Another hurdle for JG Summit Petrochem

17-Feb-05

JG Summit Petrochemical Corp., a joint venture between JG Summit Holdings and Marubeni Corp. of Japan plans for a proposed loan of US$300 million for the naphtha cracker facility in Batangas City- the country’s first ever naphtha cracker facility. The proposed facility would start commercial operations by the first half of 2008 with a capacity of 350,000 metric tons. JG Summit is hard pressed to meet the deadline on the closure of a loan, and has informed the Department of Trade and Industry (DTI) that is has moved back the financial closing of a loan for its proposed naphtha cracker facility to December this year instead of June. JG Summit Petrochem made representations during a public hearing that the financial closing for the cracker would be achieved by June. The Tariff Commission, and the National Economic and Development Authority (NEDA) have opposed the proposed extension to December. Last December, the TRM agreed to give JG Summit Petrochem another 6 month reprieve to firm up plans to put up the country’s first ever naphtha cracker. A committee created by the technical working group of the Tariff Commission will review and evaluate the milestones submitted by JG Summit Petrochem for its naphtha cracker facility that was used as the basis for the imposition of higher tariff on certain petrochem imports. President Arroyo issued EO 161 maintaining high duties on 11 petrochem products and exempting the industry from the regionwide tariff reduction program under the Asean Free Trade Area-common effective preferential tariff (AFTA-CEPT) in 2003 and 2004. The EO brought down the rates of midstream products such as polymers or resins to 10% from 15% at the same time raised the rates on finished plastic products of downstream industries 10% from 7%. The extended protection lapsed last December. If the review committee approves the milestones of JG Summit Petrochem, President Arroyo should issue an EO extending the higher tariff on certain petrochem imports for another six months. Otherwise, an EO would be signed reverting back the duties on these petrochem imports to the AFTA-CEPT rate of 0%- 5%.