Sanyoto assures of fairness in protection debate

Sanyoto assures of fairness in protection debate

JAKARTA (JP): While the heated debate over protection proposed
for a US$.1.7 billion olefin project grows more political, State
Minister of Investment Sanyoto Sastrowardoyo yesterday gave
assurances that no protectionist measures contrary to the public
interest would be adopted.

"The government can arrange the imposition of protection as such
that it will not harm the people," Sanyoto told reporters after a
meeting with President Soeharto at the Merdeka Palace here.

"We (the government) will make a serious study on protection for
Chandra Asri. Only if it is really necessary, will we grant tariff
protection for its olefin project," said the minister, who also
chairs the Investment Coordinating Board (BKPM).

Chandra Asri, now constructing an olefin project to produce
petrochemical substances for raw materials in various downstream
industries, has become controversial ever since its pre-development
stage in 1991. Ducking restrictions on domestic borrowing, the olefin
complex is now legally defined as a foreign investment project
although in reality it is controlled by the Bimantara Group, Napan
Group and Barito Pacific Group.

Sanyoto, also a member of the country's new tariff task force,
did not disclose the criteria for the study on possible protection.

Instead, the minister said: "If we grant protection to some
upstream industries, which substitute imports and can provide jobs
and save our foreign currency reserves, does it mean that we are
wrong?"

Sanyoto then added that, contrary to news reports, he never
stated that Chandra Asri would be automatically granted tariff
protection. The minister also complained about being criticized by
parties for having "un-nationalistic" views.

The controversy resurfaced to public scrutiny two weeks ago
after Chandra Asri executives urged the House of Representatives to
support their proposal for the imposition of a duty of between 35
percent and 40 percent on imports of olefin products, including
ethylene and propylene which it will start to manufacture in the
middle of next year.

At that time, Peter F. Gontha, Chandra Asri's vice president,
said that protection for the olefin project "will not harm downstream
industries but benefit them instead."

Despite his assurance, the proposal drew strong reactions from
politicians, economists as well as various business leaders.

Plastic

Most recently, four plastics associations were quoted by Bisnis
Indonesia daily yesterday as saying that their businesses will be
"disadvantaged" if the government grants tariff protection for the
olefin project.

They also suggested that the government give Chandra Asri tax
exemptions rather than tariff protection.

The four associations are the Indonesian Plastic Industry
Association (Apindo), the Association of Plastic Raw Material
Producers (AB-Plastik), the Association of Basic Organic Chemical
Producers of Indonesia (APKODI) and the Association of Formaline and
Thermosetting Adhesive Industries (AIFTA).

The Indonesian unit of Japanese fiber maker Teijin Corp. last
week expressed its opposition to extensive tariff protection for the
olefin plant.

On the approving side, prominent industrialist Sudwikatmono
stated yesterday that the government should warrant tariff protection
for Chandra Asri because "Indonesia as a developing nation needs the
project" and the proposal is "still consistent with the rules of the
General Agreement on Tariffs and Trade (GATT)".

Sudwikatmono, an executive of PT Indocement Tunggal Prakarsa, is
a shareholder in Chandra Asri's sister firm PT Tri Polyta Indonesia.

The debate has clearly led to a rift in the cabinet, as
evidenced by the different stances taken by various ministers.
Analysts have also speculated that the recent reshuffle of the tariff
team was also connected to the Chandra Asri issue.

President Soeharto last week reshuffled the country's tariff
task force which was formerly headed by Minister of Finance Mar'ie
Muhammad, an outspoken opponent of tariff protection for the olefin
project. The new tariff team is chaired by Coordinating Minister for
Trade and Industry Hartarto and includes Minister Sanyoto as well as
the Minister of Agriculture Sjarifudin Baharsjah. Mar'ie, however, is
still included as a vice chairman in the new line-up.

Minister/State Secretary Moerdiono told the press Monday night
that the President's decision had nothing to do with the Chandra Asri
controversy.

Peter F. Gontha was also quoted by Merdeka yesterday as saying
that the management of the olefin project was "ignorant" of the
government's decision to reshuffle the tariff task force.

"I do not want to comment further because everything has become
too political. It is up to the government now," Gontha said.
(hdj/mds/fhp)