Tuesday, 23 September 2014


The Federation of Indonesian Chemical Industry [FIKI] felt the need for Government support to businessplayers the lessen dependency on imported components. The support was also needed to keep chemical producers from going out of business. So far imported raw materials from China was still very cheap, so businessplayers tend to change from producers to traders. “It is much les costly to be traders,” Hidayat Nyuakman, Chairman of FIKI disclosed to Business News [15/8].

The industry had to secure supply chain of raw materials, especially the refinery line in chemicals which gas or petro-chemicals. The domestic industry did not have much choice but to facilitate. Infra structure procured by the Government would be supportive to domestic industry, “We need harbor service, good road access etc supported by the Government.”

The potential of chemical industry was not ignorable, coal based or gas based; unfortunately it was not supported by applied technology. Many handcap was felt because there was no support of advanced technology. The domestic industry had not enough supply of components like ethylene of propylene. To illustrate, PT Chandra Asri Petrochemicals Tbk produced only around 600.000 tons per year, but Chandra Asri had been established around 30 years ago. The chemical industry in Thailand had only been set up around 5 years, but the production capacity had reached millions of tons per year, way above Chandra Asri’s production output.

80 percent of chemical raw materials used by the domestic were imported. The exporter countries for petrochemicals were in the Middle East, but there were also processed chemical materials imported from Japan or South Korea. FIKI saw the need of business networking and partnership with exporter countries. “The overseas producers needed a market they would be interested in investing” Hidayat remarked.

Toward the Europe Economic Community [EEC 2015] the domestic resources and market were sought after the investors. The condition should stimulate competition for growth. Indonesian dependence on imported chemical raw materials was still high but it could be compensated by support of fiscal and tax holiday. “the upstream industry need fiscal support”

The Ministry Industry in 2012 disclosed growth of the down stream petro-chemical industry at 11% while the upstream industry grew by 9% while the upstream industry remained to grow by 4%.

The condition was contrast with Indonesia, a country rich in natural resources but inferior by management. In fact with abundant natural resources, Indonesia did not have to import petrochemical raw materials. “We are rich in natural resources to support petrochemical industry like natural gas and refinery. If the Government maximized exploration of natural resources, dependency on imported raw materials would be lessened and investment could be enhanced.

Wide discrepancy between upstream and downstream made it hard for expansion. Investment climate for the upstream sector must be bettered. “Our petro-chemical industry is still fragile. Strong commitment is called for to improve it or else we would not only lose competition at Asean level but sustainability at national level is also under threat”

Meanwhile the Directorate General of Manufacturing Industry stated that today the Government through the Ministry of Industry was scheming up a Bill on Chemical Products to be discussed at the National Legislation Program 2015 in House. “This Bill is expected to reform management system in national chemical industry to be in accordance with international regulations,” Harjanto disclosed to Business News [14/8].

Although slowing down, export increase of national industry of January-May 2014 was posted at 2.95%. the figure was calculated from ratio of same period in 2013 which contributed 66.32% to national economy. The condition was a good start for industry growth including of national petrochemical industry.

The Chemical Metal Industry was a strategic sector which often served as reference in national industry growth. The chemical industry was closely related to production chain industry was closely related and raw material procurement for the down-stream industry like coating, electronics and automotives. 

Meanwhile in the metal industry sector the Government planned to enhance downstreaming plan for minery-based industry which would cold propel national economy through increase of added value, strengthening of industry structure, and opening of employment opportunities at home. The metal industry played its important role in the development of upstream industry especially automotives, aviation, machinery and infra-structure. (SS).

Business News - August 20, 2014  

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