INDONESIA - The Chandra Asri Complex.

This is the biggest single venture to emerge out of the expansions launched in the early 1990s. It is a $1.88 bn olefins complex, the first of its kind in Indonesia, built in Merak, Cilegon, in West Java, as a JV called PT Chandra Asri. It began operations in 1995 with a capacity of 550,000 t/y of ethylene, 300,000 t/y of polyethylene, and 300,000 t/y of propylene. The complex has downstream units producing pyrolysis gasoline and a range of plastics and household products.

However, Chandra Asri is not competitive and has been a losing venture because the petrochemicals business in South-East Asia went into recession soon after it started up. As a result of net losses, it has accumulated a debt of about $1.35 bn - compared to $1.2 bn in early 2001. After a government intervention, ownership of Chandra Asri now is held 76.2% by the state's Indonesian Bank Restructuring Agency (IBRA) and 23.8% by a consortium led by Marubeni. Marubeni has an exposure to Chandra Asri exceeding $1 bn (see background in Vol. 56, DT No. 11).

Marubeni's involvement in Chandra Asri highlights the woes of Japanese trading companies duped by the corrupt members and business associates of the Suharto family (see Vol. 52, No. 11). These companies became heavily exposed to large-scale projects in South-East Asia. Many of their projects were frozen in the midst of Asia's financial crisis of 1997, which sent the Indonesian rupiah plummeting and left the economy in turmoil. Chandra Asri was forced to freeze an expansion plan, while others, such as the Tuban ethylene plant have been frozen since mid-construction. Japanese banks were also the largest lenders to the Indonesian private sector and suffered non-payment of loans during the financial crisis.

Chandra Asri's plants were built by Toyo Engineering as main contractor. Technology was provided by ABB Lummus Crest of the US. Financing included $1.4 bn in loans for the construction of the main plant from a syndication led by the Industrial Bank of Japan, Fuji Bank and Indonesian banks including Bank Bumi Daya. Marubeni also took part in the financing. Construction was started in March 1991.

PT Petrokimia Nusantara Interindo (Peni), a BP-controlled polyethylene producer and big ethylene importer, protested Suharto's tariff increase which forced Peni to buy ethylene from Chandra Asri. A compromise was brokered in June 1996 by Suharto's eldest son Sigit Harjoyudanto as he was a shareholder in Peni, along with Mitsui and Sumitomo.

Chandra Asri and Peni signed a five-year agreement, under which Chandra Asri was to supply half of Peni's needs. This was enough to keep Chandra Asri operating at 85% of capacity. By then, a 10 km pipeline linking Chandra Asri and Peni's plant had already been built.