what happened to the plastic industry?

Downstream plastic manufacturer claimed their loss over IDR2 trillion sales in 2009-2010 amid to plastic raw material import duty by 10%-15% from countries outside Southeast Asia.

This adverse condition, which has been going for 2 year, tangles 3 downstream manufacturers in troubles. The 3 manufacturers are Asosiasi Industri Plastik Hilir Indonesia (Aphindo), Industri Plastik Hilir Flexible (Rotokemas), and Gabungan Industri Aneka Tenun Plastik Indonesia (Giatpi).

They urged the government to revoke the policy and set it back at 0%. If not, the three associations, which compile 800 companies and 500,000 workers, sustainability might come to an end.

The needed to be revoke regulation is Minister of Finance Regulation No. 19/PMK. 011/2009 on the Stipulation on the Rate of Imported Duty on Certain Imported Products.

Chairman of Aphindo and the spokesperson for the 3 associations Tjokro Gunawan stated the 15% import duty causes the price of plastic raw materials in local and regional markets to increase while raw materials supply from local industry is very difficult or only 50%.

Most of bag-based and plastic packaging companies began to resume production difficulties due to the depletion of raw material supply.

On this issue, the three associations had submitted a caveat to Minister of Finance Agus Martowardojo and Minister of Industry M.S. Hidayat.

Through the letter, they asked for the revocation of the regulation this year until upstream industry could completely meet their needs. “The import duty is unnecessary.”

When the regulation set by former Minister of Finance Sri Mulyani on February 13, 2009, downstream plastic manufacturers had began to worry.

A number of important raw materials imported for the manufacture of plastic bags and packaging are polypropylene (PP) which burdened with 15% import duty. Copolymer in liquid and paste burdened with 10%.

Downstream industry, at that time, did not fight frontally. They tried to understand government’s desire by waiting for upstream petrochemical industry expansion so import dependency can be reduced.

“We were loss pretty big in 2009 while upstream industry pocketed high profit. An additional production capacity as promised has not met our expectation so we have to import 50% or about 600,000 tons of national demand.”

The improving economic conditions in 2010, which supposedly boost downstream plastic products sales turnover to IDR11 trillion is estimated to only reach IDR10 trilion.

Downstream manufacturers predict 10% potential loss or IDR1 trillion.

The lost of potential earnings is estimated to equivalent to the loss suffered in 2009. The effect of PMK 19 is double due to the increase in basic electricity tariff (TDL), minimum wage (UMR), fuel and raw materials.

“10% potential loss in 2010 and we hypothetically pocket 5%-8% profit. However, after the calculation, we might only earn 2%-3% from the total earnings.”

To stop the damage, Ministry of Industry had granted request from the manufacturer in obtaining Government-borne Import Duty (BMDTP) in 2010.

Unfortunately, due to the difficulty on bureaucratic matters, only six out of 800 downstream plastic manufacturers who were willing to use it.

To date, they cannot use the facility as Ministry of Finance has not set any decision. “We have proposed for the facility since January.”