FocusIndonesia olefin/polyolefin makers want ASEAN zero-duty deferred

17 November 2009 06:11  [Source: ICIS news]

By Chow Bee Lin

SINGAPORE (ICIS news)--Indonesian producers are lobbying to defer the implementation of the zero tariff policy on polyolefins imports within six southeast Asian countries that would take effect next year, a senior official of the Indonesian Olefin and Plastic Industry Association (INAPLAS) said on Tuesday.

The producers propose a five-year deferment to 1 January 2015, said INAPLAS secretary-general Budi Susanto Sadiman.

“We’ve sent a letter to the Ministry of Industry requesting that Indonesia maintains a 5% tariff on polyolefins imports from ASEAN countries until 2015,” he said.

Indonesia is among the six members of the Association of South East Asian Nations (ASEAN) that agreed to remove the duty under a free trade pact from 2010.

The other members that will implement zero-duty include Brunei, Malaysia, the Philippines, Singapore and Thailand.

ASEAN leaders had reiterated their commitment to the trade agreement at the Asia Pacific Economic Cooperation (APEC) forum held in Singapore last week.

“We’re concerned that the zero tariff on imports will hurt the local industry’s competitiveness, so we’re proposing that the government defer the zero duty, and in the meantime, find ways to enhance the local industry’s competitiveness,” said Sadiman.

To enhance the local industries’ competitive edge, the Indonesian government should initiate joint investments with the private sector to build a new refinery dedicated to supplying feedstock such as naphtha or gas oil to the local olefins sector, he said.

Olefins such as ethylene and propylene are feedstock for producing polyolefins.

“The sole local olefins producer Chandra Asri is currently meeting its naphtha requirements entirely from imports. All the local oil and gas companies said they cannot supply naphtha to the olefins producer because all their naphtha capacities are for meeting local gasoline demand,” he added.

A new regulation introduced by the government last year, which stipulates that 25% of the domestic oil and gas output be used by local industries as long as the prices were competitive, had failed to solve the feedstock issue faced by the olefins and polyolefins producers in the country, he said.

“The regulation doesn’t help the local industries because the oil and gas companies often choose to export their product. They deem local prices [are] uncompetitive,” he said.

Local state-owned oil and gas company Pertamina was planning to build two new refineries – one in Banteng, West Java and the other at Tuban, East Java – but there were no plans to supply naphtha to the domestic olefins producer from these proposed refineries, said Sadiman.

To prove its argument that a zero tariff would adversely affect the local industry, INAPLAS had engaged the Bandung Institute of Technology to evaluate the potential impact, said Sadiman.

“We expect the evaluation results to be ready on 27 November,” he said.

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By: Chow Bee Lin
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