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)