Michelin to jointly develop synthetic rubber plant in Indonesia

Jakarta, Indonesia – The Jakarta Globe reports that, “Indonesian petrochemical producer Chandra Asri Petrochemical and French tire manufacturer Compagnie Financiere Michelin plans to develop a $435 million synthetic rubber plant in Indonesia. The plant will be run by a joint venture called Synthetic Rubber Indonesia, of which Chandra, through its unit Petrokimia Butadiene will own 55 percent stake and Michelin 45 percent. Chandra Asri is the largest petrochemical company in Indonesia and is controlled by tycoon Prajogo Pangestu.

Michelin is one of the largest tire makers in the world. “This initiative demonstrates Michelin’s long-term commitment to Indonesia,” Jean-Dominique Senard, chief executive and general managing partner of Michelin Group said in a statement on Tuesday. “Our continuing and significant investment in Indonesia shows that we are equally committed to Indonesia’s future growth, economic and environmental development,” Senard said. The plant will produce polybutadiene rubber with neodymium catalyst and solution styrene butadiene rubber. All are important feedstocks for the production of environmentally friendly tires. The products will serve domestic needs as well as those of export markets.

Chandra Asri president director Erwin Ciputra said construction of the plant is scheduled to begin in early 2015. “We have scheduled a financial decision, with all preparations completed, for 2014. Construction should commence in early 2015, so that it can be functional in 2017, with a production capacity of 120 thousand tons per year,” Erwin said. “The existence of SRI is expected to have a positive effect on the Indonesian economy by reducing import of tire manufacturing essentials and to increase export of tires,” he added. Erwin also added that Chandra and Michelin seek to secure tax incentives, such as a reduction on income tax and a tax holiday. Indonesia’s corporate income tax currently stands at 25 percent of total earnings. The government has set a policy that allows investors in projects of more than Rp 1 trillion ($88 million) to apply for a tax break, the benefit of which would be exempted for at least five years and a maximum of 10 years.

Mahendra Siregar, chairman of Indonesia’s Investment Coordinating Board (BKPM) praised the cooperation and pledged strong government support. “This project is a capital-intensive investment in high technology. The government’s responsibility is to make sure projects like these can be implemented smoothly and finished on time,” he said. Chandra and Michelin’s investment came as Indonesia’s automotive industry keeps growing and growing, thanks to the growing middle class and a price war between manufacturers, which has led to consistently cheaper cars. Indonesia recorded 1.1 million in car sales in 2012, and is on pace to meet that pace for this year. Chandra Asri’s stock declined 1.6 percent to Rp 3,100 on Wednesday at the Indonesia Stock Exchange.”