Tariff protection will hurt exports: Executive

Tariff protection will hurt exports: Executive

JAKARTA (JP): Additional tariff protection for upstream industries would hurt Indonesian plastic exports, which are already threatened by escalating raw material prices, an executive warned yesterday.

"More tariff protection for upstream industries will lessen the competitiveness of our plastic goods," said A. Sarbini, chairman of the Indonesian Plastic Manufacturers' Association.

Sarbini was referring to the possibility that the government might soon give tariff protection to petrochemical products to be manufactured by PT Chandra Asri Petrochemical Center at its US$1.7 billion olefin plant in West Java.

The tariff controversy which raged last year resurfaced after Chandra Asri executives urged the House of Representatives to support their proposal that a duty of between 35 percent and 40 percent be imposed on imports of olefin products, including ethylene and propylene.

Chandra Asri, which is partly controlled by the Bimantara Group, plans to start production in the middle of this year.

Sarbini said that Indonesia's exports of plastic goods are already threatened by rising raw materials prices.

"The prices of plastic raw materials, in the form of various petrochemical compounds, have risen significantly over the last two years -- by between 50 and 90 percent," he said.

Sarbini said that Indonesia's export earnings from plastic goods were likely to decline during the 1994-1995 financial year.

The country's exports of plastics reached $205.43 million in 1992-93.

Tariff

The government's tariff team, comprised of several cabinet ministers, has met with President Soeharto several times but, as yet, no announcements have been made.

In December last year President Soeharto appointed Coordinating Minister for Industry and Trade Hartarto to the chair of the tariff team. Hartarto replaced Minister of Finance Mar'ie Muhammad, an outspoken opponent of Chandra Asri's tariff proposal. The December shakeup also saw the appointment to the team of Minister of Investment Sanyoto Sastrowardoyo, an ardent supporter of the Chandra Asri project, as well as Minister of Agriculture Sjarifudin Baharsjah, Minister of Industry Tunky Ariwibowo and Minister of Trade Satrio B. Joedono.

Sarbini said yesterday that under the existing system the majority of downstream plastic producers are already forced to purchase polypropylene resins, at a price higher than the international price, from PT Tri Polyta Indonesia, an affiliate of Chandra Asri.

"Only a minority of plastic goods manufacturers, which generally export their products, can import polypropylene resin without paying duties and surcharges," he said. (hdj)