RI too unstable: LG Chemical

RI too unstable: LG Chemical

SINGAPORE (Bloomberg): LG Chemical Ltd., Korea's largest chemical producer, said it has stalled plans to invest US$10 million in a plant in Indonesia because of concern over workers' safety and the country's economy.

LG Chemical had planned to build a $10 million chemical plant in Karawang, near Jakarta, to make plastic floor coverings for homes and offices.

"Indonesia is not safe or stable enough for us to place our investment there," said Hank H.K. Lee, LG Chemical's general manager. "The risks are too great as the army and police are not doing enough to guarantee our safety."

Indonesia's economy is not recovering fast enough to spur demand for the proposed factory's products, LG Chemical said. Indonesia's recession-battered economy expanded 0.2 percent last year after shrinking 14 percent in 1998.

The Korean company will hold off all investment in Indonesia at least until 2002 when it expects the rupiah's value to return to pre-1998 levels, Lee said. Indonesia's economy sank into its worst recession in decades after the rupiah lost more than two- thirds of its value against the U.S. dollar in 1998.

LG Chemical exported about $20 million of petrochemical products, such as polyethylene and acrylic acid to Indonesia last year. Before the recession, Indonesia was the company's biggest market in Southeast Asia, buying $40 million a year of its products, Lee said.

Polyethylene and acrylic acid are used to make products such as plastic bags and textiles.