Singapore, Indonesia, Malaysia, the Philippines, Thailand and Brunei are the six members of the Association of South East Nations (ASEAN) that agreed, under a free trade pact to remove import duty for a range of products, including polyolefins, starting 2010. South East Asia's plastic resins makers are readying for the enforcement of a zero tariff within the region from the beginning of 2010. However, several players are hoping that its' implementation will be deferred to 2015, as per ICIS. Apprehensions that each one could lose market share its member country makes the plastics players cautious of the removal of trade barriers. The addition of new capacities by 2010 in the region's largest resins production bases Singapore and Thailand has augmented these concerns. Singapore is estimated to have a total of over 2 mln tpa of PE capacity and over 1 mln tpa of PP capacity when ExxonMobil starts up its new pants by 2011. Thailand is expected to increase polyethylene (PE) capacity by 88% to 3.6 mln tons and polypropylene (PP) capacity by 56% to 1.95 mln tons by the end of 2010, with the start up of PTT Chemical and Siam Cement 's new plants.
The zero-tariff policy could be reversed soon after its implementation when an affected player complains. In the Philippines, if any of the local resin producers were to apply for a 'temporary restraining order' in court, the current 10% duty structure might be reinstated. Indonesia may also restore its 5% duty on polyolefin imports from ASEAN, in the event that a zero import duty policy renders the local polymer makers uncompetitive. The government is expected to evaluate the issue in Q1-2010. If Indonesia reinstates the 5% duty on resin imports from ASEAN neighbours, Malaysian producers are expected to evaluate how its counterparts in Thailand and Singapore respond, before they decide on an appropriate response. Thai resin producers were unlikely to lobby for a retaliatory measure if Indonesia reinstates the 5% import duty on ASEAN polyolefins, as their bigger concern is competition from the Middle East. Middle East polyolefins imports are subject to a 5% duty in Thailand. This coupled with their lower feedstock costs make Middle East suppliers a formidable competitor to Thai producers. If Indonesia or any ASEAN member country decides to defer the zero duty, resins producers in Singapore would look to the local government to further negotiate for a favourable outcome.