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Petrochemical industry in need of help for downstream growth
Petrochemical industry players and analysts are urging the government to help ensure stable demand and access to affordable raw materials.
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Chandra Asri’s gas processing plant in the industrial city of Cilegon in Banten, West Java, pictured in an undated photo above, produces methyl tert-butyl ether (MTBE) and butene-1. (Courtesy of Chandra Asri)
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he government's push to develop mineral processing industries has prompted Rp 151.7 trillion (US$9.53 billion) of investment this year, according to government data, for the construction of nickel and copper smelters among other things, but the Industry Ministry says investment in the petrochemical industry has been subpar.
"I think it’s still less [than optimal]," Investment Minister Bahlil Lahadalia said in a press conference on Oct. 20, noting that the country's petrochemical industry still depended on other countries for raw materials.
Investments to build petrochemical processing facilities in Indonesia only reached Rp 31.6 trillion this year, less than downstream investment in forestry and agriculture.
Abra Talattov, head of the Center of Food, Energy and Sustainable Development at the Institute for Development of Economics and Finance (INDEF), explained that the government’s push for downstream industrialization, when applied to the petrochemical sector, was hampered by a high degree of risk in large-scale projects.
Countries including China have a head start in the industry, according to Abra, meaning local chemical companies seeking to widen their operations may struggle to compete in what for them are new markets.
"That's the reason why so many petrochemical products have flooded the local market," Abra told The Jakarta Post on Friday.
Data from Statistics Indonesia (BPS) and a major petrochemical firm Chandra Asri show that the country still depends on imports of olefins, polyethylene and polypropylene – materials for midstream and downstream petrochemical firms – to meet around 33 percent, 42 percent and 57 percent of domestic demand, respectively.
