Tariff body presses JG Summit over naphtha cracker proposal

Plans of JG Summit Petrochemical Corp. to put up a long-delayed raw material facility will be subject to government inspections amid a review of the company's tariff protection. The Tariff Commission sought the Gokongwei-led firm's permission at a hearing on Monday to visit the naphtha cracker site. The firm earlier said it would start development this month. This firm — represented by the Association of Petrochemical Manufacturers of the Philippines — is opposing the downstream plastic industry's petition to eliminate tariffs on imported resin, which competes with JG Summit Petrochemical's output. JG Summit Petrochemical claims the protection is necessary to make the proposed naphtha cracker plant, which will supply raw materials to its resin factory, viable. "What is the plan for the naphtha cracker? It's been a nagging issue for eight years already," Tariff Commission Chairman Edgardo C. Abon said at the hearing, adding that his staff would have to make a visit before deciding. The manufacturers' group is blocking the Philippine Plastic Industry Association's request to eliminate the 15-percent tariff on resin imported outside Southeast Asia. Patrick Henry C. Go, JG Summit Petrochemical general manager and first vice-president for sales and marketing, reiterated that groundbreaking would happen this month and the plant should be up by mid-2013. Negotiations with the Korean Export Import credit agency, which is funding the proposed P34.38-billion plant in Batangas, are ongoing while other financing options are being explored, Go said. JG Summit Petrochemical claims plans had been delayed due to the credit crunch arising from the global economic downturn. Tariffs on competing resin imports should remain at 15 percent even as the plant is yet to begin local production to guarantee JG Summit Petrochemical's investment, Go said. Plastic makers, meanwhile, reiterated their arguments for lowering resin tariffs, saying their industry will need cheaper imported resin to compete with finished plastic goods from abroad while local production remains paltry without a naphtha cracker. Shares of JG Summit Holdings, Inc. — the petrochemical firm's parent — rose by 1.8 percent to P5.60 apiece.