INDONESIA: Plastics makers call for government support

He said the government should therefore provide more support for the development of the upstream plastics industry. "Our biggest hurdle is the high import content in our products,” Tjokro said on the sidelines of an industry seminar hosted by HSBC.

"Providing fiscal incentives is a must as setting up a business in the upstream industry generally requires a large investment,” he said, adding that the fiscal facilities could be in the form of a tax holiday for a certain period of time.

At present, the government provides an income tax holiday of five to 10 years for five priority sectors, including basic petrochemicals, which can serve as raw material for upstream production processes. However, because the procedures to access the tax break are still complicated, few investors have applied for the facility.

Industry Minister MS Hidayat recently said the government would resume talks with two Middle East investors keen to set up oil refineries in Indonesia. The byproducts from the refineries are expected to feed the upstream plastics industry.

Apart from that, the government should also remove import duties on upstream products that could not be produced domestically to increase production-cost efficiency, Tjokro said.

"Import tariffs are not effective as an incentive to attract investment anymore. Manufacturers seek countries where they can invest efficiently and these places will serve as their regional production base,” he said.

Indonesia currently places import duties of up to 10 % from non-ASEAN countries, while it charges 5 % tariffs on fellow ASEAN members.

Imports of raw material for the downstream industry has reached about USD 8.5 billion per year, according to the association. The increase in raw material production from local producers will be able to significantly reduce the operating costs of companies in the downstream industry, which at present still mostly import their raw material needs.

Source: Daily "The Jakarta Post", Jakarta; 29 Nov 2013(Syed Rashid Ali, Karachi, Pakistan)