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Local iron and steel processing companies have called on the government to provide comprehensive protection for the entire domestic steel industry as the existing and planned regulations protect only the upstream sector.
The government’s recent plan to increase steel import duties under the Most Favored Nations (MFN) clause is seen as lacking protection for the downstream industry, the Indonesian Iron and Steel Industry Association (IISIA) executive director Hidayat Triseputro said in Jakarta on Tuesday.
The MFN import-duty rule was one of 13 Indonesian steel industry improvement programs agreed between the government and IISIA recently to curb rising imports of steel raw materials that hurt local producers.
‘We are proposing that the government harmonizes its protection simultaneously from the upstream to the downstream steel industry, because the downstream side is hampered by unfair trading and massive imports,’ Hidayat said.
According to his business group’s review, Indonesia should follow the example of iron and steel associations in other countries and regions, such as the US, Europe, Turkey and South America, which have issued petitions against China’s alleged unfair trade policy.
China, which is currently the world’s biggest steel producer, has been accused recently of dumping its steel globally following an over-capacity in its own industry amid its declining economic growth.
‘At the ASEAN level, there is an understanding that we need to issue a petition that there is unfair trade conducted by our partner in a free-trade agreement [FTA]. The process will take a quite long time, so we need to improve our own regulations,’ Hidayat said.
The MFN steel-tariff policy is expected to be imposed in the second half of this year in an effort to respond to the influx of imported steel, leading to a decline in local steel production of between 30 and 40 percent.
Among the countries not included in the MFN clause are China, Japan and Korea, while MFN countries include India, along with other countries in Latin America and Eastern Europe. The proportion of steel imports from MFN and non-MFN countries is 50-50, according to the Finance Ministry.
The MFN steel tariffs are expected to run alongside the implementation of a steel import duty hike, which was announced in May, to between 15 percent and 40 percent, up from between 0 percent and 5 percent at present.
As part of the efforts to boost local steel production, the policy package also requires the use of local steel products for infrastructure works funded by both national and local budgets.
Despite expecting a positive impact from the policy package, Hidayat said imports would continue to increase as imported raw steel was cheaper than locally produced steel, while demand for steel-related products was rising in the country.
According to Hidayat, the current domestic consumption of steel amounted to 14 million tons per year, which could only by filled by local supply of around 8 million to 9 million tons, with the remainder coming from imported products.
Also on Tuesday, Industry Minister Saleh Husin said the usage of locally made steel products should help the country to reduce imports in an effort to protect domestic industry, based on President Joko ‘Jokowi’ Widodo’s instruction that all state institutions and industries prioritize local content.
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