APHINDO : THE DOWNSTREAM PLASTIC MARKET STILL HIGHLY PROSPECTIVE

The Aphindo Association reported that domestic plastic consumption in Indonesia was still low compared to that in other Asean countries so there was wider market opportunities for the downstream plastic industry. Tjokro Gunawan, President of Aphindo stated on Monday (9/2). Thailand’s need was 50kg per year per capita, while Indonesia only 10kg. It proves Indonesia’s high potential because Indonesia’s population was equal to 60% of Asean population.

In line with the expansion in the upstream sector in this case the petro chemical industry dependency on import could be reduced. That was what being done by the petro chemical industry, they expanded and build new factories with investments worth billions of dollars till 2019. Tjokro disclosed that the capital investments originated from PT Pertamina (Persero) and PTT Global Chemical, PT Chandra Asri Petro Chemical Industry Tbk and PT PolytamaPropindo.

Pertamina partnership with a Thailand company to build an integrated petro chemical industry complex was worth USD 8 billion. Chandra Asri injected USD 1.3 billion at home to build a Styriene Butadinee Rubber (SBR) and increase capacity of Naptha Cracker plant. Meanwhile Polytrama would build an imported Propylene Receiver Terminal worth USD 10 billion.

Tjokro stated that Aphindo had proposed lowered income tax to the Ministry of Industry and the Association was asked to make detailed calculation. He had asked the Government to lower import tax for plastic raw materials to 5%. He said that the percentage was inclusive of business continuity on the upstream as well as downstream. Today the effective import tax was 10% which was regulated in the Regulation of the Ministry of Finance (PMK) No. 19.2009 on import tax of certain products.

The import tax as applicable today was rated as not hospitable to industry. The percentage was too high so price of imported raw materials was less competitive. The 10% import tax made importers refuse to import from Asean countries of ACFTA. Imported raw materials was not ignorable as supply from the domestic side was still not sufficient. Business expansion in the upstream sector needed time so the downstream industry must import to fulfill need. Import of PP this year was estimated at 700,000 tons while PE was around 500,000 tons while tye need for PP came to 1.5 million tons and 1.3 million tons for Pollitilena.

Tjokro felt that production cost was not advantaged by lowered world’s oil price that was happening in Thailand due to Rupiah depreciation factor.

Under the circumstances, business people at the downstream line were making adjustment of selling price up to 5%. The cause was not only Rupiah depreciation and import tax but also wages increase and inflation. The need for plastic at national scale this year was predicted at 3 to 4 million tons. The highest demand was still plastic bags and plastic bottles. Supposedly plastic material was replaceable by glassware, wood or metal. (SS)

Business News - February 13, 2015