Tariff team shaken by protectionism controversy

JAKARTA (JP): The government is restructuring the team on tariff and fiscal affairs amid controversy over the proposed protection of a new olefin project and the opposition to the imposition of new, high tariffs from prominent economist Sumitro Djojohadikusumo.

State Minister of Investment Sanyoto Sastrowardoyo told reporters here yesterday that President Soeharto, under Presidential Decree No. 80/1994, has appointed Coordinating Minister for Trade and Industry Hartarto to chair the team, replacing Minister of Finance Mar'ie Muhammad. The decree also increases the number of people on the team.

Based on a 1993 decree, the team is chaired by Minister of Finance Mar'ie Muhammad and has Minister of Industry Tunky Ariwibowo and Minister of Trade Satrio B. Joedono as members.

The new team, which will start working on Jan. 5, will have Mar'ie as its vice chairman and Tunky, Sanyoto, Joedono, Minister of Agriculture Sjarifudin Baharsjah and an assistant to the coordinating minister for industry and trade as its members, Sanyoto said.

"I don't know when the President signed the decree. I myself just learned that I was chosen as a member of the team yesterday (Wednesday)," he said.

He added that investment affairs have a close relationship to the commercial activities of any new industrial plants, plantations, tourism agencies, or mining projects.

He said the restructuring of the tariff team should not be linked to the recent proposal by a petrochemical company that its olefin project in West Java be protected against imports.

Executives of the company, PT Chandra Asri Petrochemical Center, last week 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, petrochemical substances, which it will start to manufacture in the middle of next year.

Peter Gontha, a director of Chandra Asri, said that the tariff level could be lowered by four percentage points per year within seven to eight years.

"People should not consider protection as something terrible," Sanyoto said yesterday.

"There are some foreign business people who dislike seeing Indonesia becoming better. They are trying to use this situation for their own interests," he said.

He added that the team's restructuring did not indicate that certain industrial firms will get tariff protection.

Minister Mar'ie, when asked by reporters about Chandra Asri's proposal, ruled out last week the possibility that the government would provide tariff protection for its US$1.7 billion olefin project in Cilegon, West Java.

Sanyoto has said that if the country considers the prospects of the company, the government might have to support it.

He agreed on Peter's view that imposing import tariffs on ethylene and propylene products would not hurt, but instead could encourage the development of downstream industries.

Tunky, in the meantime, said that any infant upstream industrial plant asking for the government's protection must be transparent to the government, especially on its funding structure and production costs.

He said his ministry has sent a questionnaire to Chandra Asri on its financial structure, production costs and other related matters. The ministry will pass on its reply to the tariff team.

Sumitro

Sumitro said yesterday that tariff protection for upstream industrial plants should be limited to a maximum range of five percent to 10 percent in order to help producers of the downstream industry to survive and to maintain their exports.

"I personally think that a 40-percent duty imposed on imports of upstream industrial products is too high. I am concerned that such a high tariff will most likely hurt downstream industries which are mostly labor intensive in nature," Sumitro told reporters after the opening of a two-day annual meeting of the Civil Servants Cooperatives Association here.

He cautioned that once the government imposes a high duty, the production costs of downstream industries will increase, thereby raising their sales prices and making them less competitive on the world market.

Sumitro, who is also a chairman of the association, said that small-scale and medium-sized producers may not be able to survive in such a situation and may have to reduce the number of their workers.

"It's better for the government to rescue dozens of small downstream industrial companies from a disaster caused by tariff protection, rather than supporting the interest of a single company," Sumitro said.

"But, I am now talking about policies in general not about Chandra Asri alone," he added.

Sumitro said he was worried that once the government imposed tariff protection for a certain company, the protection would become permanent.

He also suggested that the government hire independent consultants to make a study on any company requesting tariff protection. "Of course, Chandra Asri has hired its own consultants for making a feasibility study on its business," he said. (icn/fhp)