Petrochemical Industry Also Needs to Be Protected from Import

The Jakarta Globe
July 11, 2024 | 8:47 pm
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(Photo Courtesy of Macrovector/Freepik)
(Photo Courtesy of Macrovector/Freepik)

Jakarta. The national petrochemical industry is also in need of protection from the rush of imported plastic raw materials just like the textile industry after the 2024 Trade Ministry regulation entered into force. This is crucial to ensure the sustainability of the domestic industry and also to convince companies who wish to make major expansions to meet the domestic demand.

The government today is seeking to protect the textile industry from import. Experts are saying that the petrochemical industry also deserves similar treatment. This is because the revisions to the 2024 Trade Ministry regulation --which detailed changes to import regulations -- prompted a rush of imported goods entering the domestic petrochemical industry, across all levels -- be it the upstream or downstream, according to Ahmad Heri Firdaus, a researcher at the think-tank Indef.

“We need to create business certainty that shows that government regulations are not easily subject to change. The petrochemical industry is quite specific, it needs raw materials, specific technologies, and manpower with certain skills. That is why we need to guard the petrochemical industry,” Heri said.

After the regulation entered into effect, Indonesia no longer requires imported goods to get technical considerations and recommendations from the Industry Ministry. Heri said imports should have required these recommendations before letting imported goods enter the country. Heri added that the revised regulation would weaken the petrochemical industry and hamper any potential investment. Even though the Indonesian petrochemical sector is in dire need of investments, as a number of its ecosystems still do not exist in the country

Heri called for the government to build better harmony between its regulations. The 2024 Trade Ministry regulation should refer to the 2015-2035 National Industrial Development Master Plan (RIPIN). In 2015, Indonesia launched a government regulation regarding this master plan. However, the 2024 Trade Ministry regulation does not mention taking into consideration this 2015 government regulation. 

“I think this Trade Ministry regulation has the potential to override the government regulation on RIPIN. It is crystal clear that the RIPIN urges Indonesia to strengthen its industrial structure and bring in a lot of investment. If there is a ministerial regulation that is counter-productive, it can be detrimental to our country,” Heri said.

The Indonesian Olefin, Aromatic, and Plastic Industry Association (Inaplas) also expressed their concerns. The import relaxation had caused a decline in production within the industry. 

"The economic conditions that have not improved after Covid-19, coupled with geopolitical tensions in Europe and the Middle East, have dealt a fatal blow to the domestic petrochemical industry. The effects remain until the upstream or downstream segments of the petrochemical industry send an SOS signal. The upstream sector imports raw materials following the relaxation. The downstream sector is also flooded with imports when the market demand weakens,” said Inaplas’ business development director Budi Santoso Sadiman.

Budi said the upstream petrochemical sector should be capable of meeting its raw material needs using domestic supplies. But rather than prohibiting imports completely, the government can limit them instead. For instance, it only allows raw materials that do not exist or are produced domestically. Even if there is, imports can only be carried out if upstream has reached a utilization rate of above 70-80 percent.

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