Tariff support crucial for dev’t of petrochem sector

Government must provide tariff support to the petrochemical industry to ensure the sector’s development, according to a study by a leading economic think-tank.

The study, conducted by the Center for Research and Communication (CRC), cited how in other Asian countries, higher tariff served as a catalyst to the development of fully integrated petrochemical industries.

Taiwan, South Korea, Japan, India, Thailand, Malaysia and Indonesia, according to the study, granted initial tariffs ranging from 25-40 percent, much higher than the 15-percent tariff on polymer resins in the country.

The aforementioned countries presently have mature and integrated petrochemical industries, exporting their excess output of resins and plastic products.

The study points out that it is imperative for government to increase or at least extend tariffs on imported plastic resins as well as assist in the development of a naphtha-cracker plant, an essential facility in the production of petrochemical products.

The increased or extended tariffs must be in effect until such a time that a naphtha-cracker plant is fully operational in the country as the industry, being newly established, is still in its infancy and needs adequate time to develop the necessary expertise and expand domestic markets.

Aside from low tariffs, the domestic petrochemical industry is also bogged by the entry of "technically smuggled" resins which are done through Customs Bonded Warehouses (CBW) as some unscrupulous parties which are allowed to import such materials tax-free for use as a component in certain export products, sell them at the local market to the detriment of the domestic petrochemical industry.

Business groups have welcomed the results of the study, stressing the need to develop the domestic petrochemical industry, citing that it is vital to sustain healthy economic conditions.

Petrochemicals, says the CRC study, are widely used in almost all industries including automobiles, appliances, agriculture, fisheries and construction among others, highlighting the need for government to extend all the needed support to promote its development.