Government asked to keep import tariff on petrochem products at 15% till 2010

Major players in the petrochemical industry want an assurance from the government that the existing 15-percent tariff on petrochem products will be maintained until 2010.

"If the (naphtha cracker project) pushes through, then the government will make the right representation," Chemphil Group chairman and Petrochemical Corp. of Asia-Pacific (Petrocorp), president Antonio M. Garcia said, adding that for the petrochem industry to prosper in the coming years, the tariff rates should be maintained.

Under the World Trade Organization (WTO) agreement, import tariff rates of member countries should be lowered to a range of 0 to five percent by 2004. But, the Philippine government is proposing to the WTO that it be allowed to keep existing import tariff rates on petrochemical, automotive and agricultural products until 2010.

At present, there are four petrochemical companies in the Philippines. Two of them produces polyethylene products while the other two produce polypropylene.

The construction of a naphtha cracker plant in the country is deemed necessary for the producion of raw materials such as ethylene and propylene that are needed for the production of polyethylene and polypropylene.

According to Garcia, other Asian countries are making their own stand on certain tariff issues. "The Malaysians are negotiating for their tariffs on cars. We should make the same effort (to protect industries to be affected)," he said.

It was learned that the petrochem industry will also eventually push for tariff protection for the ethylene and propylene products of naphtha cracker plants in the country. The first naphtha cracker plant in the country has yet to be put up.

Local petrochem industry players will apparently push for a five-percent tariff on the naphtha cracker produce. The first naphtha plant will have a capacity of 600,000 to 700,000 tons per year to be operational by mid-2004 to 2005.

The government, through its petrochemical subsidiary PNOC-Philippine Petrochemical Development Corp. (PPDC), is eyeing a 34-percent stake in the cracker project. But the company is willing to reduce its equity to give way for more private sector participation.

Last year, a memorandum of agreement was signed by 11 prospective foreign and local investors of the project which include Petrocorp, Petron Corp., Bataan Polyethylene Corp., Philippine Resins Industries Inc., Itochu Corp., D & L Industries, BP Amoco, Sumitomo Corp., Mitsubishi Corp., Mitsui and Co., and Marubeni Corp.