Published On: Mon, Jun 6th, 2016

Plastic Industry Indonesia May Expand in 2016 Despite New Taxes

Sales in Indonesia’s plastic industry are expected to rise 6.5 percent to 4.3 million tons (roughly USD $8 billion) in 2016 supported by rising plastic and plastic products demand in those industries that use these materials (for example, Indonesia’s food & beverage industry and the automotive industry). Fajar Budiono, Secretary General of the Aromatic, Olefin and Plastic Industry Association (Inaplas), said the year 2016 should be a good one for the plastic industry as the economy of Indonesia has started to stabilize after a prolonged slowdown.

plastic products

Plastic Industry Indonesia May Expand in 2016 Despite New Taxes

However, in the first quarter of 2016, sales of plastic materials in Indonesia actually fell 1 percent due to the government’s decision to implement a IDR 200 charge on each plastic bag sold by retailers such as supermarkets and vendors. This charge is part of a six-month trial and aims at curbing consumption of plastic bags, while at the same time generating more government revenue (the move to add a charge on each plastic bag has reportedly managed to reduce plastic bag consumption in Indonesian supermarkets by 25 percent, a positive result).

Despite the weaker performance in Q1-2016, turnover in Indonesia’s plastic industry is expected to rise 2 percent (y/y) to 2 million tons (USD $2.2 billion) in the second quarter of the year supported by rising consumption due to the Ramadan and Idul Fitri festivities. During these Islamic celebrations Indonesians increase consumption of food and beverage products as well as products such as clothes, shoes and bags.

Inaplas also stated that it hopes more Indonesian investors in the plastic industry to import new plastic manufacturing equipment from Taiwan. Most machinery that is used to produce plastic in Indonesia is imported from Taiwan due to the relatively affordable price and relatively high quality of the machinery. However, new developments in Taiwan have given birth to better equipment (higher quality, more efficient, and more environment-friendly). Therefore Inaplas recommends Indonesia’s plastic and rubber manufacturing community to attend the Tapei International Plastic and Rubber Industry Show (PLAS) in Taiwan between 12-16 August 2016.

According to a study published in the journal Science, Indonesia is the world’s second-largest plastic waste producer (after China). Research claims that Indonesians use a total of 187.2 million tons of plastic per year. Meanwhile, Greeneration Indonesia mentioned that plastic bag usage in Indonesia’s modern and traditional retailers is estimated at 700 per person each year, or roughly 178.5 billion bags.

It remains unknown whether Indonesia will also impose an excise tax – of at least IDR 200 (approx. USD $0.02) – on plastic bottles. Earlier this year, the central government proposed this move (in additional to the charge on plastic bags) in a bid to combat plastic waste. Lawmakers will discuss this proposal this month. Analysts say this additional tax will have a negative impact on various industries, including plastic and food & beverage.