Jakarta – Businesses and experts are urging the government to pay attention to the petrochemical industry, which is suffering from an influx of imported goods after the 2024 Trade Ministry regulation on imports (Permendag No 8/2024) came into force.
Calls are mounting for anti-dumping import duties and the return of the 2023 Trade Ministry regulation (Permendag No. 36/2023).
One of these calls came from Fajar Budiono, the secretary-general of the Indonesian Olefin, Aromatics, and Plastics Association (Inaplas). Fajar said the government should protect the petrochemical industry from import.
"The utilization rate of downstream petrochemical products for finished goods are nearing 60 percent, while it is already under 70 percent in the upstream sector. So this is an injury to the industry," Fajar said, not long ago.
The demand for local petrochemical goods is forecast to grow 4.2 percent annually. But the low purchasing power and the huge numbers of imported goods –particularly finished ones– are affecting this projection. The situation also prompted manufacturing plants in the downstream sector to reduce their production. Inaplas previously proposed some measures that the government could consider, namely anti-dumping import duty or safeguard measures for plastic raw materials, including polypropylene and linear low-density polyethylene.
In 2017, the government imposed anti-dumping import duties on biaxially oriented polypropylene (BOPP) such as film, sheet plates, and foil that came from Thailand and Vietnam. The duties were 28.4 percent on BOPP produced by Thai companies other than A.J Plast Public Company Limited. The tariffs were around 3.9 percent on Vietnamese goods. The policy, which was in effect in 2017-2019, bore fruit, according to Fajar.
"Prices were not ruined, so the production costs could be covered. The utilization rate also rose," Fajar said while calling for the government to reinforce similar policies again.
Inaplas is currently collecting data related to anti-dumping import duties. The association hopes the Indonesian Anti-Dumping Committee (KADI) and the Indonesian Trade Security Committee (KPPI) can implement the instrument flexibly. Fajar said that the petrochemical industry was pivotal to the economy. Data showed investment
in an integrated naphtha cracker could contribute Rp 41.04 trillion to the economy while generating jobs for 3.22 million people. The wages generated could total Rp 8.56 trillion and would provide value-added tax worth Rp 2.67 trillion.
Mohammad Faisal, the executive director of the think-tank Core, said that imported goods had made the domestic petrochemical industry's market share increasingly smaller. Indonesia has a free trade agreement with the United Arab Emirates, which waives import duties on Emirati petrochemicals, thus potentially harming the domestic industry.
Faisal attributed the huge import volume to the lack of strict supervision in the customs area as foreign goods could easily enter the Indonesian market. As imported goods go rampant, local petrochemical industries have lower production. Some companies have even stopped production as a result. However, anti-dumping duties have been temporary so far. According to Faisal, the government needs to come up with a more sustainable, long-term solution to ensure that the domestic petrochemical industry remains competitive.
Calls from the downstream sector
Likewise, the Indonesian Downstream Plastic Industry Association (Aphindo) is calling for the government to restrict imports of finished plastic goods. Imported finished plastic goods are popular in the market as they are cheaper, thus disrupting the local downstream petrochemical industry. China is among the countries that supply cheaper goods to Indonesia. Henry attributed the cheaper price to China's lower labor costs and the adequate availability of raw materials.
"So, why are our products more expensive? This is because we [Indonesia] import our raw materials. Not to mention the electricity, labor wages, and bureaucratic costs such as permits, excise, and taxes," Aphindo's secretary-general Henry Chevalier said, while calling for import restrictions.
"While I'm aware that the 2024 Trade Ministry regulation on imports (Permendag 36/2024) is among the government's efforts to protect the domestic industry. But restrictions are not enough, and the government also needs to regulate the import procedures."
The government must also reject imported plastic goods that do not comply with the Indonesian National Standard (SNI), according to Henry.
Source: https://jakartaglobe.id/special-updates/govt-told-to-impose-antidumping-import-duty-on-petrochemical