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The minister of state-owned enterprises said on Monday that next year’s planned IPO of PT Krakatau Steel could be jeopardized if the government is unable to delay implementation of the Asean-China Free Trade Agreement.

Mustafa Abubakar said he had asked President Susilo Bambang Yudhoyono to delay implementation of the trade deal due to concerns that the elimination of import tariffs on Chinese steel would threaten the state-owned steel maker.

“I hope the government will be able to negotiate and postpone the [implementation of the] FTA,” he said. “We really hope the FTA can be delayed in order to let Krakatau’s planned IPO go ahead.”

China signed a preliminary pact for a free-trade deal with the 10 members of the Asean, including Indonesia, in November 2002.

The parties agreed to gradually scrap import duties on thousands of products by 2012, with import duties on Chinese goods, including steel, to be reduced to between zero and 5 percent from Jan. 1.

Mustafa said he had discussed implementation of the deal with members of the House of Representatives’ Commission VI, which oversees trade, industry and state-owned enterprises, and they had strongly recommended that implementation be delayed.

Nevertheless, Krakatau president director Fazwar Bujang said on Monday that he was still upbeat about the IPO, which is scheduled for October. The company is expected to float 20 percent to 30 percent of its total equity and expects to raise Rp 3.5 trillion ($371 million).

Fazwar said Krakatau was “welcome and open to committed investors,” possibly including Nippon Steel, if the Japanese company agreed to buy a pre-determined stake during the IPO.

The money raised is expected to help Krakatau finance the purchase of a blast furnace and additional infrastructure worth $450 million. The infrastructure expansion is aimed at quadrupling Krakatau’s production capacity from the current 2.5 million tons per year to 10 million tons a year within five years.

Krakatau received approval from the House to list in October 2008, after eight months of delays by the House. But the company was forced to delay the IPO because of the global financial crisis. Janeman Latul & Aditya Wikrama