Election year a boost for plastics industry

The Jakarta Post, Jakarta | Mon, 11/10/2008 11:15 AM  

The US$5 billion plastics industry, hit by a slower demand in the past few months, should start picking up pace again next month setting the stage for 6 percent growth next year, a trade association has estimated. 

The industry would benefit from the general elections and larger harvests for some commodities next year, said the Indonesian Olefin and Plastic Industry Association (Inaplast). 

"Political campaigns will flourish next year. The presidential and legislative elections would also mean higher consumption of plastic containers for food and beverages, as well as plastic bags," Inaplast secretary general Budi Susanto Sadiman said. 

"Larger harvests would also bring greater demand for durable plastic commodity bags to carry tons of produce. Such large harvests did not happen every year," he said. 

Local demand of plastic goods is around 2.5 million tons a year, while production capacity is only 2 million with 80-90 percent actual production. The gap is filled by imports. 

This year, he added, the industry was actually on track to grow by the targeted 6 percent until several months ago, when the prices of raw materials for plastics started going down in line with the declining trend in global crude oil prices. 

"Naphthalene for instance, a key raw material for plastics, went down faster than the oil price itself. This has prompted the market to cut down demand waiting for it to decline even further," Budi said. 

Budi was speaking last Friday at the Indian Embassy, on the sidelines of the promotion of the 7th International Plastics Exhibition and Conference which would be held by the Plastindia Foundation next February in New Delhi. 

Because of the downturn in the past month, the industry "would grow at around 4 percent this year, still slightly better than the 3 percent growth in 2007." 

The industry produces a wide range of plastic goods from food containers to components for car interiors. It absorbs around 350,000 workers working directly in the factories, with more than 1 million others indirectly involved in the industry. 

Several polymer manufacturers such as Chandra Asri, Tri Polyta and Titan chemicals supply feedstock to the industry. The industry consumes an average of 200,000 tons of plastic resin monthly, Budi said. 

The industry has 6,000 companies, 80 percent of them based in Java. Around a third of them are middle scale companies. 

"The Indonesian plastic industry could learn a lot from India," said Jony Joe Jusdy, development manager of plastic producer Argha Karya Prima. 

"They have the technology we need." 

Vijay Merchant, chairman of the environment & plastic image committee of Plastindia Foundation, who was also present Friday's expo promotion, agreed. 

"India's plastic production is worth $16 billion and produces 6 million tons a year. It absorbs 3 million workers and has been exporting products to 157 countries." 

Whilst being upbeat about prospects for next year, Budi is urging the government to do more to protect the domestic industry, since the market has been flooded by illegally imported plastic products. 

"We need the government to be more protective of local products by addressing the illegal -- and cheaper -- products coming from overseas." (iwp)