丸紅は26日、石油化学大手チャンドラ・アスリ事業から撤退すると発表した。株式24.59％などをドイツ系コメルツバンク・インターナショナル・トラスト（シンガポール）に売却する一方、同社が持つムシパルプ事業関連の株式を取得しインドネシアの事業を再構築する。今回の取引を前提として、丸紅は同日発表した2005年３月期決算で213億円の税引き前損失を計上した。
丸紅によると、コメルツと26日に基本合意に達しインドネシア政府などの許認可取得を経て２〜３カ月後に正式な契約を締結する。1995年に操業を開始したチャンドラ・アスリに対する丸紅の投融資総額は800億円に上る。今回コメルツ社に譲渡するのは、チャンドラ・アスリ株のほか、同社向け５億8,100万米ドルの融資。譲渡額は明らかにしていない。
| four giant
projects -- the Paiton and Gunung Jati B power-generating projects, the petrochemical projects in Tuban and the Chandra Asri petrochemical project. Tanjung Jati B インドネシアのTanjung Jati B石炭火力発電所 Paiton I and II electricity provjects in Java パイトンI石炭火力発電所（発電容量1,230MW） パイトン II 石炭火力発電所( JAVA POWER: 1,220MW) |
Copyright © 1997 by the American Chemical Society
Indonesia offers a rich picking of entertaining anecdotes about its businesses and industry. The list is so long that one could be tempted not to take Indonesia seriously. In fact, some Indonesians laugh heartily when relating the tales.
For instance, although cars are manufactured in Indonesia, the government-appointed "national car" is imported from South Korea, made by Kia Motors, a company flirting with bankruptcy. Earlier this year, what was thought to be the world's largest gold deposit at Busang was exposed as the largest mining fraud in history. And three to four years ago, a businessman--sent to jail for diverting hundreds of millions of dollars of state-bank funds that he said he was using to build petrochemical plants in western Java--was often seen playing golf or going to his office while supposedly serving his sentence. He eventually "escaped."
These stories may distract an observer from a country that has caught the interest of the international business community. For the past few years, Indonesia has registered an excellent economic performance and a surge in foreign investment. The outlook is exuberant. Activity is booming right, left, and center, and nowhere is that more true than in the chemical industry.
Last year, Indonesia's economy grew 7.8%, and it will repeat that performance for the next three years, according to World Bank forecasts. Between 1991 and 1995, Indonesia's gross domestic product (GDP) grew more than 7% per year, according to a recent report by Mitsubishi Chemical's subsidiary Martech Inc. GDP per capita is approaching $1,000, although a depreciating rupiah lately has been altering that figure. And Indonesia's stock market has been among the best performing in Asia for the past year.
Chemicals these days are the hottest industrial sector for foreign and local investors alike. Last year, the chemical sector attracted about 35% of all foreign investment in Indonesia, says Roderick Brazier of Jakarta-based Castle Group, a market-entry consulting firm. And Indonesia's Investment Coordinating Board, which approves all investments made in the country, reports that in the first half of 1997, petrochemicals represented 43% of a total of $16.2 billion of foreign investment in Indonesia. Domestic investment in petrochemicals approved by the board represented 20% of the total value of the projects reviewed in the period.
It is a tribute to the Indonesian market that a chemical industry is emerging so rapidly when less difficult operating environments can be found next door in Singapore, Malaysia, or even Thailand. Japan's Martech predicts in its report, "Petrochemical Industry in Southeast Asia 1997," that polyethylene demand in Indonesia will grow from 1.38 billion lb this year to 1.88 billion lb in three years. Similarly, it expects demand there for polyvinyl chloride to grow about 30% from 660 million lb this year to more than 880 million lb in 2000. As for the fiber intermediate purified terephthalic acid (PTA), Martech forecasts this year's demand of 3.75 billion lb will grow 29% to nearly 4.85 billion lb in 2000.
Growing household incomes in Indonesia also are injecting new life into the agricultural sector, which employs most Indonesians. Spurred by an expanding and increasingly affluent urban middle class, demand for food is growing in quantity, quality, and variety, says Gilles Issaly, head of agrochemicals at DuPont in Jakarta.
DuPont expects that the market for fungicides, herbicides, and insecticides will grow from about $235 million this year to $312 million within five years, representing an annual growth of 6 to 7%. Although insecticides account for the bulk of this market, sales of rice herbicides are rising fastest, from about $10 million this year to $26 million in 2002.
In view of market prospects, DuPont has begun production in Indonesia in an 80-20 joint venture with local partner Maspion. In July, production of its locally sold herbicides began at the $10 million plant located in Surabaya, on the eastern portion of the island of Java. Although there is a problem with herbicide poisoning in Indonesia, Issaly explains at length all the measures that DuPont takes to educate farmers on the proper use of its products. He says DuPont also has built public baths in villages around Indonesia to make it easier for farmers to wash after treating their crops.
Much of the country's petrochemical industry presently is concentrated about 85 miles west of Jakarta, in the Merak peninsula. Vividly illustrating the rapid growth of the area, executives of fiber-intermediate-producer Bakrie Kasei report that although one or two petrochemical plants were operating in the area in 1990, there now are more than 40.
Bakrie Kasei itself embodies one of Mitsubishi Chemical's largest overseas investments. Mitsubishi's partner is the local group Bakrie Brothers. The joint-venture company now produces up to 1.3 billion lb of PTA per year locally, as well as some polyethylene terephthalate. Bakrie Kasei's president, Yoshiaki Shiratsutchi, says production of PTA started slightly ahead of schedule in February 1994.
Santoso W. Ramelan, Bakrie Kasei's chairman, points out the venture was sixth in line to build a PTA plant in Indonesia. However, as other projects were abandoned, Bakrie Kasei made its way to the top of the list to become the first PTA project on the list to be implemented. Ramelan, who is a senior executive in several of Bakrie Brothers businesses, says the government looks favorably upon the group partly because its management is ethnic Indonesian.
Japanese trading companies are particularly active in Indonesia. And in the chemical and petrochemical sector, they seem to be part of most deals. Executives of Japanese trading company Marubeni say Indonesia represents Marubeni's third biggest foreign "risk exposure" in the world--trading company jargon for how much the company stands to lose in Indonesia if its investments, loans, and loan guarantees were to fall through. It is a similar story at Mitsui & Co. where Sentaro Yamazaki, the Jakarta-based executive who oversees the chemical business, says Indonesia contains the firm's biggest risk expense outside of Japan, at $2 billion.
U.S. and European firms also are quite active. Ventures are under construction or up and running by BP Chemicals, DuPont, Amoco Chemical, and Arco Chemical, to name a few.
Bank of America became heavily involved in Indonesia's chemical sector last year as a financial adviser to Trans-Pacific Petrochemical Indotama (TPPI), a new company that is building a $2.3 billion petrochemical complex in Tuban, on the northeast coast of Java. The complex will require more than $3 billion in investment if downstream facilities are included. TPPI will feature Indonesia's second ethylene complex. The first, Chandra Asri, near Merak, came on-line in 1995 after enduring long delays during its construction.
About 75% of TPPI's planned facilities will be financed by international loans, and much of them will be underwritten by BA Asia, a Bank of America merchant banking arm. Robert A. Johnson, a Hong Kong-based chemical engineer and BA Asia project financier, comments, "We have loan commitments for $1 billion already." He adds that construction is under way, with the facility scheduled to start operating in 1999. He expects no delay or interference from authorities.
TPPI's Tuban project is impressive. Within three years--on what until recently was a greenfield site devoid of significant infrastructure--an integrated petrochemical facility will be producing olefins, aromatics, and downstream chemicals. Initially, ethylene output will be 1.5 billion lb per year. According to Johnson, TPPI will meet about two-thirds of its feedstock requirements by using condensate from Pertamina, the state-owned oil company. This is unlike the Chandra Asri complex, which uses mostly imported naphtha to make ethylene.
The main sponsor of TPPI, with a 70% stake, is the Tirtamas Group, a large Indonesian conglomerate with close ties to the family of Indonesian President Suharto. Another 20% stake is owned by Siam Cement, Thailand's largest business group. The other partners are Japanese trading companies Nissho Iwai and Itochu, which have a central role in orchestrating the downstream portion of the project. The U.S.'s Koch Refining is also likely to acquire some equity, says Johnson. Engineering will be mostly by U.S. firm Stone & Webster.
A seemingly well-thought-out project such as TPPI's in Tuban gives Indonesia's chemical industry an aura of reassuring familiarity. Much like most successfully financed projects around the world, it is built on the conservative assumption of no tariff protection, says Johnson. Moreover, its justification is a combination of familiar rationales: market, feedstock, and integrated design. Johnson is convinced TPPI will be one of the most cost-competitive complexes in the world.
Unlike the Tuban project, which so far is proceeding more or less as planned, the history of Indonesia's chemical industry is not so smooth.
Pertamina originally was responsible for managing the growth of industries that depend on oil and gas feedstocks. But a scandal in the mid-1970s, in which several billion dollars were lost, caused Pertamina to be stripped of some of its clout and influence. Fertilizer producer Pupuk Kaltim was born out of this crisis, and it had a rough beginning.
Trading company Mitsui had a difficult time in Indonesia at first. In the 1970s, the company became involved in eight chemical joint ventures with Indonesian partners, says Yamazaki. "Most of these eight joint ventures suffered losses," he says, and as a result no more joint ventures were established until five years ago.
Chandra Asri is probably most illustrative of the difficulties that the country's chemical industry has had to suffer. The government halted construction of the complex for almost two years after all the necessary funds had been borrowed. That two-year delay was costly--$500 million is the company's estimate for losses, including currency fluctuations, interest, and lost revenue.
But these fits and starts that Mitsui, Pupuk Kaltim, and Chandra Asri experienced should not detract from the point that Indonesia's chemical industry has been developing rapidly in the past few years. The environment has changed. For Pupuk Kaltim, the collapse of the Soviet Union has changed the world fertilizer market. For other firms, investing in Indonesia has simply become more attractive.
Jackson Yu, a vice president at consulting firm SRI International, Menlo Park, Calif., cites a series of factors that have helped the Indonesian industry in recent years. He says the government has abolished some foreign ownership limitations, reduced tariffs on more than 700 consumer and capital goods, removed minimum investment levels, and eliminated the requirement that foreign investors operate in an industrial park. He adds that the corporate tax rate has also been reduced, but that "to offset this tax decrease, the government removed the tax deferral it allowed on capital goods imported as part of an investment."
The experience of Salim Group's involvement in the chemical sector and its propensity to commit to increasingly larger investments provide an example of the sort of thinking behind some of the projects being considered. Salim is Indonesia's largest business group, with annual sales of about $20 billion, or more than 10% of Indonesia's GDP. About two-thirds of the group's business is conducted in Indonesia.
Salim's chemicals division president and chief executive officer, Hartono Gunawan, relates that in 1984 Salim acquired a food company that had some chemical business. As Salim realized links with some of its manufacturing businesses, it gradually began to build more chemical plants. Today, Salim operates or has stakes in plants producing polyethylene, alkyl benzene, polyvinyl chloride, caustic soda, and styrene, as well as monosodium glutamate and pharmaceuticals.
"We're basically capturing business opportunities," says Paulus I. Setiawan, deputy group general manager of petrochemicals at Salim. "There is big demand here--population growing at 2 to 2.2% per annum; GDP is growing 7 to 8% per annum. So the obvious thing is to put a downstream unit next to the customer, which can tap all of this demand."
In the process of building petrochemical plants, Salim has established relationships with several international companies. Among them are BP Chemicals, Dow Chemical, and Japanese trading companies Tomen, Mitsui, and Sumitomo. This stable of ventures consumes olefins that in large part have to be imported from abroad. Gunawan notes that $100 million annually could be saved in transportation costs alone if Salim had access to a domestic source of ethylene.
Plans are under way to build such a plant. Salim--together with BP Chemicals, Tomen, Sumitomo, Nichimen, and Mitsui--is studying the possibility of building a naphtha or condensate cracker capable of producing at least 1.5 billion lb per year of ethylene. Setiawan says that, unlike TPPI's situation, only a cracker will be built because most of the downstream facilities already exist. The investment would be about $1 billion.
Official announcement of the feasibility study was made in January. However, it appears that Salim and some of its partners had been considering the idea for an even longer time than has TPPI. Mitsui's Yamazaki says partners are currently discussing how to split the equity. He adds that it is also necessary to coordinate with Chandra Asri so that both crackers can operate smoothly in the future. According to several recent press reports, firms in the Salim Group and Chandra Asri investors have exchanged equity, but none of the entities involved would officially confirm this.
Salim's Setiawan insists there is a need for the Salim-BP cracker. He says an official announcement that the companies will proceed with the project is "imminent." The announcement will be followed by an international "road show" to gather loan commitments for up to 75% of the cost of the project. The British financial firm Schroders-Indonesia has been retained as financial adviser, he says.
Moreover, Salim recently obtained a license from the Investment Coordinating Board to build its project. Although encouraging, the development is not necessarily all that significant because obtaining licenses tends to be not much more than a formality in Indonesia. Companies often apply for licenses before they have even fully decided to build a project, says Hideo Tokuya, Jakarta-based general manager of chemicals at Marubeni.
Citing the growth of demand in Indonesia, Setiawan says the domestic market alone in 2001 will absorb the output of at least three crackers in that country. And by 2005, he says, Indonesia will have room for a fourth facility. Making his case for the Salim cracker even stronger by alluding to a domestic source of feedstock, he says partners are "now thinking to produce naphtha by the means of splitting [locally sourced] condensate." Setiawan adds that the Salim cracker will also import naphtha to "increase its comfort margin."
What Setiawan does not say is that the sourcing of raw materials from state-owned Pertamina is not a straightforward process. Over the past few decades, off-take agreements with Pertamina have been linked to instances of high-level corruption and nepotism, according to Far Eastern Economic Review journalist Adam Schwarz, in his book on Indonesia, "A Nation in Waiting." Having alternate sources of supply would therefore appear to make sense.
As the sobering episode of the birth of Chandra Asri has shown, there is a large element of unpredictability in establishing a large petrochemical project in Indonesia. To some extent, one cannot tell whether a project will indeed be implemented until it actually starts to produce. Much of this randomness originates from the government, so whether Salim's project will be implemented soon depends to some degree on the attitude of the authorities.
But the message there is reassuring. "Look at ethylene balances. We need to build these new crackers--TPPI and Salim," says H. Ahmad Gazali, director for the chemical industry at the Indonesian government's Ministry of Industry & Trade. A ministry background paper prepared in June with the help of Japanese foreign aid outlines the government's positive attitude toward petrochemicals.
First noting that basic chemicals play a central role in industrial development, the paper describes broad policy objectives. However, the paper is not specific on any new incentives or policies that the government might adopt to help further development of the industry.
"There is no tax holiday in Indonesia," says Gazali. "But depending on the project, we might offer some incentives." He also expresses a bit of displeasure over the heavy involvement of trading companies in development of the chemical industry. "There is little R&D performed in Indonesia, because it is the traders that develop the projects. If there was an R&D component to the investment, we'd provide incentives," he says.
Mitsui's Yamazaki offers a mixed review of government policies toward the chemical industry. On the one hand, he says, there is no master plan. As a result, it is left up to companies to build things such as jetties, to secure electricity, and to buy land. "Not like in Singapore, totally opposite," he says. He refers to the cluster of chemical companies near Merak as a "coincidence" rather than the result of an overall plan.
"The government has not helped, generally," he says. But he can nonetheless point to a few instances of government support for the industry. Corporate tax was recently reduced to 30% from 35%, he says. Additionally, some struggling chemical companies have at times benefited from narrowly targeted tariff protection.
Much has been made of how corrupt the Indonesian government is. It regularly comes near the top of regional rankings of corrupt governments, attracting much media attention in the process. Surprisingly, some executives appear not to be too concerned about this. One foreign executive tells C&EN: "I've been posted in other countries. Sure, [government officials are] corrupt here, but at least it is organized. There are established rates, it is clear who gets what and what the results will be. And once you've paid, you indeed get the results." Another executive, whose job is to select investment opportunities among the countries of Southeast Asia, similarly shrugged off the problem: "It's okay. We can learn to live with this."
Corruption appears to have a more sinister side where environmental protection is concerned. One plant manager says it is normal practice to pay off Indonesian government officials in charge of enforcing environmental standards because compliance procedures are cumbersome and time-consuming. On the other hand, unlawful emissions of harmful chemicals do not necessarily result from these practices. "If a plant is found to be polluting its surroundings, the farmers, fishermen, or tribesmen living nearby get furious and quickly launch an assault on the plant carrying spears or traditional weapons," he says. "So you know immediately when you have a problem."
The combination of corruption and lack of infrastructure, however, raises the cost of doing business in Indonesia and therefore reduces the country's competitiveness with its regional neighbors. And it's not surprising that in some industries the cost of making additional payments to government officials or to individuals with close links to the center of power can eat into the profitability of firms.
In addition to these problems, another difficulty of operating in Indonesia is retaining skilled workers. Chandra Asri's manager of public affairs, Sharif S. Beck, says his firm is a training ground, that workers are often poached by other companies opening up chemical plants in Indonesia. Bakrie Kasei reports a similar situation.
The companies say this is happening despite offering their staff very attractive compensation packages, including free company housing. Indonesia's chemical industry is young, they point out, and experienced labor is fully employed by the existing chemical plants. New facilities typically pay higher salaries than the going rate, hoping to lure experienced staffers into switching jobs.
Competition from foreign countries is another challenge in operating in Indonesia. When producers around the world have difficulty getting rid of their stock, ships often make their way toward Indonesia's friendly markets. Tariff protection shields Indonesia to some extent, but not all chemicals are protected in this way. In addition, several executives confirm to C&EN that the country's geography of thousands of islands indeed makes it the ideal staging ground for rampant smuggling activities.
As in other countries, general conditions in the chemical industry also affect companies. For instance, Bakrie Kasei is bracing itself for additional supplies of PTA on the market when new plants come on-line soon. Similarly, Tri Polyta, a sister company of Chandra Asri because the largest investor in both is Barito Pacific, is suffering from a downturn in the price of polypropylene. The company is particularly hard hit because it does not produce much other than polypropylene, and it is dependent on outside suppliers for its raw materials. Hans Mawenkang, Tri Polyta's plant operation manager, says it would make sense to merge the two companies. Beck says this would be impossible, because Tri Polyta is listed on the stock markets in Jakarta and New York, but Chandra Asri is privately held.
Political uncertainty is also on the minds of at least some chemical companies when considering significant investments in Indonesia. There have been numerous editorials, news items, and even books over the past several years written about the lack of a clear succession after Suharto--who has been president for 32 years--leaves his post. Recent riots offer a clue, but an idea of how bad political violence can get in Indonesia is provided by the period when Suharto assumed power from his predecessor Sukarno. About 300,000 Indonesians died at that time in a purge of the Communists, who had been accused of fomenting a coup. For a period of several months in 1965, the country was in complete turmoil.
Consultants at Castle Group completely dismiss the idea that total chaos could occur anytime soon in Indonesia. "There is no Sarajevo or Cambodia here," says Richard S. Howard, Castle's head of research. His colleague, consultant Hidayat Jati, says the economic progress of the past few years has given Indonesians in all walks of life a stake in seeing progress continue: "People may argue here about techniques, but not about the aims of economic policies. The model works, more or less."
Castle's consultants point out that signs of a breakup in law and order will cause the military to intervene. They say the military is a "strong institution." Mitsui's Yamazaki concurs, believing that the military can be counted on to maintain law and order within the country should social order break down.
But Indonesia apparently isn't such a bad place. Although Marubeni has been embittered by its participation in the Chandra Asri saga, the firm is returning to a positive outlook on Indonesia. Question Tokuya about what will happen in Indonesia after Suharto, and he says: "I don't expect big changes. We're thinking about new projects. We have a few plans under consideration."
Copyright © 1997 by the American Chemical Society
Cruising down the highway at about 100 mph--which is not uncommon in Indonesia--it takes a bit less than one and a half hours to reach Chandra Asri from the center of Jakarta. The complex is in the heart of Indonesia's main petrochemical cluster, in the Merak peninsula, by the sea west of Jakarta. On a clear day, one can see the volcano Krakatau, which exploded in 1883.
Once at Chandra Asri, one encounters gleaming facilities that began commercial production in May 1995. Built at a cost of $1.2 billion and making use of engineering firm ABB Lummus technology, Chandra Asri incorporates a cracker with an annual capacity of 1.12 billion lb of ethylene and 529 million lb of propylene. It also has a polyethylene unit that can produce 660 million lb annually and a wastewater treatment facility that meets world standards, according to Bob Payne, an Australian who is a construction manager for Chandra Asri.
Managers and workers at the site seem proud to be operating the first olefin complex in Indonesia. "There had been a total of nine licenses issued for petrochemical complexes to other companies before us," says Sharif S. Beck, manager of public affairs at the complex. "We're the only [company] to have actually gone ahead with implementation." Adds his assistant Emir Faisal, "A few years ago, I never would have believed that Indonesia could have facilities such as these."
But there's a complicated story behind the project. And that story shows why, despite Chandra Asri's being technically operational, it's far from having become the resounding commercial success that its sponsors had originally hoped.
Chandra Asri is essentially a 75-25 joint venture between Indonesian and Japanese investors. Of the Japanese, Marubeni Corp. has the bigger share, at 17.5% of the total; the other 7.5% Japanese-owned stake is held by Showa Denko. The main Indonesian investor is the Barito Pacific Group, which is also an important producer of wood pulp. Chandra Asri is well connected. Its chief officer, or "president commissioner," is Bambang Trihatmodjo, Indonesia's President Suharto's son.
When the original plans were made in 1990, the promoters envisaged an ethylene capacity of 1.5 billion lb per year, says Hideo Tokuya, general manager of chemicals at Marubeni in Jakarta. A total investment of $1.7 billion was foreseen for the entire complex. And, according to Chandra Asri's project development director, Tom Jones, an American who has been with Chandra Asri from the start, an aromatics and a polypropylene unit were to be part of the package.
Unfortunately, in 1991 the Indonesian government ordered that construction of the Chandra Asri project be halted. "We were 60% done by then," says Jones. Construction had begun the previous year. Authorities were reportedly acting on a World Bank report that Indonesia's foreign debt exposure was getting too high.
Construction was restarted almost two years later, Beck says. Chandra Asri officially says restructuring the debt is what did the trick. According to Marubeni officials, this was accomplished by the Indonesian investors' move to create an overseas corporation in Hong Kong. They channeled funds into this shell company, which became the main sponsor of the project. In this way, Chandra Asri became a "100% foreign-funded" investment. Additionally, Chandra Asri's sponsors agreed to reduce the scope of the project. The planned ethylene capacity was lowered to 1.1 billion lb per year, and plans to implement the polypropylene and aromatics units were dropped.
The halt in work was traumatic for Chandra Asri. Construction was financed largely through yen loans, and the freeze coincided with a period of record highs for Japanese currency. The freeze also meant that interest charges built up for a longer period, and cash flow was delayed. Adding in all these costs, construction of the Chandra Asri complex cost $1.7 billion, Beck says, which is just as originally planned. However, $500 million worth of capital equipment had been stripped from the original plan. Beck notes that if the cost of servicing the debt is excluded, Chandra Asri today is a profitable concern.
Another exacting repercussion, which could not have been predicted at the time, was that the project came on-line at a time of depressed petrochemical prices, just after a worldwide surge that Chandra Asri narrowly missed. Had the project come on-line at the time that was originally scheduled, it would have captured these high margins, says Jones.
The Indonesian government has provided some relief to Chandra Asri since it became operational. Last year, it imposed a tariff of 25% on imported ethylene to help convince polyethylene producer Petrokimia Nusantara Interindo (Peni) to source its ethylene from Chandra Asri. Peni's main shareholders are BP Chemicals and Indonesia's Salim Group. Chandra Asri did not come on-line at full capacity, partly because orders from Peni weren't placed. The government also has imposed tariffs on propylene.
Chandra Asri currently is expanding operations. Basically, it will implement the original design of the petrochemical complex, says Jones. Capacity will be boosted to 1.5 billion lb per year of ethylene and 728 million lb of propylene. Another polyethylene unit with an annual capacity of 440 million lb will be added. Butadiene and polybutene units will be installed, and a 400 million-lb-per-year polypropylene unit will be set up.
"One could write a book about the history of Chandra Asri," says New Zealander Beck, a resident of Jakarta for 18 years. But he himself prefers to do research for a book about the city's night life.