to upstream industrial products how can industries working at the midstream and downstream levels compete in the global market," Aburizal asked, after the inauguration of three petrochemical plants affiliated with the Bakrie Group.
The three new plants are a purified terephthalic acid (PTA) plant owned by PT Bakrie Kasei Corporation, a polyethylene terepthathalate (PET) resin plant owned by PT Bakrie Kasei-PET and a PET-film plant owned by PT Bakrie Diafoil.
Both PET-resin and PET-film are derivatives of PTA, while the production of PTA needs paraxylene, an aromatic product, as a raw material.
Currently, the import tariff on both paraxylene and PTA is set at zero percent. However, there is growing concern that the government might erect new tariff protection for paraxylene when an aromatic plant controlled by the politically well-connected Humpuss Group starts producing paraxylene.
Such concerns are not groundless, especially since the government broke its own promise by protecting olefin products.
Last February, the government established a temporary 20 percent duty surcharge on imports of ethylene and propylene on top of a 5 percent import tariff. Then, last month, the government turned the temporary measure into a permanent one by incorporating the surcharge into the tariff structure.
Both ethylene and propylene are produced by PT Chandra Asri Petrochemical Center, which is believed to have strong political clout.
Minister of Industry and Trade Tunky Ariwibowo said yesterday that he would do his best to improve the chemical industry's messy tariff structure.
"I will harmonize the tariff structure in due time. It is my homework, and I continue to keep this in mind," Tunky said at the inauguration.
However, Tunky did not state that the government would not protect Humpuss's aromatic plant in Arun, Aceh. The plant, with an annual production capacity of 370,000 tons of paraxylene and 160,000 tons of benzene, plans to start commercial production in 1998.
Aburizal, who is also chairman of the Bakrie Group, noted that Bakrie plans to build the country's third PTA plant with the same production capacity in 1998, even though the current PTA market is not favorable.
"While PTA is not protected, we are worried that the government may protect raw materials for PTA," Aburizal said, adding that Bakrie Kasei plans to increase its annual capacity to one million tons of PTA in 1998.
With its new PTA plant, Bakrie Kasei's annual capacity currently stands at 600,000 tons of PTA per annum.
Bakrie Kasei is 51 percent owned by Mitsubishi Chemical Corporation of Japan, 20 percent by PT Bakrie & Brothers, 19 percent by Japan Asia Investment Co. Ltd. and 10 percent by the International Finance Corporation.
Director General of Steel, Machinery, Electronic and Chemical Industries Effendi Sudarsono, also present yesterday, said the government would maintain the existing tariff structure for aromatic products.
"The government tries to be consistent in maintaining such harmonized import tariffs," he said. (rid)